Kenvue Inc. Q3 FY2024 earnings call

• The company is rapidly transforming ways of working to unleash potential and create long-term shareholder value. - Leveraging brand portfolio, activating new playbook; Self Care and Essential Health already benefiting, while Skin Health and Beauty is advancing focus areas. - 2024 marketing investment on track to be ~20% more than last year, with increased focus on social media marketing powered by analytics and AI. - Q3 delivered strong adjusted gross margin expansion of 130 basis points to 60.7%. - Exiting nearly three quarters of TSAs and on track to fully exit by mid-2025. - On track to deliver $350 million in annual savings by 2026 through Our Vue Forward initiative. - Self Care saw share gains in pain and allergy, with Tylenol and Zyrtec continuing to grow share. - Essential Health had broad-based growth, with Listerine and Band-Aid showing positive momentum. - Skin Health and Beauty in U.S. faced challenges but saw initial progress in Neutrogena's face and sun platforms, and partnerships like with dermatologists.

Self Care: Organic growth was 0.7% year-over-year. Value realization contributed 1.8% of growth, offset by a volume decline of 1.1% due to softer incidences in allergy and pediatric fever, and some retailers reverting to historical order patterns. Essential Health: Grew across all categories and regions, with organic growth of 4.5%. Value realization was 3.7%, and volume grew 0.8% for the second consecutive quarter. Skin Health and Beauty: Organic sales declined 2.7% year-over-year, with a 4.7% volume decline partially offset by 2% of positive value realization.

• Expect organic growth towards the low end of the 2% to 4% range shared at the beginning of the year due to Skin Health and Beauty recovery pace and softer category dynamics in Self Care and Skin Health and Beauty. - Adjusted diluted earnings per share expected in the range of $1.10 to $1.20. - Full year foreign exchange is expected to be a headwind of about 1%. - Q4 is expected to be the strongest growth quarter for the year due to cumulative impact of new playbook and easier year-over-year comparisons.

• Forward-looking statements are subject to various risks, uncertainties and changes that could cause actual results to differ materially. These include risks related to operating and financial performance, market opportunities and growth, which can be found in earnings materials and SEC filings.

Q: Bonnie Herzog asked about updated organic sales growth guidance and visibility in light of U.S. consumer and global macro pressures.

A: Thibaut Mongon said external factors like slower category growth, cautious consumer in China, and late start to cold, cough and flu season are impacting. But Q4 is expected to be strongest growth quarter due to cumulative impact of new playbook and easier year-over-year comparisons. Paul Ruh added confidence in delivering towards the middle of adjusted EPS guidance range due to productivity improvements.

Q: Anna Lizzul inquired about recent trends for Skin Health and initiatives for Andrew.

A: Thibaut Mongon said external environment is challenging, but the company is strengthening the team, bringing new talent, and using external partnerships. Andrew brings experience in growing brands and turning around businesses. Paul Ruh mentioned DCL was not a material factor in Q3 and Q4.

Q: Andrea Teixeira asked about green shoots and how Andrew will amplify initiatives.

A: Thibaut Mongon listed examples of green shoots like Neutrogena face being back to number one, marketing campaigns driving views, and Andrew will play a part in amplifying these across the skincare portfolio. Paul Ruh talked about TSA exits on track and Our Vue Forward program progress.

Q: Peter Grom asked about potential for weaker category growth to persist and impact on return to algorithm growth.

A: Paul Ruh said 2024 is a year of transformation, and transformation will continue into 2025, allowing acceleration in top-line growth, with income growing faster than sales.

Q: Filippo Falorni asked about retailer inventory levels and impact from drug channel store closures.

A: Thibaut Mongon said inventory levels in U.S. are low, and in Q4, cautious ordering patterns continue. For drug channel, store closures have short-term impact but normalize over time as consumers go to other stores.

Q: Steve Powers asked about mentality and goal for Skin Health and Beauty in 2025.

A: Thibaut Mongon said the goal is to return the segment to growth in 2025, focusing on fueling expansion in EMEA, better execution of playbook, innovation, and campaigns.

Q: Keith Devas asked about category trends and reinvestment.

A: Paul Ruh said confident in sourcing funds from gross profit and Our Vue Forward to continue investing in brands, with algorithm calling for continued investment based on return on investment.

Q: Nik Modi asked about skincare portfolio complexity and hero products.

A: Thibaut Mongon said the team prioritizes biggest parts of the portfolio, like Neutrogena's sun and face, and focuses on unifying the brand and improving shopability.

Q: Korinne Wolfmeyer asked about gross margin and input cost inflation.

A: Thibaut Mongon said pleased with gross margin performance, sources include value realization, manufacturing and supply chain efficiencies, but commodity tailwinds may wind down. Q4 is typically lowest gross margin period due to plant maintenance.

Q: Jeremy Fialko asked about underlying softening in consumer and price discounting.

A: Thibaut Mongon said low levels of incidence don't reflect consumer state, consumer still prioritizes health and looks for convenience and value, and no significant increase in promotional intensity.