Kenvue Inc. Q1 FY2025 earnings call

• New operating model fully activated, leveraging Kenvue’s five extraordinary powers for brand growth.
• Completed Transition Services Agreement program, streamlining systems and processes.
• Moved into new global headquarters in Summit, New Jersey, enhancing collaboration.
• In Self Care, Tylenol strengthened its number one position, and Zyrtec grew value and volume share in Allergy. In Skin Health and Beauty, EMEA showed strength, and US consumption improved due to brand building campaigns. In Essential Health, premium offerings like Listerine and Aveeno grew.
• CFO transition: Paul Ruh to depart, Amit Banati to join on May 12, bringing 30 years of global CPG experience.

Self Care: Organic sales grew 0.3%. Growth was broad-based across allergy, digestive health, and smoking cessation franchises, offsetting a decline in the cough, cold, and flu category. Nearly 80% of the business expanded or maintained market share. Skin Health and Beauty: Organic sales declined 4.8% due to destocking in China, a soft sun season in Latin America, strategic price investment in the US, and a loss of rotations in the club channel. However, the EMEA region remained strong with organic sales growth for the twelfth consecutive quarter, driven by Aveeno and OGX. Consumption outpaced organic sales. Essential Health: Organic sales were flat, with growth in Wound Care offset by declines in Women’s Health and Oral Care. Global category deceleration and destocking in Asia-Pacific impacted performance.

• Maintains organic sales growth outlook for 2025 in the 2%-4% range, expecting acceleration in the back half.
• FX impact: Dollar depreciation leads to ~1% drag on top-line, adjusting net sales growth range to 1%-3%.
• Adjusted operating margin expected to contract slightly due to tariffs, with adjusted diluted EPS flat vs last year, but up low-single-digit on constant currency basis.

• Tariffs: Estimated $150 million gross impact in 2025 on imported products/components; mitigate through productivity initiatives, alternate sourcing, supply chain optimization.
• Macro shifts and seasonal variability posing risks to segment performance.

Q: Drill down on innovation plans and spending given consumer pressures.

A: Broadly no significant change to innovation plans; tweaking to offer right value equation, ensuring presence where shoppers are and right price pack architecture.

Q: Phasing of organic growth, specifically second quarter.

A: Muted start due to allergy season delay, destocking, and price investments; back half expected to accelerate with strong commercial plan.

Q: Confidence in Skin Health and Beauty's recovery.

A: Encouraged by positive consumption signs, flywheel turning, with momentum in US priority platforms.

Q: Balance of marketing investment and promotional activity in Skin Health and Beauty.

A: Continue to invest responsibly with eye on ROI, seeing progress in margin improvement as consumption increases.

Q: Price and trade investments in Skin Health and Beauty and consumer response.

A: Consumers responding positively, seeing increase in household penetration with Gen Z, hitting right psychological price thresholds.

Q: Supply chain exposure to China and opportunities.

A: China represents ~10% of annualized foreign sources; supply chain resilient with dual/triple sourcing, capturing upside opportunities.

Q: Self Care flu incidence impact and tariff composition.

A: US flu incidence had mixed regional effects; tariffs composed of finished goods and raw materials from China, with pharma tariffs not yet in effect.

Q: SG&A elevation and restructuring.

A: SG&A includes brand investment and infrastructure costs; on track with Our Vue Forward program to deliver $350M savings by 2026.

Q: Trading down or private-label impact.

A: No significant down trade to private-label globally; penetration of private-label in categories is down.

Q: Expectations for new CFO Amit Banati.

A: Brings 30 years of CPG experience, focusing on driving profitable growth, revenue growth, and resource allocation.

Q: Tariff impact timeline and mitigation.

A: Tariffs reflected in 2025 guidance; mitigate through productivity, sourcing, supply chain, and revenue growth management; efforts to absorb impact by 2026.