Kenvue (US:KVUE)2024-11-07 21:02Financial Performance - Kenvue reported net sales of $15.4 billion for the fiscal year 2023, establishing itself as the world's largest pure-play consumer health company by revenue [204]. - For the fiscal three months ended September 29, 2024, net sales were $3,915 million, a decrease of 0.4% compared to $3,931 million for the same period in 2023 [225]. - Net income for the fiscal three months ended September 29, 2024, was $438 million, representing a decline of 12.6% from $493 million in the prior year [225]. - For the fiscal nine months ended September 29, 2024, net sales were $11.8 billion, a slight increase of $15 million, or 0.1%, compared to the prior year [251]. - Total net sales for the company were $11.793 billion for the fiscal nine months ended September 29, 2024, a slight increase of $15 million, or 0.1% [266]. Profitability Metrics - Gross profit for the fiscal three months ended September 29, 2024, was $2,250 million, reflecting a 1.4% increase from $2,218 million in the prior year [225]. - Operating income decreased by 7.9% to $710 million for the fiscal three months ended September 29, 2024, down from $766 million in the same period of 2023 [225]. - Cost of sales decreased by $48 million, or 2.9%, to $1.6 billion, resulting in a gross profit margin expansion of 100 basis points to 58.5% [227]. - Gross profit margin expanded by 240 basis points to 58.4% for the fiscal nine months ended September 29, 2024, due to supply chain optimization initiatives [252]. Segment Performance - Segment net sales for Self Care were $1.625 billion, up 0.7%, while Skin Health and Beauty declined by 4.2% to $1.072 billion [237]. - Essential Health segment net sales increased by $19 million, or 1.6%, to $1.202 billion [237]. - Self Care Segment net sales were $1.6 billion for both the fiscal three months ended September 29, 2024, and October 1, 2023, with a slight increase of $12 million, or 0.7% year-over-year [242]. - Skin Health and Beauty Segment net sales decreased by $47 million, or 4.2%, to $1.1 billion for the fiscal three months ended September 29, 2024, primarily due to competitive pressures in the United States [244]. - Essential Health Segment net sales increased by $19 million, or 1.6%, to $1.2 billion for the fiscal three months ended September 29, 2024, driven by strong performance in Oral Care [246]. Expenses and Costs - Selling, general, and administrative expenses increased by $59 million, or 3.9%, to $1.6 billion, with expenses as a percentage of net sales rising to 40.8% [228]. - Restructuring expenses amounted to $31 million, driven by costs related to the 2024 Multi-Year Restructuring Initiative [229]. - Restructuring expenses were $120 million for the fiscal nine months ended September 29, 2024, related to global workforce reductions and management structure changes [255]. Cash Flow and Financing - Net cash flows from operating activities decreased by $1.242 billion, or 56.0%, to $976 million for the fiscal nine months ended September 29, 2024 [276]. - Net cash flows used in investing activities increased by $70 million, totaling $293 million, primarily due to purchases of property, plant, and equipment [278]. - Cash and cash equivalents decreased by $325 million to $1,057 million as of September 29, 2024, compared to $1,382 million as of December 31, 2023 [283]. - The company has authorized a share repurchase program for up to 27 million shares, with 5.7 million shares repurchased for $114 million during the nine months ended September 29, 2024 [298][299]. Restructuring and Separation Costs - Kenvue is incurring non-recurring separation-related costs as it establishes itself as a standalone public company, expected to continue through the first half of fiscal year 2025 [211]. - The company expects to incur approximately $550 million in pre-tax restructuring expenses over fiscal years 2024 and 2025, with $275 million planned for each year [284]. Risks and Challenges - The company is involved in ongoing litigation and investigations, which may adversely impact its financial condition and cash flows [300]. - The company has faced significant inflationary pressures, impacting costs of raw materials and supply chain, and has partially offset these through price increases and supply chain optimization [307]. - If inflationary pressures continue, the company may struggle to offset higher costs through price increases, potentially affecting its financial condition [308]. - The company is exposed to foreign currency risk due to operations in multiple countries, particularly in the EU, UK, Japan, China, Canada, Brazil, and India [305]. Interest and Debt Management - Interest expense decreased by $4 million to $96 million for the fiscal three months ended September 29, 2024 [232]. - Interest expense, net for the nine months ended September 29, 2024, was $283 million, primarily related to Senior Notes and Commercial Paper [294]. - The company's long-term debt portfolio is primarily fixed-rate, minimizing the impact of interest rate fluctuations on operations [309]. - Interest rate risk is managed through a mix of variable and fixed-rate debt, with potential exposure to new floating rate debt under the Revolving Credit Facility [309].