Kenvue (US:KVUE)2024-05-09 20:02Financial Performance - Kenvue reported net sales of $3.9 billion for the fiscal three months ended March 31, 2024, reflecting an increase of $42 million, or 1.1% compared to the same period in 2023[206]. - Net sales increased by 1.1% to $3.894 billion for the fiscal three months ended March 31, 2024, compared to $3.852 billion for the same period in 2023[220]. - The company experienced organic growth of $73 million, primarily due to value realization, despite volume-related decreases[207]. - Selling, general, and administrative expenses rose to $1.6 billion, an increase of $71 million, or 4.7%, compared to $1.5 billion in the same period last year[209]. - Operating income decreased by $90 million, or 14.1%, to $550 million for the fiscal three months ended March 31, 2024, compared to $640 million in the prior year[206]. - Net income for the fiscal three months ended March 31, 2024, was $296 million, a decline of $173 million, or 36.9%, from $469 million in the same period in 2023[206]. Segment Performance - Self Care segment net sales rose by 3.5% to $1.698 billion, with organic growth of 4.2% driven by increased demand for Cough, Cold, and Allergy products[225]. - Skin Health and Beauty segment net sales decreased by 5.1% to $1.054 billion, with organic growth declining by 4.5% due to volume-related decreases and execution challenges[227]. - Essential Health segment net sales increased by 3.7% to $1.142 billion, with organic growth of 4.9% primarily driven by strong performance in Oral Care[230]. - Adjusted operating income for the Self Care segment increased by 4.1% to $606 million, supported by value realization and supply chain optimization[226]. - Adjusted operating income for the Essential Health segment rose by 21.9% to $256 million, driven by value realization despite volume-related decreases[231]. Cost and Expenses - The gross profit margin increased by 240 basis points to 57.6% for the fiscal three months ended March 31, 2024, up from 55.2% in the prior year, driven by value realization and supply chain optimization[208]. - Cost of sales decreased by $75 million, or 4.3%, to $1.7 billion, attributed to supply chain optimization and lower ingredient costs[208]. - Restructuring expenses amounted to $41 million for the fiscal three months ended March 31, 2024, related to global workforce reductions and organizational efficiencies[211]. - Interest expense increased significantly to $95 million from $1 million in the prior year, driven by interest on Senior Notes and Commercial Paper[214]. - Provision for taxes decreased by $9 million to $131 million, with an effective tax rate increase to 30.7% from 23.0% year-over-year[215]. - Other operating expenses increased by $95 million to $78 million, primarily due to a $68 million impairment charge related to corporate headquarters[212]. Cash Flow and Capital Management - Net cash flows from operating activities decreased by $515 million to $287 million for the fiscal three months ended March 31, 2024, compared to $802 million in the prior year[235]. - Cash and cash equivalents decreased by $227 million to $1.2 billion as of March 31, 2024, down from $1.4 billion as of December 31, 2023[242]. - Net cash flows used in investing activities were $152 million for the fiscal three months ended March 31, 2024, compared to $41 million in the same period of 2023[237]. - Net cash flows (used in) from financing activities were $(326) million for the fiscal three months ended March 31, 2024, a significant decrease from $7,388 million in the prior year[238]. - The company paid $383 million in dividends during the fiscal three months ended March 31, 2024, with a declared dividend of $0.20 per share[250]. - The company has authorized a share repurchase program for up to 27 million shares, with 4.6 million shares repurchased for $91 million during the fiscal three months ended March 31, 2024[253]. Debt and Risk Management - As of March 31, 2024, the company had cash and cash equivalents of $1.2 billion and a borrowing capacity of $4.0 billion under its Revolving Credit Facility[239]. - The company remains in compliance with all debt covenants as of March 31, 2024, with no defaults reported[249]. - As of March 31, 2024, the company's outstanding long-term debt portfolio was primarily composed of fixed-rate debt, minimizing the impact of market interest rate fluctuations on operations[264]. - The company manages interest rate risk through a mix of variable and fixed-rate debt, aiming for a cost-effective portfolio[264]. - The company is exposed to commodity price risks from various inputs, including resins, pulp, corn derivatives, and energy, and employs strategic pricing mechanisms to manage these costs[265]. - Credit risk is mitigated through diverse customer bases and credit evaluations, although current macroeconomic conditions may complicate receivable collections[266]. - The company may hedge anticipated fixed-rate debt issuance through cash flow hedges to manage interest rate risk[264]. - Future floating rate debt may expose the company to interest rate changes, particularly under the Revolving Credit Facility[264]. - The company has limited concentrations of credit risk due to the diversity of its customer base, reducing potential credit losses[266]. - Nonperformance by counterparties to financial instrument contracts is considered unlikely, as the company contracts with credit-worthy entities[266]. - The company is subject to various market and economic factors that influence interest rate risk, including U.S. monetary and tax policies[264]. - The company utilizes collateral or other security as appropriate to further mitigate credit risk[266]. Corporate Developments - Kenvue completed its separation from Johnson & Johnson in August 2023, with J&J retaining approximately 9.5% of Kenvue's outstanding common stock[190]. - The company is incurring non-recurring separation-related costs, expected to continue through at least fiscal year 2024[192]. - The company’s Ukrainian business represented 0.2% of net sales for the fiscal three months ended March 31, 2024, and 0.1% of net assets[201].