Kenvue (US:KVUE)2024-05-07 17:22Financial Data and Key Metrics Changes - The company reported a 1.9% organic growth in Q1 2024, following an 11.2% growth in the same quarter last year, indicating a solid performance despite a 3.1% decline in volumes compared to the prior year [9][51] - Adjusted gross margin expanded by 290 basis points, reflecting strong execution in supply chain productivity and value realization [44][55] - Adjusted net income for the quarter was $547 million, with adjusted diluted earnings per share at $0.28, representing a 7.7% growth on a like-for-like basis compared to last year [86] Business Line Data and Key Metrics Changes - Self Care segment achieved 4.2% organic growth on top of 15.3% growth last year, with notable share growth for major brands like Tylenol and Zyrtec [36][52] - Essential Health grew by 4.9% this quarter, driven by strong performance in Oral Care and Baby Care, despite a 1.9% volume decline [38][53] - Skin Health and Beauty segment saw a decline of 4.5% in organic sales, with a 6.9% decline in volume, indicating challenges in stabilizing this business [14][82] Market Data and Key Metrics Changes - The U.S. market experienced a reduction in retail inventory levels, impacting volumes in the Self Care segment, which is expected to continue into Q2 [10][62] - In Asia, particularly China, the company reported strong growth in Self Care brands, with significant innovation contributing to market leadership [12][107] - The company noted a shorter cough, cold, and flu season in the U.S. compared to the previous year, affecting overall market performance [10][27] Company Strategy and Development Direction - The company is focused on three strategic priorities for 2024: reaching more consumers, freeing up resources for brand investment, and fostering a culture of performance and impact [8][21] - The "Our Vue Forward" initiative aims to streamline operations, reduce costs, and enhance competitiveness as the company transitions to an independent entity [49][79] - The company is committed to increasing brand activation investments by 15% in 2024, funded through improved gross margins and cost structure transformation [18][50] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver on its plans for the year and execute long-term growth strategies, despite acknowledging challenges in the Skin Health and Beauty segment [21][34] - The company anticipates low single-digit negative growth in Q2, primarily due to inventory reductions and a slow start to the allergy season, but expects a recovery in the second half of the year [81][87] - Management highlighted the importance of maintaining strong relationships with consumers and healthcare professionals to drive brand loyalty and market share [66][29] Other Important Information - The adjusted effective tax rate for Q1 was 28.3%, influenced by jurisdictional earnings mix and share-based compensation [31] - The company plans to maintain its outlook for organic growth in the range of 2% to 4% for the full year, with earnings per share expected between $1.10 and $1.20 [58][86] - The company is actively engaging with healthcare professionals to increase brand recommendations and consumer engagement [29][41] Q&A Session Summary Question: What should be expected in Skin Health and Beauty moving forward? - Management indicated that recovery in Skin Health and Beauty will take time and will not be linear, but they are focused on executing their stabilization plan [90][91] Question: How is the promotional intensity affecting the market? - Management noted that their categories remain resilient, and they are focused on maintaining brand relevance and credibility with healthcare professionals [65][66] Question: What are the expectations for the "Our Vue Forward" program? - Management emphasized that the program is crucial for reinventing the company's operations and enhancing competitiveness as they exit transitional service agreements with J&J [68][69] Question: What drove the outperformance in Q1? - The outperformance was attributed to price realization and some volume growth, with strong performance noted in Europe and Essential Health segments [73] Question: How will the company manage gross margin expectations? - Management expressed confidence in achieving their gross margin goals, driven by pricing strategies and operational efficiencies, despite ongoing inflationary pressures [131]