Kenvue (KVUE) Q2 2024 earnings summary

Executive summary

• Q2 2024 net sales were $4.0B, nearly flat year-over-year, with 1.5% organic growth driven by price/mix and Essential Health, offset by volume declines in Self Care and Skin Health and Beauty.

• Adjusted gross profit margin expanded by 410 bps to 61.6% year-over-year, driven by supply chain efficiencies and value realization; reported gross margin was 59.1%.

• Net income for Q2 2024 was $58M, down sharply from $430M in Q2 2023, primarily due to a $488M impairment charge for Dr.Ci:Labo® and higher restructuring costs; adjusted net income was $611M.

• Brand investment increased by approximately 20% year-over-year, targeting high-yield strategies and innovation, while maintaining EPS guidance.

• Transformation and restructuring efforts, including productivity improvements and cost reductions, are driving intended impact and providing strategic flexibility.

Financial highlights

• Q2 2024 net sales: $4.0B (down 0.3% year-over-year); organic growth of 1.5%.

• Adjusted gross profit margin: 61.6% (up 410 bps year-over-year); reported gross margin: 59.1% (up 360 bps).

• Adjusted operating income margin: 22.8% in Q2; reported operating margin: 3.9% due to impairment.

• Adjusted net income: $611M; adjusted diluted EPS: $0.32; reported net income: $58M; reported EPS: $0.03.

• Free cash flow for the first half of 2024 was $0.5B, compared to $1.4B in the prior year period.

Outlook and guidance

• Full-year 2024 organic growth expected in the 2%-4% range; net sales growth guidance 1%-3%; adjusted EPS guidance of $1.10-$1.20.

• Adjusted operating income margin expected at 21%-22%; adjusted effective tax rate forecasted at 25.5%-26.5%.

• Foreign exchange expected to be a 1% headwind for the year.

• Sequential improvement in Skin Health and Beauty volumes expected, with return to positive growth anticipated in Q4.

• No further retail destocking impact expected in the U.S. for the back half; healthy inventory levels internationally.