Kenvue (KVUE) Q3 2024 earnings summary

Executive summary

• Q3 2024 net sales were $3.9B, down 0.4% year-over-year, with organic growth of 0.9% driven by price/mix gains and productivity improvements despite volume declines and FX headwinds.

• Adjusted gross margin expanded by 130 bps to 60.7%, and gross profit margin improved to 58.5%, reflecting supply chain efficiencies and value realization.

• Adjusted diluted EPS was $0.28, while reported EPS was $0.20, with declines attributed to increased brand investment and a higher tax rate.

• Brand activation investment increased by 20% year-over-year, funded by gross margin expansion and cost savings initiatives.

• Transformation initiatives, including the Kenvue Playbook and Vue Forward, are driving operational improvements and targeting $350M in annual savings by 2026.

Financial highlights

• Q3 2024 adjusted net income was $542M; reported net income was $383M, with adjusted diluted EPS at $0.28 and reported EPS at $0.20.

• Adjusted operating margin was 22.1% in Q3, reflecting higher marketing investments; reported operating margin was 16.8%.

• Free cash flow for the first nine months of 2024 was $0.7B, down from $2.0B in the prior year period.

• Net interest expense for Q3 was $96M; total debt at quarter-end was $8.7B, with cash and equivalents at $1.1B.

• Research & development expenses for Q3 2024 were $97M, up from $78M in Q3 2023.

Outlook and guidance

• 2024 net sales and organic growth are expected at the low end of 1.0%-3.0% and 2.0%-4.0% ranges, respectively, with a ~1% FX headwind.

• Adjusted diluted EPS guidance for 2024 is reaffirmed at $1.10-$1.20, supported by productivity gains and cost savings.

• Adjusted operating margin forecast remains at 21%-22% for 2024.

• Adjusted effective tax rate for 2024 expected at 26.5%-27.0%.

• Restructuring and separation-related costs are expected to continue through H1 2025.