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KI

Kenvue Inc. (KVUE)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 was mixed: net sales declined 3.9% YoY to $3.74B as organic sales fell 1.2% and FX was a 2.7% headwind, but GAAP gross margin expanded 40 bps to 58.0%; adjusted gross margin contracted 20 bps to 60.0% as volume deleverage, FX and price investments offset productivity gains .
  • EPS beat: Adjusted diluted EPS was $0.24 vs Wall Street consensus $0.23*; revenue was $3.74B vs $3.68B*, with 11 EPS and 12 revenue estimates contributing. Management held FY’25 organic growth outlook (2–4%) but cut margin outlook due to tariffs, guiding adjusted EPS to “about flat” YoY and GetEstimates*.
  • Tariffs the swing factor: KVUE now embeds ~1% FX headwind (better than ~3% prior) but estimates ~$150M gross tariff cost in 2025; the company is mitigating via productivity, alternative sourcing, supply chain optimization and RGM, yet expects full-year adjusted operating margin to contract slightly vs prior improvement guide .
  • Strategic execution: U.S. consumption outpaced organic sales in all three segments as KVUE leaned into price/trade investments to sharpen competitiveness; TSA exits are complete, Our Vue Forward efficiencies are tracking, and a seasoned CFO (Amit Banati) was appointed—supporting a H2 acceleration narrative .

Note: *Values retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

  • Consumption > shipments across all segments as KVUE activated “five extraordinary powers”; Self Care consumption strength helped offset weak international cold/flu incidence; Tylenol gained share for the 11th straight quarter in the U.S. .
  • TSA exits completed in April—2,300+ services disentangled—supporting lower structural costs, agility, and reduced separation complexity .
  • Gross margin up 40 bps YoY to 58.0% on lower separation/intangible amortization; supply chain productivity provided tailwinds even as KVUE invested in price/trade to restore competitiveness .

What Went Wrong

  • Organic sales -1.2% with volume -0.9% and value realization -0.3% as planned U.S. pricing/trade investments and China destocking weighed; adjusted operating margin fell to 19.8% (vs 22.0% LY) on higher brand investment .
  • Skin Health & Beauty organic sales -4.8% on China destocking, soft sun season in LatAm, club channel rotation loss, and U.S. strategic price investments; segment AOI declined YoY .
  • Tariff escalation (~$150M gross 2025 impact) forces guide-down for FY’25 adjusted operating margin (now expected to decline YoY) and adjusted EPS “about flat” (low-single-digit FX headwind) .

Financial Results

Headline P&L vs prior quarters (oldest → newest)

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Billions)$3.899 $3.662 $3.741
GAAP Gross Margin %58.5% 56.5% 58.0%
Adjusted Gross Margin %60.7% 58.7% 60.0%
GAAP Operating Margin %16.8% 13.2% 14.9%
Adjusted Operating Margin %22.1% 19.2% 19.8%
GAAP Diluted EPS ($)$0.20 $0.15 $0.17
Adjusted Diluted EPS ($)$0.28 $0.26 $0.24

Q1 2025 actuals vs S&P Global consensus

MetricConsensusActualSurprise
Revenue ($USD Billions)$3.683*$3.741 +$0.058B / +1.6%*
Adjusted Diluted EPS ($)$0.228*$0.24 +$0.012 / +5.4%*
EBITDA ($USD Billions)$0.787*$0.808 (Non-GAAP) +$0.021B*

Note: *Values retrieved from S&P Global. KVUE reports Adjusted EBITDA; consensus/actual definitions may differ.

Segment performance (Net Sales) and Adjusted Operating Income

SegmentNet Sales Q1 2024 ($MM)Net Sales Q1 2025 ($MM)Adj. Op. Inc. Q1 2024 ($MM)Adj. Op. Inc. Q1 2025 ($MM)
Self Care1,698 1,667 601 566
Skin Health & Beauty1,054 977 146 92
Essential Health1,142 1,097 264 239
Total3,894 3,741 855 741

Additional KPIs

KPIQ1 2024Q1 2025
Free Cash Flow ($B)$0.1 $0.2
Interest Expense, net ($MM)$95 $94
Adjusted Effective Tax Rate %28.3% 27.5%
R&D Expense ($MM)$100 $99
Cash & Equivalents ($B)$1.1 (12/29/24) $1.1 (3/30/25)
Total Debt ($B)$(8.6) (12/29/24) $(8.7) (3/30/25)
Net Debt ($B)$(7.5) (12/29/24) $(7.7) (3/30/25)
Regional Net Sales ($MM) NA/EMEA/APAC/LATAM1,873 / 905 / 766 / 350 1,857 / 884 / 694 / 306

Guidance Changes

MetricPeriodPrevious Guidance (Feb 6, 2025)Current Guidance (May 8, 2025)Change
Net Sales Growth (YoY)FY 2025-1% to +1% (incl. ~3% FX headwind) +1% to +3% (incl. ~1% FX headwind) Raised (FX improved)
Organic Sales GrowthFY 2025+2% to +4% +2% to +4% (unchanged) Maintained
Adjusted Operating MarginFY 2025Improvement YoY Decline YoY due to tariffs Lowered
Adjusted Diluted EPSFY 2025Flat to +2% YoY incl. mid‑SD FX headwind About flat YoY incl. low‑SD FX headwind Lowered
FX Impact (Revenue)FY 2025~3% headwind ~1% headwind Improved
TariffsFY 2025Not included ~$150MM gross cost embedded; mitigations underway New headwind
DividendQ2 2025—$0.205/share payable May 28, 2025 Declared

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3’24)Previous Mentions (Q4’24)Current Period (Q1’25)Trend
Organic growth cadenceLow-end FY’24, H2 softness in categories FY’25 organic 2–4%, H1 muted then H2 acceleration H1 muted (destock + trade pricing); still targeting H2 acceleration Stable plan
Brand investment & RGM+20% A&P; content factory; RGM build A&P 10.6% of sales; trade spend upgrades U.S. price/trade resets to hit psychological thresholds; selective global pricing later Intensifying in H1
Supply chain/TSA70%+ TSA exits; efficiency focus ~85% exits; mid-2025 completion TSA exits completed in April Positive completion
Tariffs/macroN/ATariffs excluded from guide; FX headwind ~$150MM gross tariff impact; margin guide cut; mitigations activated New headwind
China/DistributionCategory softness; destocking dynamic Distributor issues; reclaim retail activation Destocking mostly done by end-Q2; APAC drag persists near term Stabilizing by Q2
Skin Health & BeautyEarly “green shoots” EMEA/U.S. store work U.S. regained #1 face care; more innovation in 2025 U.S. promo resets, influencer campaigns; EMEA momentum continues Gradual recovery
AI/TechnologyAnalytics/automation in ops IBP and AI-driven forecasting; trade-tech rollout 5-year Microsoft partnership to scale Azure AI (predictive, smart agents, GenAI) Capability build

Management Commentary

  • “Consumption for the quarter outpaced organic sales growth across each of our three segments.” — CEO, prepared remarks .
  • “We are maintaining our organic sales growth outlook… and we are updating our adjusted operating margin and adjusted diluted EPS outlook to reflect… tariffs and FX.” — CEO .
  • “We estimate the gross impact of tariffs… will be nearly $150 million for 2025… we will face higher than previously anticipated costs… and will not be able to absorb the full impact this calendar year.” — CEO .
  • “We are pleased to share that Amit Banati will join us on May 12 as our new Chief Financial Officer… a world-class executive with 30 years of experience.” — CEO ; appointment PR details .

Q&A Highlights

  • Innovation and spend cadence: KVUE keeps 2025 innovation slate intact with a back-half skew; will balance value price points and merchandising; no major cutbacks despite category deceleration .
  • Quarterly phasing: Company does not guide quarterly, but reiterated muted H1 from APAC destock and U.S. trade pricing, with H2 acceleration as headwinds lap and plans scale .
  • Skin Health recovery: Heavy promotional resets and shelf work should drive share/consumption; aiming for 2025 segment growth with broader distribution, stronger dermatology engagement and social-led campaigns .
  • Tariffs: ~$150MM gross impact with two-thirds from China exposure; mitigation via productivity, alt sourcing, and RGM; full offset expected to take time beyond 2025 .
  • Supply chain exposure: China is ~10% of foreign-sourced inputs; multi-sourcing and resiliency investments provide agility; potential to capture shelf gaps if competitors face disruption .

Estimates Context

  • Q1 2025 beats vs S&P Global consensus: Revenue $3.741B vs $3.683B*; Adjusted EPS $0.24 vs $0.228*; 12 revenue/11 EPS estimates contributed; narrative suggests limited upside on margins given tariff headwinds near term (guide cut) .
  • Potential estimate revisions: Expect modest upward tweaks to near-term revenue/EPS on beat, offset by lower FY’25 adjusted operating margin and EPS trajectory (“about flat” YoY) due to tariffs .

Note: *Values retrieved from S&P Global.

Key Takeaways for Investors

  • H1 headwinds, H2 acceleration: Organic growth still targeted at 2–4% for FY’25 with a back-half skew; watch for APAC destocking resolution by end-Q2 and U.S. promotional resets to convert to volume .
  • Margins pressured by tariffs: Adjusted operating margin guide reduced (now down YoY), and FY’25 adj. EPS “about flat” despite FX improvement; tariff mitigation is multi-quarter .
  • Category/brand health: Self Care remains resilient with share gains; Skin Health recovery is gradual but building via price architecture fixes, shelf execution and social/derm amplification, especially in EMEA and improving U.S. .
  • Structural execution: TSA exits completed; Our Vue Forward savings tracking; CFO transition adds seasoned operator, underpinning cost/forecast discipline and RGM sophistication .
  • Trading implications (near term): Stock likely sensitive to tariff policy headlines and evidence of Q2 destock normalization; beats on H2 consumption/volume conversion and Skin Health execution are potential upside catalysts .
  • Medium-term thesis: Portfolio of #1/#2 OTC and consumer health brands with improving analytics/AI and RGM capabilities; sustained productivity and capital-light cash generation support dividends (declared $0.205 for May 28) and reinvestment .