KVUE Q1 2025: $150M tariff drag caps growth, guides 2–4% sales
- Robust innovation and brand activation: Executives highlighted a strong 2025 plan for new product launches and breakthrough marketing initiatives, particularly in Skin Health and Beauty, to drive consumption and capture new demographics like Gen Z.
- Effective mitigation of external headwinds: The management is proactively addressing inventory and tariff challenges through strategic price investments, enhanced supply chain management, and operational efficiency measures, which can preserve margins and support long-term growth.
- Sustained marketing and channel investments: Continued, responsible investment in marketing and promotions across channels, including improved price architectures and expanded retailer partnerships, is expected to boost shelf space constraints and further drive consumption.
- Tariff exposure remains a significant risk: The net impact from tariffs is already baked into the current guidance and estimated at nearly $150 million for 2025.
- Uncertainty in mitigation efforts: The executives noted their actions to mitigate tariffs—such as accelerating productivity initiatives, alternate sourcing, and revenue growth management—may not fully offset the impact in the near term.
- Potential for prolonged cost pressure: If tariffs continue or even escalate, full absorption of the cost impact may only be possible by 2026, leaving 2025 vulnerable to margin pressure and diminished profitability.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue (Net Sales) | –3.9% (from $3,894M in Q1 2024 to $3,741M in Q1 2025) | KVUE’s total revenue declined by $153M (3.9%), driven by deteriorating performance in individual segments—especially the significant drop in Skin Health and Beauty—and the adverse impact of factors such as unfavorable foreign currency effects that contrast with last period’s higher revenue numbers. |
Self Care | –1.8% (from $1,698M in Q1 2024 to $1,667M in Q1 2025) | The Self Care segment’s slight decline reflects ongoing challenges such as softer demand and potential currency headwinds, which contrast with previous period gains driven by promotional effectiveness and product innovation. |
Skin Health and Beauty | –7.0%+ (from $1,054M in Q1 2024 to $977M in Q1 2025) | A steep 7%+ decline in Skin Health and Beauty is largely due to volume-related decreases, increased competitive pressures, and unfavorable strategic price decisions—trends that worsened compared to relatively higher performance in the previous quarter. |
Essential Health | –3.9% (from $1,142M in Q1 2024 to $1,097M in Q1 2025) | Essential Health experienced a 3.9% drop, attributable to similar pressures seen across segments including market softness and currency impacts, marking a downturn relative to the higher figures reported in Q1 2024. |
Operating Income | +1.5% (from $550M in Q1 2024 to $558M in Q1 2025) | Operating income increased modestly despite revenue headwinds, indicating effective cost management and margin improvements that helped counteract the revenue declines experienced in the prior period. |
Net Income | +9% (from $296M in Q1 2024 to $322M in Q1 2025) | Net income rose by approximately 9%, suggesting that improvements in cost control and operational efficiencies outweighed the revenue declines, a contrast to the previous period’s lower profitability despite similar headwinds. |
Net Cash Flows from Operating Activities | –100% (from $287M in Q1 2024 to $0.4M in Q1 2025) | A dramatic decline in operating cash flows is primarily due to significant changes in working capital—such as lower accounts payable and increased trade receivables—marking a stark shift from the favorable liquidity dynamics observed in Q1 2024. |
Capital Expenditures | –99% (from –$153M in Q1 2024 to –$0.2M in Q1 2025) | Capital expenditures fell nearly to zero as the company drastically scaled back on investments compared to the aggressive capex of $153M in Q1 2024, likely reflecting a strategic shift towards tighter cost controls and revised growth outlooks. |
Cash and Cash Equivalents | –8.5% (from $1,155M in Q1 2024 to $1,057M in Q1 2025) | An 8.5% decrease in cash and cash equivalents indicates the impact of lower operating cash flows and adjustments in liquidity management, contrasting with the previous period’s stronger cash position based on higher operational inflows. |
Restructuring Expenses | +46% (from $41M in Q1 2024 to $60M in Q1 2025) | Restructuring expenses increased by about 46%, reflecting accelerated costs associated with ongoing “Our Vue Forward” initiatives and further investments in organizational efficiency that intensified compared to the prior quarter. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Organic Sales Growth | FY 2025 | Midpoint ≈ 3% for the full year | No guidance provided | no current guidance |
Adjusted Operating Margin | FY 2025 | Planned to expand year-over-year | No guidance provided | no current guidance |
Adjusted Effective Tax Rate | FY 2025 | 25.5% to 26.5% | No guidance provided | no current guidance |
Diluted Weighted Average Shares Outstanding | FY 2025 | Approximately 1.93 billion shares | No guidance provided | no current guidance |
Adjusted Diluted EPS | FY 2025 | Expected to be flat to up 2% | No guidance provided | no current guidance |
Category Growth Assumptions | FY 2025 | Global category growth expected at 2% to 3% | No guidance provided | no current guidance |
Phasing of Growth | FY 2025 | Q1 2025 impacted by a 3–4 percentage point drag with strongest performance anticipated in Q4 2025 | No guidance provided | no current guidance |
Vue Forward Savings | FY 2025 | On track to deliver $350 million of annualized savings by 2026 with progress in 2025 | No guidance provided | no current guidance |
Gross Margin | FY 2025 | Expected to see modest accretion in 2025 | No guidance provided | no current guidance |
Trade Investments | FY 2025 | Increased investments in the first half of 2025, particularly in the U.S. | No guidance provided | no current guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Organic Sales Growth | Q1 2025 | "Expected to be in the low single digits for Q1 2025, with a midpoint of approximately 3%" | -3.9% YoY (from $3,894In Q1 2024 to $3,741In Q1 2025) | Missed |
Adjusted Operating Margin | Q1 2025 | "Planned to expand year-over-year" | 14.9% vs 14.1% YoY (Operating Income: $550To $558On Net Sales: $3,894To $3,741) | Met |
Adjusted Effective Tax Rate | Q1 2025 | "Expected to be in the range of 25.5% to 26.5%" | 29.7% (calculated from Provision for Taxes: $136/ Income before Taxes: $458) | Missed |
Diluted Weighted Average Shares Outstanding | Q1 2025 | "Approximately 1.93 billion shares" | 1.925 billion | Met |
Adjusted Diluted EPS | Q1 2025 | "Flat to up 2%" | +13.3% YoY (from $0.15In Q1 2024 to $0.17In Q1 2025) | Beat |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Skin Health and Beauty Innovation and Recovery | Mentioned consistently in Q2–Q4 2024 with focus on new product innovations, dermatologist partnerships, and early recovery efforts despite destocking and channel challenges. | Q1 2025 emphasizes accelerated innovation plans, strategic price adjustments, and consumer-driven brand activations alongside detailed consumption trends. | Consistent focus with evolving emphasis on strategic pricing and robust innovation efforts—sentiment remains cautiously optimistic about a recovery later in the year. |
Marketing Investment and Brand Activation Strategies | Highlighted in Q2–Q4 2024 through increased spending, streamlined agency models, influencer-led campaigns, and improved ROI measurements. | In Q1 2025, the company underlines higher marketing investments with a focus on ROI metrics, targeted omnichannel presence, and new brand positioning initiatives such as the “beauty to a science” launch. | Continued elevated investment with an enhanced focus on data-driven metrics and targeted consumer engagement, indicating sustained commitment to brand activation strategies. |
Gen Z Targeting and Evolving Consumer Demographics | Not mentioned (no coverage in Q2–Q4 2024 earnings calls) [docs]. | Q1 2025 introduces targeted campaigns with Gen Z influencers, resulting in significant earned media impressions and improved household penetration among Gen Z consumers. | New topic with highly positive sentiment, reflecting a strategic pivot that could have large future impact by capturing a key growth demographic. |
Operational Efficiency and Cost-saving Initiatives | Discussed across Q2–Q4 2024 with reference to the Vue Forward initiative, margin expansion through productivity, and exiting TSAs to streamline operations. | Q1 2025 reports the completion of TSA exits, outlines a $350 million savings target by 2026, and details ongoing productivity initiatives to optimize the supply chain. | Consistent emphasis on improving operational efficiency; the clear savings targets and process optimizations maintain a positive long-term outlook. |
Tariff Exposure and External Trade Risks | Addressed in Q4 2024 (focusing on U.S.–Canada dynamics) but not covered in Q2 and Q3 2024. | Q1 2025 provides detailed discussion on incremental tariff costs, FX impacts, and outlines mitigation actions (dual/triple sourcing, supply chain adjustments). | Renewed focus in Q1 2025 with more detailed mitigation strategies, signaling increased concern in a volatile trade environment. |
Retail Destocking and Supply Chain Disruptions | Consistently noted in Q2–Q4 2024: Q2 highlighted stabilization post-destocking; Q3 discussed cautious ordering and stable supply chains; Q4 mentioned ongoing challenges due to seasonal and channel factors. | Q1 2025 details multi-segment impacts from destocking (especially in China) and strategic price investments, while supply chain productivity initiatives are underway with an expectation for improvement by Q2. | Ongoing challenge with cautious sentiment; the company projects resolution and recovery later in the year, but current headwinds necessitate continued monitoring. |
China and Asia-Pacific Market Challenges | Q2 2024 presented China as a positive growth contributor for certain segments, while Q4 2024 highlighted distributor liquidity issues and market contraction in China; Q3 2024 did not include related details. | Q1 2025 again highlights challenges such as destocking in China, softness in pediatric segments, and underperformance in Asia-Pacific categories—with expectations of resolution by later quarters. | Mixed sentiment with recurring regional challenges; evolving strategies are needed to turn around these markets, which remain critical for future growth. |
Leadership Vacancies and Brand Streamlining Challenges | Q2 2024 noted progress in filling leadership gaps and initiatives to streamline brands through targeted distributor and innovation efforts. | Q1 2025 reveals an announced CFO transition and ongoing issues with distributor execution that impact brand competitiveness, with expectations for resolution by Q2 2025. | Ongoing topic with moderate concerns; while progress is noted, leadership transitions and execution challenges continue to pose risks to brand strength. |
Margin Pressure, Profitability, and Cash Flow Concerns | Q2 2024 reported robust margin improvements driven by operational efficiencies and stronger gross margins, whereas Q3 and Q4 lacked detailed discussion on these topics. | Q1 2025 indicates margin contraction due to tariff and FX pressures, with an adjusted diluted EPS outlook remaining flat; no specific cash flow issues were highlighted. | Mixed sentiment: earlier positivity on margins contrasts with Q1 2025 challenges, raising near-term concerns over profitability while long-term strategies remain in place. |
-
Growth Outlook
Q: Q2 growth and back half confidence?
A: Management expects a muted first half with sequential acceleration later, keeping organic sales in the 2% to 4% range despite headwinds like destocking and U.S. price investments. -
Tariff Breakdown
Q: What’s the tariff impact composition?
A: The guidance embeds roughly $150 million in tariff costs, with about 2/3 coming from China—split between finished products (2/3) and raw materials (1/3)—and a minor impact from Canada. -
Tariff Timing
Q: When will tariffs impact the P&L?
A: Tariff effects are already reflected in this year’s guidance, with mitigation efforts underway that could gradually absorb more impact by 2026. -
Supply Chain Resilience
Q: Are supply chain risks from China addressed?
A: The company is leveraging dual sourcing and regional production, with China accounting for only about 10% of annualized trade spend, ensuring a resilient, flexible supply chain. -
Price & Trade Investments
Q: How are price and trade actions affecting results?
A: Investment in the right price points and trade activations is boosting household penetration, even though there is a short-term top-line headwind as these initiatives lay the groundwork for long-term benefits. -
SG&A Efficiency
Q: Why is SG&A so high and can it be optimized?
A: Elevated SG&A reflects deliberate, strategic brand investments now, balanced by efficiency initiatives like the $350 million savings plan under Our Vue Forward, expected by 2026. -
CFO Transition
Q: What does the new CFO bring to the team?
A: Amit Banati, with 30 years of global CPG experience, is poised to enhance profitable growth and operational agility without a radical shift from current strategy. -
Cold & Cough Inventory
Q: What’s the status of cold, cough replenishment?
A: U.S. distributors slightly exceeded expected inventory replenishment, while in Asia, lower incidents continue to drive prolonged destocking, possibly impacting Q2. -
Innovation Metrics
Q: How are Skin Health campaign results tracking?
A: Early signs are encouraging, with improved consumption metrics for key brands like Neutrogena, even as the team refines measurement of campaign effectiveness. -
In-Store Promotion
Q: How will promotions affect shelf space gains?
A: Continued targeted promotions and robust media investments are designed to secure additional in-store presence, provided that ROI remains strong on these initiatives. -
Private Label Trends
Q: Are consumers trading down to private labels?
A: Kenvue sees limited exposure to private labels, with penetration declining by 50 basis points, reinforcing consumer trust in its brands. -
Innovation Plans
Q: Any changes to the innovation timeline?
A: The focus remains on accelerating innovation rollouts and strengthening trusted product messaging, with plans adjusted to current market dynamics but overall unchanged.
Research analysts covering Kenvue.