Q4 2024 Earnings Summary
- Kenvue expects to accelerate organic sales growth to 2%–4% in 2025, driven by strong innovation plans, including launching 40% more innovations compared to 2024, especially in Skin Health and Beauty. The company is confident that these plans will contribute to volume-led growth, with acceleration anticipated in the second half of the year.
- Active measures are being taken to address challenges in China, including replacing underperforming distributors and reclaiming direct responsibility for brand activation. These steps are expected to improve sales in the Asia-Pacific region.
- Adjusted operating margins are expected to expand in 2025, supported by strong productivity and efficiency initiatives, which will offset strategic investments in pricing and marketing. The company has clear plans for gross margin accretion and operating margin improvements throughout the year.
- Kenvue anticipates a negative impact on growth in the first half of 2025 due to destocking and strategic price investments, projecting a low single-digit decline in organic sales in Q1. This includes a 3- to 4-point headwind from lingering effects of low pediatric pain incidences and distribution disruptions in China.
- Disruptions in China, particularly with distributor challenges and reduced customer orders, are expected to continue affecting sales, especially in the Essential Health and Skin Health segments. The company acknowledges that fixing these issues will take more than one quarter, indicating prolonged challenges in a key market.
- Cash flow conversion was approximately 60% in fiscal 2024, below the company's target of over 100%, and Kenvue does not expect to reach this target in 2025 due to ongoing investments and separation-related expenses. This suggests continued pressure on cash generation and potential impacts on financial flexibility.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | Virtually unchanged (3,662 million USD vs. 3,666 million USD) | Total revenue remained stable as the slight increases in Self Care (+2%) and Skin Health and Beauty (+1%) were offset by a decline in Essential Health (-4%), suggesting offsetting market dynamics across segments. |
Self Care Revenue | +2% increase (1,569 million USD vs. 1,537 million USD) | The increase in Self Care revenue likely reflects modest gains from improved pricing actions and consumer demand, building on previous period investments in product innovation and marketing, which helped modestly lift growth from prior values. |
Skin Health and Beauty Revenue | +1% increase (1,011 million USD vs. 1,001 million USD) | A small increase in this segment indicates slight recovery or stabilization, possibly due to improved product mix and market positioning compared to prior corrective actions, although the growth remained limited when compared with previous period outcomes. |
Essential Health Revenue | -4% decline (1,082 million USD vs. 1,128 million USD) | The decline in Essential Health revenue may be attributable to continued challenges such as pricing/mix pressures and weakening market demand that were less pronounced in previous periods, thereby dragging down the overall revenue mix. |
Operating Income (EBIT) | Huge surge from 46 million USD to 483 million USD | The dramatic increase in operating income indicates significant operational improvements, likely driven by enhanced cost efficiencies, restructuring and margin expansion efforts that built upon prior period constraints, resulting in an over tenfold improvement. |
Net Income | -10% decline (293 million USD vs. 327 million USD) | Despite strong operating performance, net income fell by 10%, potentially due to a combination of higher SG&A investments, restructuring costs, and possibly adverse tax impacts relative to the previous period, which eroded bottom-line profitability. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Organic Sales Growth | FY 2024 | 2%-4% | no current guidance | no current guidance |
Adjusted Operating Margin | FY 2024 | 21%-22% | no current guidance | no current guidance |
Adjusted Effective Tax Rate | FY 2024 | 26.5%-27% | no current guidance | no current guidance |
Interest Expense | FY 2024 | $380M | no current guidance | no current guidance |
Adjusted Diluted EPS | FY 2024 | $1.10-$1.20 | no current guidance | no current guidance |
Foreign Exchange Impact | FY 2024 | 1% headwind | no current guidance | no current guidance |
Organic Sales Growth | FY 2025 | no prior guidance | 3% midpoint | no prior guidance |
Adjusted Operating Margin | FY 2025 | no prior guidance | year-over-year expansion | no prior guidance |
Adjusted Effective Tax Rate | FY 2025 | no prior guidance | 25.5%-26.5% | no prior guidance |
Diluted Weighted Average Shares | FY 2025 | no prior guidance | 1.93B | no prior guidance |
Adjusted Diluted EPS | FY 2025 | no prior guidance | flat to up 2% | no prior guidance |
Category Growth | FY 2025 | no prior guidance | 2%-3% | no prior guidance |
Vue Forward Savings | FY 2025 | no prior guidance | $350M annualized by 2026 | no prior guidance |
Gross Margin | FY 2025 | no prior guidance | modest accretion | no prior guidance |
Trade Investments | FY 2025 | no prior guidance | increased in 1H 2025 | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Organic Sales Growth | FY 2024 | “Toward the low end of 2% to 4%” | ~0% for Q4 2024 (revenue from 3,666In Q4 2023 to 3,662In Q4 2024) | Missed |
Adjusted Operating Margin | FY 2024 | “21% to 22%” | 13.2% (Operating Income of 483÷ Total Revenue of 3,662) | Missed |
Interest Expense | FY 2024 | “~$380 million” | ~$378 million total (95+ 92+ 96+ 95) | Met |
Adjusted Diluted EPS | FY 2024 | “$1.10 to $1.20” | $0.53 (0.15+ 0.03+ 0.20+ 0.15) | Missed |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Skin Health and Beauty | Faced recurring underperformance in Q1 (-4.5% ), Q2 (-2.4% ), and Q3 (decline and slower U.S. recovery ) | Achieved 2.6% organic sales growth with positive progress and a turnaround strategy for 2025 | Sentiment turning more positive |
Retail Destocking and Inventory Management | Destocking impacted Q1 , continued in Q2 , and was low-risk by Q3 | Projected 3–4 point headwind in early 2025 results, notably in Q1, due to ongoing strategic inventory adjustments | Remains a significant headwind |
Cost-Saving and Productivity (Vue Forward, etc.) | Vue Forward launched in Q1 targeting $350M savings by 2026 , ongoing progress shown in Q2 and Q3 | By Q4, over half of expected savings realized, enabled a 20% increase in brand spending | Continuously expanding impact |
China Market Disruptions and Distribution Issues | Q2 noted Dr.Ci:Labo challenges , Q3 saw consumer softness and challenging environment | Q4 highlighted secondary distributor failures, leading to direct retailer activation and a prolonged recovery timeline | Heightened focus on mitigation |
Organic Sales Growth & Strategic Price Investments | Previously guided 2–4% organic growth range, with pricing actions offsetting inflation | Finished 2024 at 1.5% organic growth; targeting 2–4% in 2025, emphasizing volume-led gains and selective pricing resets | Steady outlook for 2025 |
Margins and Profitability Outlook | Achieved margin expansions each quarter (Q1 +290 bps , Q2 +410 bps , Q3 near 60% ) | FY 2024 gross margin at 60.4% (+200 bps), operating margin at 21.5%, modest further improvement expected in 2025 | Continuing to strengthen |
Cash Flow Conversion & Financial Flexibility | Not discussed in Q1, Q2, or Q3 | Conversion at 60%, below 100%+ target due to separation costs and strategic investments. Improving trajectory anticipated post-2025 | Newly addressed topic |
Increased Brand Innovation & Marketing Investments | Investment ramped steadily in Q1–Q3, with a +20% year-over-year jump in H1 focusing on HCP engagement and influencer marketing | In Q4, marketing spend reached 10.6% of sales; planning 40% more product innovations in 2025 | Escalating investment levels |
Macroeconomic Challenges (Inflation, FX, etc.) | Managed hyperinflation (Q1 ) and FX (Q2 , Q3 ) via selective price increases and productivity | Q4 acknowledged persistent cost and FX headwinds, with hedging strategies in place | Ongoing pressure |
Uncertainty in Self Care Segment | Low incidence of cough/cold/flu dampened demand in Q1–Q3 | Q4 saw a double-digit decline in pediatric pain, overshadowing otherwise solid Self Care growth | Continues to weigh on segment |
Research analysts covering Kenvue.