Kenvue (KVUE) Q4 FY24 earnings call: guidance and Q&A

Clarification on 2025 organic sales guidance, specifically the contribution of Q4 negative impacts (cold/flu, China distribution) to Q1 drag, and assumptions for restocking/fix timelines.

Management expects Q1 to be impacted by lingering pediatric pain effects (no restocking assumed due to erratic season in U.S. and destocking in China) and China distribution issues. These factors, plus strategic trade investments, create a 3-4 point headwind in Q1, leading to low single-digit organic sales decline. H2 acceleration is expected as these impacts cycle through.

“In a market like the U.S., while we see -- when we saw an uptick at the beginning of January, then a decline in the middle of January, and we see a slight uptick again recently, it has been pretty erratic, and I think it's too soon to call for an upside in the U.S. In China, the go-to-market is different. Distributors and stores tend to stock up ahead of the season. They had a low season in Q4 as we talked about. And so even if the incidence goes up in Q1, we would expect them to destock and to bleed the inventory in Q1 with no impact on our shipments.”

asked by Filippo Falorni · answered by Thibaut Mongon

How the 2-3% category growth assumption plays out globally vs. U.S./international, and if Q2 organic sales growth will also be muted. Also, if Q4 2025 assumptions include a return to normal for the headwinds seen in Q4 2024.

Category growth slowing to 2-3% in 2025 is mainly due to lower price impact. Consumers seek value but prioritize health. Q2 will see acceleration but not full strength due to ongoing China issues. Q4 2025 assumes absence of Q4 2024 headwinds (normal cold/flu season) and full impact of plans.

“What we are talking about in Q4 is the absence of the headwinds that we saw in Q4 of 2024. We expect a normal season overall in colds, cough and flu. And we also see selective price actions outside the U.S. and the full impact of our plans with the most strength being seen in Q4 of 2025.”

asked by Peter Grom · answered by Paul Ruh

Insight into innovation pipeline and potential for shelf space gains in Skin Health and Beauty, including expectations for Sun Care season.

Recovery in Skin Health and Beauty is taking longer but plans are working, with strong traction in Europe/LatAm and positive signs in North America (Neutrogena #1 face care brand in U.S. channels). Stronger innovation pipeline and campaigns (e.g., Tate McRae for Neutrogena) are planned for 2025. Confident in upcoming Sun Care season and retailer partnerships.

“You look at the campaign we just released this week with Tate McRae. We got 1 billion media impressions in the first 24 hours, that's 5x the engagement rate on organic social media versus what we would expect from industry benchmarks. So up to a very good start.”

asked by Anna Lizzul · answered by Thibaut Mongon

Elaboration on temporary trade investments, expected volume-led growth in H2, negative U.S. price realization vs. positive abroad. Also, details on operating margin guidance (SG&A, A&P investment levels).

Strategic pricing investments are selective, primarily in the U.S., to improve competitiveness and drive volume. This will lead to negative value realization in the U.S. in Q1/Q2, offset by pricing abroad in H2. Gross margin accretion is expected in 2025. A&P investment will continue at a moderate level, with a focus on ROI, while still delivering operating margin expansion.

“An example is, one thing we are correcting is that in the past, we have made some price increases. And for certain codes, we crossed certain price ratios that impacted our volumes. So after doing a few successful pilots in 2024, where we have checked that going back down below this price ratios, we're driving volume, we are doing -- we are implementing those, again, on select codes in 2025.”

asked by Andrea Teixeira · answered by Thibaut Mongon

Cadence of gross/operating margin trajectory for 2025, especially Q1, and risk mitigation plans for potential tariffs.

Margin evolution will follow top-line trajectory, muted in H1 (especially Q1) and accelerating in H2. Q2 typically highest gross margin, but some shift to Q3 due to investments. For tariffs, Kenvue has a dedicated team and playbook ready, including alternate sourcing and potential pricing actions, primarily for U.S.-Canada trade. 2025 outlook does not factor in tariff impact.

“The guidance that we have does not include any impact of any tariffs. And that's something that we will be, of course, working closely with our customers to ensure that we continue to provide consumers with the right value equation, but we are ready whenever it comes. Our playbook is ready to be activated.”

asked by Korinne Wolfmeyer · answered by Paul Ruh

How incentive compensation works for regional managers, particularly regarding FX impact on targets, and mitigation of risk if spending is pulled back to hit post-FX numbers.

Incentive compensation is tied to "One Kenvue" approach, with levers to offset FX impacts. No dispensation for FX; plans reflect external guidance (organic sales, constant currency EPS). Hedging programs are used for predictability. Teams are compensated holistically, and investments will be protected by taking out complexity and non-value-added costs.

“An important thing that I wanted to mention is that we do have hedging programs, and we have those for the purpose of predictability. And we employ them very rigorously. And the last thing that I wanted to mention is that in 2025, we have already factored in the headwinds that I referred to. So mid-single digits headwinds in EPS. And that's how we compensate our teams.”

asked by Nik Modi · answered by Thibaut Mongon