Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Kenvue Inc (KVUE, Financial) delivered year-over-year organic growth of 0.9% in Q3 2024, despite a softer top line.
- The company achieved strong productivity improvements, resulting in an adjusted gross margin expansion of 130 basis points compared to last year.
- Kenvue Inc (KVUE) is on track to invest approximately 20% more in marketing in 2024, focusing on social media and analytics-driven strategies.
- The company is making progress in exiting TSAs, with nearly three-quarters exited and on track to fully exit by mid-2025.
- Kenvue Inc (KVUE) is implementing a new playbook to strengthen its market presence, with early positive results in self-care and essential health segments.
Negative Points
- Organic sales in the skin health and beauty segment declined by 2.7% year-over-year, impacted by a muted sun season and challenging dynamics in China.
- The company is facing slower category dynamics in allergies and pediatric fever, affecting self-care segment growth.
- Kenvue Inc (KVUE) has lowered its full-year 2024 organic growth guidance to the low end of the 2% to 4% range due to slower recovery in skin health and beauty.
- The U.S. market is experiencing a deceleration in the skincare category, which is expected to continue into Q4.
- Despite improvements, the company acknowledges that the recovery of its U.S. skin health business will not be immediate or linear.
Q & A Highlights
Q: Can you provide more color on the drivers of your updated organic sales growth guidance for Q4?
A: Thibaut Mongon, CEO: We expect Q4 to be our strongest growth quarter due to the cumulative impact of our new playbook and easier year-over-year comparisons. Factors like last year's destocking and portfolio rationalization won't repeat, providing tailwinds. However, we are seeing a late start to the cold and flu season, which is a challenge.
Q: What are the recent trends in health and beauty, and how is China impacting your business?
A: Thibaut Mongon, CEO: The external environment, including a slow sun season and deceleration in the skincare category, is challenging. We see continued softness in Asia. Internally, we are focusing on executing our playbook with precision and strengthening our team, including welcoming Andrew Stanleick to lead skin health and beauty in North America and Europe.
Q: Can you elaborate on the green shoots you're seeing and the impact of increased A&P investments?
A: Thibaut Mongon, CEO: We are transforming our operations and increasing investments. In skin health and beauty, we see green shoots in areas like Neutrogena's face and sun platforms. Our marketing campaigns, especially on social media, are connecting well with younger audiences, evidenced by significant engagement metrics.
Q: How are you managing retailer inventory levels and the impact of store closures in the drug channel?
A: Thibaut Mongon, CEO: In the U.S., inventory levels are low, and we don't expect further destocking. Globally, cautious ordering patterns persist in self-care categories. We work closely with retail partners to manage assortments amid store closures, ensuring consumers can access our trusted brands.
Q: What are your expectations for skin health and beauty in 2025?
A: Thibaut Mongon, CEO: We aim to return the segment to growth in 2025 by expanding green shoots and countering U.S. category deceleration with better execution, innovation, and campaigns. We are focused on securing more distribution points and enhancing in-store prominence.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
