Over a year since its IPO, Kenvue (KVUE, Financial), formerly part of Johnson & Johnson (JNJ, Financial), has experienced a turbulent period. Despite this, the stock saw a notable uplift today following a positive Q1 earnings report. Kenvue not only surpassed Q1 EPS expectations but also confirmed its financial guidance for FY24. Additionally, the company announced a 4% workforce reduction, anticipated to save approximately $350 million annually before taxes by FY26. These savings will primarily be reinvested into Kenvue’s top fifteen brands.
The focus brands, including Tylenol, Benadryl, Motrin, and Zyrtec, largely fall within Kenvue's Self-Care segment and drive about two-thirds of the company's growth. This segment reported a 3.5% year-over-year increase in net sales to $1.70 billion in Q1, primarily due to favorable pricing, despite a 1.4% drop in volume. Overall, Kenvue's total volume fell by 3.1%, affected partly by previous retailer inventory adjustments. The company anticipates continued inventory reductions into the second quarter of FY24.
On a brighter note, improvements in the supply chain, some relief from cost inflation, and effective pricing strategies helped boost the adjusted gross profit margin by 290 basis points to 60.2% year-over-year. Investors were also reassured as Kenvue maintained its FY24 EPS guidance at $1.10-$1.20, with revenue expectations between $15.59 billion and $15.90 billion, and an organic growth target of 2-4%.
Despite not achieving outstanding Q1 results and facing ongoing volume decreases, Kenvue managed a better-than-expected performance, which has somewhat revitalized investor sentiment. This was further supported by the introduction of a cost-saving plan, providing a much-needed uplift to the stock, which had previously declined 25% from its IPO price.
