Kenvue's stock jumps after earnings beat as company unveils plan to cut 4% of global workforce

By Ciara Linnane

Sales boosted by self care and oral care in the first quarter

Kenvue Inc.'s stock jumped 2% early Tuesday, after the consumer health business that was spun out of Johnson & Johnson last year posted better-than-expected first-quarter earnings and announced plans to cut jobs.

"We entered 2024 with clear strategic priorities to reach more consumers, reinvent our ways of working to invest more behind our brands, and to foster a culture that rewards performance and impact," said Thibaut Mongon, Kenvue CEO in prepared remarks.

The company (KVUE) had net income of $296 million, or 15 cents a share, for the quarter, down rom $469 million, or 27 cents a share, in the year-earlier period.

Adjusted per-share earnings came to 28 cents, ahead of the 25-cent FactSet consensus.

Sales rose to$3.894 billion from $3.852 billion, ahead of the $3.791 billion FactSet consensus.

Kenvue entered a transition service agreement with J&J (JNJ) in 2023 under which it will provide services to the company for varying periods of time.

The company has now launched a program to better position itself for growth that includes plans to lay off about 4% of its current global workforce with the aim of reducing pretax costs by about $350 million.

Most of that will be fully realized in 2026. The company expects to book about $275 million of pretax charge in fiscal 2024 and fiscal 2025 to cover the costs of the program.

"As we exit services under the TSA, these initiatives will structurally position Kenvue for success in the future and create long-term shareholder value," said Paul Ruh, chief financial officer, in a statement.

Sales in the first quarter were boosted by self care on strong demand and growth in essential health led by oral care, which was partially offset by softness in skin health and beauty.

Volume fell by 3.1% due to the lapping of one-time retailer inventory re-builds in the first quarter of 2023, as well as the impact of retailer inventory reduction in the first quarter of 2024, which Kenvue is expecting to continue through the second quarter.

Kenvue is still expecting full-year adjusted EPS of $1.10 to $1.20 and for sales to grow 1% to 3%. The FactSet consensus is for EPS of $1.14.

The stock has fallen 12% in the year to date, while the S&P 500 SPX has gained 8.6%.

-Ciara Linnane

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05-07-24 0730ET

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