01—Abstract
Summary
Summary of the 10-Q filed May 8, 2025. Cited figures are marked; the original filing is the authoritative source.
Kenvue Inc. reported net sales of $3.74 billiona for the fiscal three months ended March 30, 2025, down $153 million, or 3.9%, from $3.89 billion a year earlier.
Organic sales declined 1.2%b, with foreign currency reducing reported sales by 2.7%. Volume fell 0.9% and value realization fell 0.3%. Skin Health and Beauty was the weakest segment, with Organic sales down 4.8% on competitive pressures and strategic price investments, mainly in the United States.
Segment adjusted operating income fell 11.3% to $897 millionc. Net income rose to $322 million from $296 million, helped by lower impairment charges (none this quarter versus $68 million a year earlier) and lower Other expense, net. Diluted EPS was $0.17 versus $0.15.
Cash flow from operations was $428 milliond, up from $287 million, largely from working capital timing. The company repaid $750 million of 5.50% Senior Notes due 2025 and increased commercial paper borrowings to $1.68 billion from $800 million. Total debt was $8.74 billion, and cash was $1.06 billion.
Management believes existing cash and operating cash flow will cover obligations for at least 12 months. Restructuring expenses under the 2024 Multi-Year Restructuring Initiative rose to $60 million, and the initiative is expected to total approximately $550 million, with annualized gross savings of about $350 million beginning in fiscal 2026. The filing estimates incremental gross tariff exposure of approximately $150 million for fiscal 2025.
Litigation remains a key overhang. Acetaminophen, phenylephrine, benzoyl peroxide, and Zantac-related lawsuits are pending, and the company says it cannot reasonably estimate its potential liability for several of them.
Talc liabilities outside the United States and Canada remain with Kenvue, while J&J indemnifies talc claims in the United States and Canada. Management says the ultimate outcome of legal proceedings is not expected to have a material adverse effect on financial position, though results could be affected in any period.
02—Key points
Key Highlights
- Net sales were $3.74 billion, down 3.9% from $3.89 billion; Organic sales declined 1.2% with volume down 0.9% and value realization down 0.3%.
- Skin Health and Beauty net sales fell 7.3% to $977 million, with Organic sales down 4.8% and segment adjusted operating income down 37.0% to $92 million.
- Net income rose 8.8% to $322 million; diluted EPS was $0.17 versus $0.15, aided by no impairment charges this quarter versus $68 million a year earlier.
- Operating cash flow increased to $428 million from $287 million, primarily from working capital timing.
- Total debt was $8.74 billion, including $1.68 billion of commercial paper, after repaying $750 million of 5.50% Senior Notes due 2025.
- The 2024 Multi-Year Restructuring Initiative is expected to total about $550 million in pre-tax charges, with annualized gross savings of about $350 million from fiscal 2026.
- Estimated incremental gross tariff exposure is about $150 million for fiscal 2025; litigation over acetaminophen, phenylephrine, benzoyl peroxide, and Zantac remains pending.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2025, Kenvue kept $0.09.
- Revenue$3.74B100.0%
- Cost of revenue−$1.57B42.0%
- Gross profit$2.17B58.0%
- Operating costs−$1.61B43.0%
- Operating income$558.0M14.9%
- Interest, other & tax−$236.0M6.3%
- Net income$322.0M8.6%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2025filed May 8, 2025Financial Statements
Q1 FY2025 against Q1 FY2024
| Line item | Q1 FY2025Q1 FY2024 | Change |
|---|---|---|
| Revenue | $3.74B$3.89B | −3.9% |
| Cost of Revenue | $1.57B$1.65B | −4.8% |
| Gross Profit | $2.17B$2.24B | −3.3% |
| R&D Expenses | $99.00M$100.00M | −1.0% |
| SG&A Expenses | $1.54B$1.57B | −2.3% |
| Operating Income | $558.00M$550.00M | +1.5% |
| Interest Expense | $107.00M$109.00M | −1.8% |
| Net Income | $322.00M$296.00M | +8.8% |
| EPS (Basic) | $0.17$0.15 | +13.3% |
| EPS (Diluted) | $0.17$0.15 | +13.3% |
| Shares Outstanding (Basic) | 1.91B1.92B | −0.1% |
| Shares Outstanding (Diluted) | 1.93B1.92B | +0.3% |
05—Questions
Frequently Asked Questions
Why did net sales decline in the quarter?
Net sales fell $153 million, or 3.9%, to $3.74 billion. Foreign currency reduced reported sales by 2.7%, and Organic sales declined 1.2%, driven by volume decreases of 0.9% and unfavorable value realization of 0.3%. The filing attributes the Skin Health and Beauty decline mainly to competitive pressures and strategic price investments in the United States, while Self Care gains in North America were offset by Cough and Cold declines and destocking in China.
Did profitability improve despite lower sales?
Net income increased 8.8% to $322 million, and diluted EPS rose to $0.17 from $0.15. Operating income rose 1.5% to $558 million. Gross profit margin expanded 40 basis points to 58.0%, and Selling, general, and administrative expenses fell $36 million. However, segment adjusted operating income declined 11.3% to $897 million.
How is the company managing its debt and liquidity?
Kenvue repaid $750 million of 5.50% Senior Notes due 2025 and increased commercial paper to $1.68 billion from $800 million. Cash and cash equivalents were $1.06 billion, and the company had a $4.0 billion revolving credit facility, undrawn at quarter-end. Management believes cash and operating cash flow will cover obligations for at least the next 12 months.
What are the main litigation risks disclosed?
The filing discloses pending product liability lawsuits over acetaminophen, phenylephrine, benzoyl peroxide, and Zantac-related claims. For several matters the company says it cannot reasonably estimate the likelihood or magnitude of potential liability. Talc claims in the United States and Canada are subject to J&J's indemnification, while talc exposure outside those countries remains with Kenvue. Management does not expect the ultimate outcome to have a material adverse effect on financial position.
What is the outlook for restructuring and tariffs?
The 2024 Multi-Year Restructuring Initiative is expected to cost about $550 million, with $288 million incurred inception-to-date through March 30, 2025, and annualized gross savings of about $350 million beginning in fiscal 2026. The company estimates incremental gross tariff exposure of about $150 million in fiscal 2025 and is pursuing internal mitigation to partly offset it.
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