One year after landing on the New York Stock Exchange, Kenvue, originally a consumer health business company for Johnson&Johnson, pressed the layoff button. On May 7th US time, Kenvue released its Q1 2024 financial report and stated that the company's board of directors approved a measure on May 6th, with an expected global layoff of 4%, aimed at improving organizational efficiency and positioning Kenvue better for future growth.
While announcing global layoffs, Johnson&Johnson also plans to clear its remaining 9.5% stake in Kenvue. Kenvue has well-known brands such as Dabao, painkillers Tylenol, Bondi Band Aids, Ludeqing, and Johnson&Johnson Baby. According to Kenvue's official disclosure data, Kenvue has a total of 22000 employees, so it is roughly estimated that this layoff will affect 880 employees.
On May 16th, a reporter from Nandouwan Finance Society made multiple attempts to contact Kenvue, but as of the time of publication, no response has been received.
Kenvue announces global layoffs of 4%
Johnson&Johnson has been continuously reducing its holdings in the past year and plans to clear its holdings in the near future
Kenvue was formerly a consumer goods and personal health care business under Johnson&Johnson. In 2021, Johnson&Johnson split and restructured the business, and named it Kenvue in September 2022. On May 4, 2023, Kenvue listed on the New York Stock Exchange at an issue price of $22 per share. On its first day of listing, Kenvue reported $26.9, with a market value of up to $50.2 billion. At this time, Johnson&Johnson holds 90.9% equity in Kenvue.
According to Kenvue's announcement released on May 7, 2024, the company's board of directors approved a measure on May 6, 2024, which is expected to reduce the current global workforce by approximately 4% and continue to save approximately $350 million in total pre tax costs annually. This will be fully realized by 2026, with some of it being reinvested into the company's brand to promote growth. To achieve these savings, the company expects to incur approximately $275 million in pre tax restructuring costs in fiscal years 2024 and 2025, respectively.
The announcement mentions that in 2023, Kenvue signed a Transition Services Agreement (TSA) with Johnson&Johnson to provide certain services to the company for different periods of time. Kenvue CFO Paul Ruh stated, "As we exit TSA services, these measures will structurally lay the foundation for Kenvue's future success and create long-term value for shareholders.".
Screenshot of Kenvue's official website
According to Kenvue's official disclosure data, Kenvue has a total of 22000 employees, of which 1800 are in China. Therefore, it is roughly estimated that this layoff is expected to affect 880 employees globally.
A reporter from Nandouwan Finance Society noticed that in addition to layoffs, the parent company Johnson&Johnson has been continuously reducing its holdings in the past year. On August 23 last year, Kenvue announced its departure from Johnson&Johnson and became a completely independent company. At that time, Johnson&Johnson's shareholding had dropped to 9.5%. On May 13 this year, Kenvue once again announced that Johnson&Johnson would sell the remaining shares to Goldman Sachs and JPMorgan Chase in a debt to equity swap.
Screenshot of Kenvue's official website
Businesses such as Dabao, Ludeqing, and Chengye Doctor
The smallest increase in price and the most severe decline in sales volume
According to the financial report, as of March 31, 2024, Kenvue's net sales increased by 1.1% year-on-year to $3.894 billion, net profit decreased by 36.9% year-on-year to $296 million, and gross profit margin increased from 55.2% year-on-year to 57.6%.
According to business segments, Kenvue is divided into three major segments: personal care, skin health and beauty, and basic health. The personal care sector is Kenvue's largest revenue business, with brands such as Taino under its umbrella. Its Q1 net sales slightly increased to $1.698 billion year-on-year; Secondly, the basic health sector, which owns brands such as Li Shidelin and Aihe, saw a slight increase in net sales to 1.142 billion US dollars year-on-year; The net sales of the companies, including Ludeqing, Avino, Chengye Doctor, and Dabao Skin Health and Beauty, decreased by 5.1% year-on-year to 1.054 billion US dollars, making it the only sector with a decline in net sales.
Screenshot of financial report
In Q1 2024, Kenvue saw an average price increase of 5.0%, with basic health and personal care sectors experiencing higher than average price increases of 6.8% and 5.6%, respectively. With the price increase, Kenvue sales have declined, with an average decline of 3.1%. However, it is worth noting that the skin health and beauty sector with the lowest price increase (2.4%) experienced the most severe decline in sales, with a decline of 6.9%. Kenvue attributed the decline in performance in this sector to poor execution of US commercial stores.
Screenshot of financial report
Compared to the price increase in Q1 2023, Kenvue saw an average price increase of 8.7% and sales continued to grow by 2.5%. However, the price increase measures in the first quarter of this year did not allow Kenvue to taste the sweetness of previous years. A reporter from Nandouwan Finance News noticed that Procter&Gamble has also maintained profitability through price increases in recent years. Some of its businesses under Procter&Gamble may also experience sales increasing instead of decreasing after price increases. However, products such as the star SK-II have been repeatedly criticized for declining sales.
Net sales in both North America and Asia Pacific markets have declined
Johnson&Johnson baby powder under its umbrella is controversial for its carcinogenicity
By region, Kenvue's net sales declined in both North America and the Asia Pacific region in the first quarter, while its net sales increased in EMEA and Latin America. Among them, net sales in North America decreased by 3.5% to $1.873 billion, and in the Asia Pacific region decreased by 0.3% to $766 million.
Kenvue CEO Thibaut Mongon stated during the Q1 2024 earnings conference call that the growth momentum of the Chinese business was good last year, with double-digit growth in the first quarter of this year. However, the growth rate of brand businesses such as Chengye Doctor slowed down, with "China accounting for about 7% of our business. This is a promising market for businesses, and Kenvue has enough opportunities to achieve growth in this market. We are committed to the long-term prospects of the Chinese market, and this view has not changed.".
A reporter from Nandouwan Finance News noticed that Kenvue's Johnson&Johnson baby powder has been embroiled in cancer controversy in recent years. In August 2022, Johnson&Johnson even announced that it will stop selling baby powder made from talcum powder globally in 2023 and replace talcum powder with products based on corn starch. However, Johnson&Johnson has always insisted on safety in terms of product quality. In April 2023, Johnson&Johnson announced once again that it plans to pay $8.9 billion in compensation over the next 25 years to resolve claims related to its baby powder and other talc containing products suspected of causing cancer.
Kenvue brand. Official Image Source
According to the financial report, Kenvue expects a net sales growth of 1.0% to 3.0% for the entire year of 2024, and an organic growth range of 2.0% to 4.0% for the entire year.
On May 16th, a reporter from Nandouwan Finance Society made multiple attempts to contact Kenvue, but as of the time of publication, no response has been received.