Q1 2024 Kenvue Inc Earnings Call

May 7, 2024

Operator: Hello, and welcome to Kenvue's first quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise.

Hello, and welcome to you can view first quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press star one on your telephone keypad.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star one on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Tina Romani, Head of Investor Relations for Kenvue.

As a reminder, this conference is being recorded.

It's now my pleasure to introduce your host Tina Romani head of Investor Relations for Ken view.

Tina Romani: Good morning, everyone, and welcome to Kenvue's first quarter 2024 earnings conference call. I'm pleased to be joined today by Thibaut Mongon, Chief Executive Officer, and Paul Ruh, Chief Financial Officer.

Tina Romani: Good morning, everyone and welcome to can be used first quarter 'twenty 'twenty four earnings conference call.

Tina Romani: Pleased to be joined today by cheap among gon, Chief Executive Officer, and Paul Real Chief Financial Officer.

Tina Romani: Before we get started, I'd like to remind you that today's call includes forward-looking statements regarding, among other things, our operating and financial performance, market opportunities, and growth. These statements represent our current beliefs or expectations about future events and are subject to various risks, uncertainties, and assumptions that could cause our actual results to differ materially. For information regarding these risks and uncertainties, please refer to our earnings materials related to this call posted on our website and our filings with the SEC.

Tina Romani: We get started I'd like to remind you that today's call includes forward looking statements regarding among other things, our operating and financial performance market opportunities and growth.

Tina Romani: These statements represent our current beliefs or expectations about future events and are subject to various risks uncertainties and assumptions that could cause our actual results to differ materially.

Tina Romani: For information regarding these risks and uncertainties. Please refer to our earnings materials related to this call posted on our website and our filings with the SEC.

Tina Romani: During this call, we've also referenced certain non-GAAP financial information. The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for financial information presented in accordance with U.S. GAAP. These non-GAAP financial measures should be viewed in conjunction with the most comparable GAAP financial measures. A reconciliation of these items to the nearest U.S. GAAP measure can be found in this morning's press release and our presentation, available on our IR website, investors.kenvue.com. With that, I'll turn it over to Thibaut. Thank you, Tina.

Tina Romani: During this call. We've also reference certain non-GAAP financial information.

Tina Romani: Presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for financial information presented in accordance with U S. GAAP.

Tina Romani: These non-GAAP financial measures should be viewed in conjunction with the most comparable GAAP financial measures.

Tina Romani: A reconciliation of these items to the nearest U S. GAAP measure can be found in this morning's press release and our presentation are available on our IR website investors that can be your dot com with that I'll turn it over to Tivo.

Thibaut Mongon: Thank you, Tina, and thank you to everyone for joining us today. I'm pleased to be here with you this morning to discuss our solid start to the year with Q1 results coming in ahead of expectations. Earlier this year, I shared with you how we are committed to transform our organization with three clear strategic priorities in 2024, reaching more consumers, freeing up resources to invest in growth, and fostering a culture of performance and impact. Our teams around the world are focused on executing with precision the changes required to bring these three priorities to life. And everywhere in the organization, you start seeing Kenvue shaping up as a different company.

Tivo: Thank you Tina and thank you to everyone for joining us today I'm pleased to be here with you. This morning to discuss our solid start to the year with Q1 results coming in ahead of expectations.

Tivo: Earlier this year I shared with you how we are committed to transform our organization with three clear strategic priorities in 2024.

Tivo: Reaching more consumers freeing up resources to invest for growth and fostering a culture of cost for a month and impacts our teams around the world are focused on executing with precision the changes required to bring these three priorities to life.

Tivo: Everywhere in the organization and you'll start seeing can view shaping up as a different company.

Thibaut Mongon: We are early in this journey, and this transformation will not happen overnight. But this quarter's encouraging performance, the key programs initiated throughout the organization, and the high level of employee engagement do reinforce my confidence in our ability to deliver the plan this year and deliver our long-term value creation algorithm from 2025 onwards. The solid financial performance this quarter, beginning with our 1.9% organic growth on top of 11.2% last year, reflects the power of the Kenvue portfolio and the quality of our people. As anticipated, volumes are not yet a contributor to our growth with a 3.1% decline versus the prior year, and we are not yet where we want to be in skin health and beauty.

Tivo: Well early in this journey and this transformation will not happen overnight, but this quarter's encouraging performance. The key program initiatives throughout the organization and a high level of employee engagement jewelry enforce my confidence in our ability to deliver the planned this year and deliver our long term value creation algorithm from 2025.

Tivo: To us.

Tivo: The solid financial performance this quarter, beginning with a one 9% organic growth on top of 11, 2% last year reflect the power of the portfolio.

Tivo: Quality of our people.

Tivo: As anticipated volumes are not yet a contributor to our growth with a three 1% decline versus prior year and we are not yet where we want to be in skin health and beauty.

Thibaut Mongon: But at the same time, we continue to strengthen our leadership positions in self-care, and our innovations are a strong contributor to our growth in essential health. And we do all of this while exiting TSAs, reinventing our ways of working, freeing up resources to invest in our brands, and nurturing our new culture of performance and accountability. All of this positions us well for the future.

Tivo: But at the same time, we continue to strengthen our leadership positions in self care and our innovations are strong contributors to our growth in essential health and we do all of this while exiting TSA is reinventing our ways of working freeing up resources to invest behind our brands and nurturing our new culture of performance and accountability.

Tivo: All of this positions us well for the future.

Thibaut Mongon: So let's have a closer look at our progress on each of our three strategic priorities, beginning with reaching more consumers and starting with our largest segment, self-care. Let me first share with you what we see in the self-care market. We see consumers continuing to look for science-based, effective solutions to take care of themselves and their loved ones. But this quarter, volumes were affected by two factors. First, the cough, cold, and flu season was shorter and slower than last year.

Tivo: So let's have a closer look at our progress on each of our three strategic priorities.

Tivo: Beginning with reaching more consumers and starting with our largest segment self care. Let me first share with you what we see in the self care market, we see consumers continuing to look for science based efficacious solutions to take care of themselves and their loved ones, but this quarter volumes were affected by two factors.

Thibaut Mongon: And second, we saw some U.S. retailers reducing their inventory levels. These factors will continue to have a meaningful impact on Q2 volumes, and in a quarter where we will lap top competitors, we'll mask the underlying strength of our brand. In this context, our team delivered outstanding performance. In self-care, we delivered 4.2% growth on top of 15.3% growth last year and continue to outperform the market owing to the breadth of our portfolio in terms of categories and geographies.

Tivo: First the cough cold and flu season, what's shelter and slower than last year and second we saw some U S retailers, reducing inventory levels. These factors will continue to have a meaningful impact on Q2 volumes and in a quarter, where we will lap tough compares with masks the underlying strength of our brands.

Tivo: In this context, our team delivered outstanding performance in self care, we delivered four 2% growth on top of 15, 3% growth last year and continued to outperform the markets owing to the breadth of our portfolio in terms of categories and geographies.

Thibaut Mongon: In the U.S., for example, each one of our largest brands grew share during the quarter. Tylenol, the number one pain care brand in the world, achieved its seventh consecutive quarter of share growth in the U.S., further widening the spread between us and our next competitor.

Tivo: In the U S. For example, each one of our largest brands grew share during the quarter.

Tivo: All in all the number one pain care brining the world achieved its seventh consecutive quarter of share growth in the U S. Further widening of the spread between us and our next competitor.

Thibaut Mongon: Regardless of the intensity of the season, our objective is always to advance the category and continue to gain share. And this is what our teams actively pursued this quarter, despite a softer season, with stronger media investment, expanded distribution, and a significant increase in in-store display support. We also continue to launch category-leading innovation. This quarter, we launched Tylenol Easy to Swallow with GentleGlide technology with the aim of helping approximately 20% of people who hesitate to take a pill.

Tivo: Regardless of the intensity of the season.

Tivo: Rectum is always to advance the category and continue to gain share and this is what our teams actively pursued this quarter. Despite a softer season with stronger media investment expanded distribution and a significant increase in installed display support.

Tivo: We also continue to launch category, leading innovation this quarter, we launched tylenol easy to swallow with gentle glide technology with the aim at helping to approximately 20% of people who hesitate to take a pill.

Thibaut Mongon: We are activating the same playbook in allergy. While the category is down so far this year due to colder weather and sporadic storm patterns, Adult Zeal Tech is the only brand in the category increasing penetration and has now been number one in value share for 102 consecutive weeks. Similar to Tylenol, you see Zyrtec building on its category leadership ahead of the season with expanded distribution, strengthened in-store execution with a higher number of displays, and continued excellence in healthcare professional and consumer engagement activities. This quarter, we also relaunch Zyrtec oral dissolve tablets that melt in your mouth and dissolve in seconds, a strong benefit for consumers who take oral antihistamines.

Tivo: We are activating the same playbook in allergy.

Tivo: While the category is down so far this year on colder weather and sporadic storm patterns I don't feel tech is the only brand in the category increasing penetration and that's that'll be number one in value share for 102 consecutive weeks.

Tivo: Similar to Tylenol, you'll see real Tech building on its category leadership ahead of the season with expanded distribution strength and in store execution with a higher number of displays and continued excellence in healthcare professional and consumer engagement activities.

Tivo: This quarter, we also relaunched the zertec oral dissolve tablets that melts in your mouth and dissolved in seconds, the strong benefits for consumers in oral antihistamines.

Thibaut Mongon: And we actively deploy the same recipe in the rest of the world and see the same strong performance in Asia, with brands like Tylenol and Motrin growing double-digits in China, or in Europe, with brands like Imodium or Microlact in digestive health and Nicorette in smoking cessation driving double-digit growth, all of this as a result of the precision in the execution of our brand activation plans by our teams in each market. So another solid quarter for our self-care brand.

Tivo: And we actively deployed the same recipient the rest of the world and see the same strong performance in Asia with brands like Tylenol, and Motrin growing double digit in China or in Europe with brands like emoji arm of micro locked in digestive health and nicorette in smoking cessation driving double digit growth all of this as a result.

Tivo: All of the precision in the execution of a broad activation plans by our teams in each market.

Tivo: So another solid quarter for our self care brands.

Thibaut Mongon: Next, moving to Essential Health, where we grew 4.9% this quarter, on top of 4% last year. The team's focus on executing initiatives to reach more consumers and expand our categories is yielding positive results. In oral care, where Listerine is five times larger than the next name competitor, we see growth across all regions. In the U.S., our scaled business has now delivered more than 63 weeks of continued growth. And we are not stopping there.

Tivo: Next moving to essential health, where we grew four 9% this quarter on top of 4% last year.

Tivo: <unk> focus on executing initiatives to reach more consumers and expand our categories is yielding positive results in oral care, where LISTERINE is five times larger than the next name competitor, we see growth across all regions.

Tivo: In the U S. A scaled business is now deliver more than 63 weeks of continued consumption growth and we are not stopping there at Cagny I told you about our launch of LISTERINE clinical solutions, our new premium line of alcohol and non alcohol mouthwash focused on specific health benefits, which is good.

Thibaut Mongon: At Cagney, I told you about our launch of Listerine clinical solutions, our new premium line of alcohol and non-alcohol mouthwash focused on specific health benefits, which is a great example of what we do to expand the categories in which we are leaders. Early reads indicate this innovation already accounts for 0.6% of the U.S. market and is highly incremental, bringing 72% of incremental shoppers to the Listerine brand. You see us do the same thing in the baby category?

Tivo: Great example of what we do to expense categories in which we are leaders early reads indicate this innovation are already accounts for 0.6% share of the U S market and is highly incremental bringing 72% incremental shoppers to the LISTERINE Brown.

Tivo: You'll see us doing the same thing in the baby category, a global leadership remained strong with Johnson's baby in Aveeno baby as a number one and number two brands in baby toiletries globally. We are now expanding our penetration in children's Toiletries building Ivy No kids as the fastest growing brand for children in the U S with <unk>.

Thibaut Mongon: Our global leadership remains strong, with Johnson's Baby and Aveeno Baby as the number one and number two brands in baby toiletries globally. We are now expanding our penetration in children's toiletries, building Aveeno Kids as the fastest growing brand for children in the U.S. We see an opportunity to develop this new market, where we are seeing increased demand. And we will continue to deploy this strategy across the segment with relevant innovation powered by increased investment, precise in-store execution, and expanded distribution.

Tivo: An opportunity to develop this new market, where we are seeing increased demand.

Tivo: And we will continue to deploy the strategy across the segments with relevant innovation powered by increased investments precise in store execution and expanded distribution.

Thibaut Mongon: Now moving to skin health and beauty, where we saw our business decline 4.5% in the quarter, with a 6.9% decline in volume. As we have discussed, stabilizing this business is a key priority for us. In the U.S., our team is activating a three-pronged approach, increasing in-store presence, enhancing consumer and dermatologist engagement, and amplifying innovation. While more work needs to be done and it is too early to see results, I'm encouraged by the progress the team is making against each priority, and I believe we are moving in the right direction.

Tivo: Now moving to skin health and beauty, where we saw our business declined four 5% in the quarter with a six 9% decline in volume.

Tivo: As we have discussed stabilizing this business is a key priority for us in the U S. Our team is activating a three pronged approach in creating in store presence elevating consumer and dermatologists engagements and amplifying innovation.

Tivo: While more work needs to be done and it is too early to see results I'm encouraged with the progress the team is making against each priority and I believe we are moving in the right direction.

Thibaut Mongon: The U.S. team is laser-focused on strengthening in-store presence and prominence through better planning with customers, enhanced packaging that clearly articulates dermatological benefits, and more prominent in-store brand activation. For example, the teams have moved quickly to improve the awareness and shopability of Neutrogena HydroBoost Water Cream, the latest Neutrogena innovation launched last year. New packaging with updated graphics is underway.

Tivo: The U S team is laser focused on strengthening in store presence and prominence who better planning with customers enhanced packaging that clearly articulate dermatological benefits and more prominent in store brand activation.

Tivo: For example, the teams have moved quickly to improve the awareness and shop ability of neutrogena Hydra boost water cream. The latest neutrogena innovation launched last year, new packaging with updated graphics is underway media investments are up nearly 15% and in store, we implemented on shelf signage that more effectively.

Thibaut Mongon: Media investments are up nearly 15 percent, and in-store, we implemented on-shelf signage that more effectively communicates our product's dermatological benefits to shoppers. As part of our strategy to increase our impact with dermatologists, Kenvue showed up strong at the American Academy of Dermatology annual meeting in March, where more than 10,000 dermatologists came together. We presented 22 new pieces of scientific research and hosted a panel moderated by Neutrogena brand ambassador Jennifer Gardner to showcase our science-led approach to innovation.

Tivo: Communicate our products dermatological benefits to shoppers.

Tivo: As part of our strategy to increase our impact with dermatologist can just shut up strong at the American Academy of Dermatology annual meeting in March where more than 10000 Dermatologists came together, we presented 22, new pieces of scientific research and hosted a panel moderated by Neutrogena brand Ambassador training.

Tivo: Gardner to showcase of science led approach to innovation with.

Thibaut Mongon: We amplified our presence on social media and achieved number one share of voice, head, With a positive showing at AAD, coupled with an expanded detailing sales force and a significant increase in our in-practice sampling, we quickly won three points of dermatologist recommendations for Neutrogena face and moisturizing treatment, regaining our position as the number one recommended brand by dermatologists in this category. We are also strengthening consumer engagement through compelling and modern marketing campaigns appealing to young consumers.

Tivo: <unk> amplified our presence on social media and achieved number one share of voice head of all of our skincare brands.

Tivo: With a positive showing at AAD, coupled with expanded detailing salesforce and a significant increase of our in practice sampling. We quickly one three points of dermatologist recommendations for neutrogena face and moisturizing treatment regaining our position as the number one recommended brand idea cytologist in this category.

Tivo: We are also strengthening consumer engagements through compelling and modern marketing campaigns appealing to young consumers.

Thibaut Mongon: A good example of this is the activation of our partnership with the Coachella Festival in April, where Neutrogena was the exclusive sun care partner. Beyond offering great sun protection to the more than 650,000 festival goers with over 120 gallons of sunscreen, the Neutrogena team amplified our activation on social media and through influencers, earning number one share of voice in the U.S. skin care category during the festival, similar to what we achieved at AAD the months prior.

Tivo: A good example of this is the activation of our partnership with the Coachella Festival in April where neutrogena weather, excluding Sun care partner.

Tivo: Beyond offering great Sun protection to the more than 650000 festival goers with over a 120 gallons a sunscreen.

Tivo: The neutrogena team amplified our activation on social media and through influences, earning number one share of voice in the U S skincare category during the festival.

Tivo: To what we achieved at AAD the months prior.

Thibaut Mongon: We're encouraged by these early indications that we are moving in the right direction. That said, we are not where we want to be in terms of market share. The recovery will take time and will not be linear, but as you can tell, we are laser focused on executing on our plan to improve our market performance and better reflect the strength of our brand. To amplify these efforts, during the quarter, we announced decisions that will allow us to operate in a more integrated manner.

Tivo: We are encouraged by the early indications that we're moving in the right direction that said, we are not where we want to be in terms of market share as the recovery will take time and will not be linear but as you can tell we are laser focused on executing on our plan to improve our market performance and better reflect the strength of our brands too.

Tivo: To amplify the efforts during the quarter, we announced decision that will allow us to operate in a more integrated manner.

Thibaut Mongon: Recruitment for a new global segment leader to be located in the U.S. is underway, and we are in the process of relocating our Los Angeles office to New Jersey, where our brand team will work side-by-side with R&D to drive innovation, cohesive execution, and growth. Now, moving to our next priority, freeing up resources to invest in our brand. As discussed with you previously, we continue our journey of transforming Kenvue from a segment of Johnson & Johnson to an independent company focused on accelerating growth.

Tivo: <unk> for a new global segment leader to be located in the U S is underway and we are in the process of relocating our Los Angeles office to New Jersey, where our brand team will work side by side with R&D to drive innovation creative execution and growth.

Tivo: Now moving to our next priority freeing up resources to invest behind our brands as discussed with you previously we continue our journey of transforming can view from a segment of Johnson <unk> Johnson to an independent company focused on accelerating growth. This quarter, we started investing more behind broad activation.

Thibaut Mongon: This quarter, we started investing more in brand activation, where we see opportunities to unlock profitable growth in line with our plan to increase our investment by 15% in 2024. And we fund these investments with a continued expansion of our growth margins and the transformation of our cost structure as we exit TSAs. I'm pleased with the progress we are making on both fronts. Adjusted gross margin expanded 290 basis points in Q1, adding to our strong track record in this space and freeing up resources to invest in the brand activation plant I described earlier.

Tivo: Where we see opportunities to unlock profitable growth in line with our plan to increase our investments by 15% in 2024 and.

Tivo: And we fund these investments with a continued expansion of our gross margins and the transformation of our cost structure as we exit tsa's.

Tivo: I am pleased with the progress we are making on both fronts. Adjusted gross margin expanded 290 basis points in Q1, adding to our strong track record in this space and freeing up resources to invest in the brand activation clients I described earlier.

Thibaut Mongon: In parallel, we are taking action to structurally change our cost base, leveraging the unique opportunity we have in front of us as we exit TSAs. You will hear from Paul more details about our view forward, our program to become a leaner, more agile, and fast-moving organization, ultimately with a lower cost base. The teams are focused on executing with precision this program that spans across 2024 and 2025.

Tivo: In parallel we are taking action to structurally change our cost base leveraging the unique opportunity we have in front of us as we exit TSS.

Tivo: We'll hear from Paul more details about our view forward a program to become a leaner more agile and fast moving organization ultimately with a lower cost base.

Paul: The teams are focused on executing with precision is programs that spans over 2024 and 2025.

Thibaut Mongon: We are at the beginning of this journey, but every day, we see Kenvue transforming a bit more into a company focused on unleashing the full potential of its portfolio of brands, better positioned to deliver on our long-term strategy of earnings growth ahead of sales growth and durable cash flow generation. Which brings me to our third priority, to foster a culture of impact and performance where we are moving in the right direction, transforming our company operationally and culturally.

Paul: We are at the beginning of this journey, but every day, we see can do transforming a bit more into a company focused on unleashing the full potential of its portfolio of brands better positioned to deliver on our long term algorithm of earnings growth ahead of sales growth and durable cash flow generation.

Paul: Which brings me to our third priority to foster a culture of impact and performance, where we are moving in the right direction transforming our company operationally and culturally.

Thibaut Mongon: Starting with strategic alignment, we rallied all Kenvuers behind our three company priorities via our robust goal-setting process, part of our new approach to performance and pay. In addition, we clarified responsibilities and decision rights throughout the company.

Paul: Starting with strategic alignment, we rallied all can viewers behind of three company priorities for our robust goal setting process.

Paul: Our new approach to performance and pay.

Paul: In addition, we clarified responsibilities and decision rights throughout the company, we streamline processes encouraging faster decision, making improved execution heightened accountability and enhanced collaboration.

Thibaut Mongon: We streamlined processes, encouraging faster decision making, improved execution, heightened accountability, and enhanced collaboration. As we continue our journey to grow Kenvue into the undisputed leader in consumer health, we are intentionally bringing in high-performing external talent. A couple of weeks ago, I was pleased to announce that Russ Dyer would be joining my leadership team as Chief Corporate Affairs Officer, an important leadership role as we continue our journey to grow.

Paul: As we continue our journey to grow <unk> into the undisputed leader in consumer health.

Paul: We are intentionally bringing in high performing external talent.

Paul: Couple of weeks ago, I was pleased to announce that Russ Dyer will be joining my leadership team as Chief Corporate Affairs officer, and important leadership role as we continue our journey to grow.

Thibaut Mongon: In addition to instilling an owner mindset across the organization to elevate operational performance, we are also committed to operating the business responsibly. With the understanding that human health is inseparably linked to environmental health, during the quarter, we affirmed our commitment to our Healthy Lives mission, our ESG strategy aiming to advance the well-being of both people and the planet. And last week, we announced that Kenvue's near-term greenhouse gas emissions reduction targets were validated by the Science-Based Targets Initiative, and this in less than one year since becoming a public company, demonstrating our team's passion and commitment on this front.

Paul: In addition to instilling an owner mindset across the organization to elevate operational performance. We are also committed to operating our business responsibly.

Paul: With the understanding that human health is inseparably linked to environmental health during the quarter, we affirmed our commitment to a healthy lives mission, our ESG strategy aiming to advance the wellbeing of both people and the planet and last week, we announced that <unk> near term greenhouse gas emissions reduction targets where validate.

Paul: Lead by the science based targets initiative and this in less than one year since becoming a public company demonstrating our team's passion and commitment on these fronts. We look forward to publishing our inaugural healthy lives Mission report in June where you will see how can view is maximizing its impact for good.

Thibaut Mongon: We look forward to publishing our inaugural Healthy Lives mission report in June, where you will see how Kenvue is maximizing its impact for good. So, as you can tell, you are starting to see a different Kenvue in action in 2024.

Paul: So as you can tell you are starting to see a different Ken viewing action in 2024, we're off to a good start for the year. Our teams are laser focused on our three strategic priorities, while making progress on our journey to transform our company.

Thibaut Mongon: We are off to a good start for the year. Our teams are laser focused on our three strategic priorities. We are making progress on our journey to transform our company, all of which makes us confident in our ability to deliver our plan for the year and execute on our long-term strategy in 2025 and beyond. Before I turn it over to Paul, I would like to thank our Kenvueers around the world.

Paul: All of which makes us confident in our ability to deliver our plans for the year and execute on our long term algorithm in 2025 and beyond.

Ken: Before I turn it over to Paul I would like to thank all can viewers around the world every day, they help consumers realize the extraordinary power of everyday care. They embrace change and are actively contributing to our transformation. They are the ones delivering the results I just shared with you and it is an honor to work alongside such.

Thibaut Mongon: Every day, they help consumers realize the extraordinary power of everyday care. They embrace change and are actively contributing to our transformation. They are the ones delivering the results I just shared with you, and it is an honor to work alongside such a great team. And now, Paul.

Speaker Change: A great team.

Ken: And now over to you Paul.

Paul Ruh: Thank you, Thibaut, and good morning, everyone. I'll start by echoing Thibaut's sentiment that I am proud of how our teams are coming together. Our colleagues are embracing change, rallying behind our transformation, and executing on our strategy priorities, all while delivering strong results this quarter. Our teams began executing against our first priority, to reach more consumers. Across the portfolio, we deployed more relevant, impactful, and distinctive brand experiences. We're beginning to see a difference in how our portfolio is coming to life in-store and with our consumers.

Paul: Thank you Tibor and good morning, everyone.

Paul: I'll start by echoing Dave's sentiment that I am proud of how our teams are coming together.

Paul: These are embracing change rallying behind our transformation and executing on our strategic priorities all while delivering strong results this quarter.

Speaker Change: Teams began executing against our first priority to reach more consumers across our portfolio, we deployed more relevant impactful and distinctive brand experiences.

Speaker Change: We're beginning to see a difference in how our portfolio is coming to life in store.

Paul: And with our consumers.

Paul Ruh: Now, this work is just beginning, but we are energized by the opportunities we see to continue strengthening our relationships with new and existing consumers all around the world. Which brings me to the next priority, to free up resources to invest more in our brands. In our press release this morning, we announced that our board formally approved our initiative to build on Kenvue's strengths and optimize its cost structure. This initiative is part of our program to optimize the way we work. We call this our view forward.

Paul: Now this work is just beginning but we are energized by the opportunities we see to continue strengthening our relationships with new and existing consumers all around the world.

Paul: Which brings me to the next priority to free up resources to invest more behind our brands.

Paul: In our press release. This morning, we announced that our board formally approved our initiative to build on <unk> strengths and optimize its cost structure.

Paul: This initiative is part of our program to optimize the way we work we call. These our view forward.

Paul Ruh: Thibaut spoke about the unique opportunity we have to reinvent how we work and lower our cost base as we exit the TSAs with J&J. Our view forward equips us to do four things. First, to optimize our geographic footprint to drive connection, collaboration, and synergy across our teams and maximize our shared service hubs. Second, to eliminate redundancies across the organization as we broaden spans of control and reduce layers of hierarchy to drive faster decision-making, creativity, and innovation, and more effective organizational communication.

Paul: <unk> spoke about the unique opportunity we have to reinvent how we work and lower our cost base as we exit TSA with J&J or.

Paul: Our view forward equips us to do four things.

Paul: First to optimize our geographic footprint to drive connection collaboration and synergy across our teams and maximize our shared service hubs.

Paul: Second to eliminate redundancies across the organization as we broaden spans of control and reduce layers of hierarchy to drive faster decision, making creativity and innovation and more effective organization on communication.

Paul Ruh: Third, to implement new systems and automation to strengthen our capabilities in areas like our ability to uncover and apply consumer insights, improve forecasting, and respond real-time to market dynamics. And finally, to better leverage our procurement partnerships, ensuring we build strategic relationships with our suppliers that are rooted in shared value creation. As an example, next week we will bring our top suppliers from around the world together with our team to share knowledge and align on priorities.

Paul: Third to implement new systems and automation to strengthen our capabilities in areas like our ability to uncover and apply consumer insights improving forecasting and responding in real time to market dynamics and.

Paul: And finally to better leverage our procurement partnerships, ensuring we build strategic relationships with our suppliers that are rooted in shared value creation.

Paul: As an example next week, we will bring our top suppliers from around the world.

Paul: Together with our teams to share knowledge and align on priorities.

Paul Ruh: Our view forward will enable Kenvue to operate more effectively, and ultimately, more competitively. We have already begun to realize efficiencies to support our investments in 2024, and we expect the ongoing annualized benefit, after full implementation of the initiative, to be approximately $350 million per annum beginning in 2026. This initiative will result in a net reduction to our global workforce of approximately 4%, and we expect to incur restructuring costs totaling approximately $550 million, split roughly evenly between 2024 and 2025 with a payback period of approximately 18 months.

Paul: Our view for award will enable <unk> to operate more effectively and ultimately more competitively.

Paul: We have already begun to realize efficiencies to support our investments in 2024 and expect the ongoing annualized benefit after full implementation of the initiatives to be approximately $350 million per annum beginning in 2026.

Paul: This initiative will result in a net reduction to our global workforce of approximately 4% and we expect to incur restructuring costs totaling approximately $550 million paid roughly evenly between 2024 and 2025 with a payback period of approximately 18 months.

Paul Ruh: Importantly, as I am sure you may have the question, there is no change to our capital allocation priorities. Our healthy balance sheet allows for strategic investment in our business for growth. Our number one priority, in addition to commitment to a strong dividend, our delivery program, and share buyback to offset dilution. In this unique moment of transformation, we believe our view forward will generate the greatest long-term value creation for our stakeholders, accomplishing two goals.

Paul: Importantly, as I am sure you may have the question. There is no change to our capital allocation priorities, our healthy balance sheet allows for strategic investment in our business for growth. Our number one priority. In addition to commitment to a strong dividend, our delevering program and share buyback to offset dilution.

Paul: In this unique moment of transformation, we believe our view forward will generate the greatest long term value creation for our stakeholders accomplishing two goals.

Paul Ruh: Reducing our cost base and, as importantly, allowing Kenvue to deploy best-in-class ways of working that move us toward our ambition to become the undisputed leader in consumer health. These initiatives, along with continued adjusted gross margin improvement, will enable us to fund an incremental $300 million investment behind our brands that we committed to in 2024. As such, there is no change to our adjusted earnings per share guidance.

Paul: Using our cost base and as importantly, allowing <unk> to deploy best in class ways of working that move us towards our ambition to become the undisputed leader in consumer health.

Paul: These initiatives along with continued adjusted gross margin improvement will enable us to fund incremental $300 million investment behind our brands that we committed to in 2024.

Paul: Such there is no change to our adjusted earnings per share guidance.

Paul Ruh: Beyond this year, this initiative will continue through 2025, supporting continued incremental investment behind our brands while staying aligned to the delivery of our long-term algorithm centered around earnings growth ahead of sales growth. Moving to our first quarter results, which demonstrate progress against our third priority, fostering a culture of performance and impact with heightened accountability. Coming in ahead of expectations, first quarter organic cell growth of 1.9% was strong, particularly when considering our 11.2% organic growth last year.

Paul: Beyond this year. This initiative will continue through 2025 supporting continued incremental investment behind our brands, while staying aligned to the delivery of our long term algorithm centered around earnings growth ahead of sales growth.

Paul: Moving to our first quarter results, which demonstrate progress against our third priority fostering a culture of performance and impact with heightened accountability.

Paul: Coming in ahead of expectations first quarter organic sales growth of one 9% was strong, particularly when considering our 11, 2% organic growth last year.

Paul Ruh: Momentum in self-care and essential health continued, partially offset by underperformance in skin health and beauty, as anticipated. Value realization contributed 5 points to growth, with approximately 75% carryover, and the remaining coming from new value realization primarily outside the U.S. It's important to note that, even as volume is at the forefront of conversations today, value realization will continue to play an important role in our growth algorithm, as the superiority and the efficacy of our products foster loyalty in our categories, and specifically, with our brands. Now, we're talking about volume.

Paul: Momentum in healthcare and essential health continued partially offset by underperformance in skin health and beauty as anticipated.

Paul: Value realization contributed five points to growth with approximately 75% carryover and the remaining coming from new value realization, primarily outside the U S.

Paul: It is important to note that even as volume is at the forefront of conversations today value realization will continue to play an important role in our growth algorithm as the superiority and the efficacy of our products for first loyalty in our categories and specifically with our brands.

Paul: Now we're talking about volume.

Paul Ruh: Volume improved meaningfully from fourth-quarter trends across all segments, in line with our expectations. Taken together, approximately two-thirds of the 3.1 volume decline is attributable to the expected lapping of a one-time inventory rebuild last year and the impact of retailer trade inventory reduction by some U.S. customers this year. We have continued opportunity here, and we expect volume to stabilize and grow in the second half of the year. Now, let's take a look at our segments.

Paul: Volume improved meaningfully from fourth quarter trends across all segments in line with our expectations.

Paul: Came together approximately two thirds of the $3. One volume decline is attributable to the expect the lapping of a onetime inventory rebuild last year and the impact of retailer trade inventory reduction by some U S customers this year.

Paul: We have continued opportunity here and we expect volume to stabilize and grow in the second half of the year.

Speaker Change: Now, let's take a look at our segments.

Paul Ruh: Healthcare performance was strong at 4.2% organic growth, on top of 15.3% last year. Notably, we continue to gain share even on a strong value realization of 5.6 points. As Thibaut mentioned, this performance reflects not only the diversity of our portfolio and strength across geographic markets but also consumers' ongoing demand for efficacious health solutions they trust. Volumes were down 1.4 points, driven entirely by the lapping of a large one-time inventory rebuild as retailers replenished supply following the triple-demic last year.

Speaker Change: Pro forma was strong at four 2% organic growth on top of 15, 3% last year.

Speaker Change: Notably we continued to gain share even a strong value realization of five six points.

Speaker Change: <unk> mentioned this performance reflects not only the diversity of our portfolio and strength across geographic markets, but also consumers ongoing demand for efficacious health solutions and they trust.

Speaker Change: Volumes were down one four points driven entirely by the lapping of a large one time inventory rebuild as retailers replenished supply following the triple damage last year.

Paul Ruh: As you consider your models for Q2, in addition to factoring the strong 2023 comparison of 14.2%, there are also a couple of unique dynamics to bear in mind. First, in Europe... Due to a shorter cold, cough, and flu season this year compared to a more prolonged season last year, we do not expect the same level of replenishment that we saw in 2023. Second, in Asia-Pacific, we do not expect the same level of incidence in China, where we experienced a large surge following the reopening last year.

Speaker Change: As you consider your models for Q2 in addition to factoring the strong 2023 compare or 14, 2%. There are also a couple of unique dynamics to bear in mind.

Speaker Change: First in Europe, due to a shorter cold cough flu season, this year compared to a more prolonged season last year, we do not expect the same level of replenishment that we saw in 2023.

Speaker Change: Second in Asia Pacific, We do not expect the same level of incidence in China, where we experienced a large surge following the reopening last year.

Paul Ruh: And lastly, in the U.S., we expect continued trading inventory contraction at some retailers. Given these dynamics alongside the soft start to the allergy season that Thibaut spoke about, we expect growth to be low single-digit negative in Q2, masking the continuous strength of in-market performance we expect to see in the quarter. We remain confident in the underlying strength of the cell health portfolio, and there are no changes to expectations for growth to accelerate in the back half, particularly as we lap easier comparisons.

Speaker Change: And lastly in the U S. We expect continued trading inventory contraction at some retailers.

Speaker Change: Given these dynamics alongside the soft start to the allergy season that Tivo spoke about we expect growth to be low single digit negative in Q2.

Speaker Change: Moskin the continued strength of in market performance, we expect to see in the quarter.

Speaker Change: We remain confident in the underlying strength of the sale carriage portfolio and there are no changes to expectations for growth to accelerate in the back half, particularly as we lap easier compares.

Paul Ruh: Moving to Essential Health, where momentum continued. Organic growth of 4.9% was comprised of 6.8 points of value realization, partially offset by 1.9 points of volume decline. Similar to self-care, the strength and diversity of our essential health portfolio fuels our growth. Thibaut shared a few examples of how we are driving growth in oral care and baby care.

Speaker Change: Moving to essential health care momentum continued.

Speaker Change: <unk> growth of four 9% was comprised of six eight points value realization, partially offset by one nine points of volume decline.

Speaker Change: Similar to self care, the strength and diversity of our essential health portfolio fueled our growth.

Speaker Change: Cable shared a few examples of how we are driving growth in oral care and baby care.

Paul Ruh: We are doing the same thing in our women's health businesses across EMEA, LATAM, and Asia Pacific. In India, for example, we are seeing strong growth in our stage 3 brand through consistent efforts in premium product distribution expansion, supported by strong media presence, as we build strength in the growing women's health category internationally. Overall, Q1 performance and sequential volume improvement reflect the value of brands to consumers, and we are confident in our ability to drive growth for the year. Moving now to skin health and beauty.

Speaker Change: We are doing the same thing in our women's health businesses across EMEA, Latam and Asia Pacific.

Speaker Change: In India. For example, we are seeing strong growth in our stage III brand through consistent efforts and premium product distribution expansion supported by strong media presence as we build strength in the growing women's health category internationally.

Speaker Change: Overall, Q1 performance and sequential volume improvement reflect the value of our brands to consumers and we are confident in our ability to drive growth for the year.

Speaker Change: Moving now to skin health and beauty, while Q1 performance is in line with our expectations as <unk> discussed our results do not demonstrate our ambition nor the full potential of our brands.

Paul Ruh: While Q1 performance is in line with our expectations, as Thibaut discussed, our results do not demonstrate our ambition nor the full potential of our brand. Organic sales declined 4.5%, with 6.9 points of volume decline, partially offset by 2.4 points of positive value realization. The U.S.

Speaker Change: Organic sales declined four 5% with six nine points of volume decline, partially offset by two four points of positive value realization.

Paul Ruh: The Skin Health and Beauty team is head-on focused on stabilizing the business, and we are still a few quarters away from seeing the impact of this work in our results. However, what I am seeing today is a team that is operating differently. As Thibaut mentioned, we are in the process of bringing our U.S.-based teams together under one roof to drive more collaboration and innovation. Additionally, we are increasing our engagement with healthcare professionals, with dermatologist recommendations increasing for the Neutrogena phase. We're also increasing engagement with our customers. For example, last week, we met with our customers at NACDF to collaborate on long-term innovation pipelines.

Speaker Change: <unk> skin health and beauty team is heads down focused on stabilizing the business and we are still a few quarters away from seeing the impact of these work in our results.

Speaker Change: However, what I am seeing today is a team that is operating differently.

Speaker Change: As Steve mentioned, we are in the process of bringing our U S. Based teams together under one roof to drive more collaboration and innovation.

Speaker Change: We are increasing our engagement with health care professionals with dermatologist recommendations increasing for neutrogena face.

Speaker Change: We're also increasing engagement with our customers for.

Speaker Change: For example, last week, we met her customers at CES to collaborate on long term innovation pipelines.

Paul Ruh: Simply put, the teams are executing the plan that we laid out at the start of the year with focus and energy to stabilize the business this year. We are seeing encouraging signs, but we certainly recognize that there is more work to do. Moving to adjust gross margins. Value Realization, alongside continued executional excellence in supply chain productivity, drove 290 basis points of margin expansion as our teams have accelerated efforts to free up resources and generate the fuel to invest behind our brands. This quarter's strong performance benefited from moderating inflation, which was a slight benefit as market favorability in logistics, energy, and agrochemicals outpaced increasing labor pressure alongside slightly favorable currency movements.

Speaker Change: Simply put the teams are executing the plan that we laid out at the start of the year with focus and energy to stabilize the business and this year.

Speaker Change: We are seeing encouraging signs, but we certainly recognize there is more work to do.

Speaker Change: Moving to adjusted gross margins.

Speaker Change: Value realization alongside continued execution excellence and supply chain productivity drove 290 basis points of margin expansion as our teams have accelerated efforts to free up resources and generate the fuel to invest behind our brands.

Speaker Change: This quarter's strong performance benefited from moderating inflation, which was a slight benefit as market favorability logistics energy and agrochemicals outpaced increasing labor pressure alongside slightly favorable currency movements.

Paul Ruh: We have a strong track record of preserving and expanding gross margin, and you can expect that to continue as we move through 2024 and beyond. At the start of the year, we shared that we expected a just-as-gross margin to be near 2021 levels, or 59%. Given where foreign exchange and net input cost inflation have moved, we now expect to be slightly above this level, though recognizing the environment in terms of inflation and FX continues to be volatile.

Speaker Change: We have a strong track record of preserving and expanding gross margin.

Speaker Change: And you can expect that to continue as we move through 2024 and beyond.

Paul Ruh: At the start of the year, we shared that we expected adjusted gross margin to near 2021 levels or 59%.

Paul Ruh: Given who are foreign exchange and net input cost inflation have moved we now expect to be slightly above this level recognizing.

Paul Ruh: Recognizing the environment in terms of inflation and FX continues to be volatile.

Paul Ruh: Turning to Adjusted Operating Income, for the first quarter, Adjusted Operating Income increased 70 basis points to 22%. This increase is primarily due to strong gross margin, partially offset by incremental standalone public company costs that we did not have in the first quarter of last year and increased investment behind our brands. Let me clarify what we mean when we say increased investment behind our brands. We are referring to advertising investment, as well as consumer and product promotion and healthcare professional spend.

Paul Ruh: Turning to adjusted operating income first quarter adjusted operating income increased 70 basis points to 22%. This.

Paul Ruh: This increase is primarily due to strong gross margin, partially offset by incremental Standalone public company costs that we did not have in the first quarter of last year and increased investment behind our brands.

Paul Ruh: Let me clarify what we mean, when we say increased investment behind our brands, we are referring to advertising investment as well as consumer and product promotion and health care professionals spend it.

Paul Ruh: It is important to note that, similar to our U.S. peers but different from some of our international peers, our advertising disclosure in our 10-K only represents our pure advertising spend for digital advertising, television, radio, and print media. The disclosure does not include other consumer or product promotion or healthcare professional spend.

Paul Ruh: It is important to note that similar to our U S peers, but difference from some of our international appears our advertising disclosure in our 10-K only represents our pure advertising spend.

Paul Ruh: Digital advertising TV radio and print media to disclosure that does not include other consumer promotion or health care.

Paul Ruh: <unk> spend when.

Paul Ruh: When we speak about our $300 million incremental investment, we are referring to the increased brand investment across all three categories of spend. Now, as you think about SG&A for the remainder of the year, given our increased investment behind our brands, it is fair to assume SG&A as a percentage of net sales will be at similar levels as Q1 for the remainder of the year. Interest expense net for the quarter was $95 million, in line with our guidance, for taxes.

Paul Ruh: When we speak about our $300 million incremental investment we are referring to the increased brand investment across all three categories of spend.

Paul Ruh: Now as you think about SG&A for the remainder of the year.

Paul Ruh: Given our increased investment behind our brands. It is fair to assume SG&A as a percentage of net sales.

Paul Ruh: We'll be at similar levels as Q1 for the remainder of the year.

Paul Ruh: Interest expense net for the quarter was $95 million in line with our guidance.

Paul Ruh: For taxes, the first quarter adjusted effective tax rate was 28, 3% the increase in the adjusted effective tax rate versus the prior year is primarily attributable to jurisdictional mix of earnings release of prior year tax reserves due to statute of limitations expiring a negative impact of share based compensation.

Paul Ruh: The first quarter Adjusted Effective Tax Rate was 28.3%. The increase in the Adjusted Effective Tax Rate versus the prior year is primarily attributable to the jurisdictional mix of earnings, the release of prior year tax reserves due to statutory limitations expiring, and the negative impacts of share-based compensation in the current period. For the full year, we continue to expect an adjusted effective tax rate of 25.5% to 26.5%, which reflects changes in tax laws as well as tax optimization strategies that the company intends to pursue. And finally, adjusted net income was $547 million for the quarter. Adjusted diluted earnings per share was $0.28.

Paul Ruh: The current period for.

Paul Ruh: For the full year, we continue to expect an adjusted effective tax rate of $25 five to 26, 5%, which reflects changes in tax laws as well as tax optimization strategies that the company intends to pursue.

Paul Ruh: And finally, adjusted net income was $547 million for the quarter.

Paul Ruh: Adjusted diluted earnings per share was 28.

Paul Ruh: On a like-for-like basis, normalizing for interest expense, public company costs, share count, and tax rate, earnings per share grew 7.7% versus last year. Which brings me to the outlook for the remainder of the year. We are maintaining our outlook for organic growth in the range of 2% to 4% and earnings per share to be in the range of $1.10 to $1.20. This range assumes about a 4 cent foreign exchange headwind based on current rates. Our outlook balances our solid first quarter while acknowledging macroeconomic dynamics impacting consumer confidence. Our guidance also considers the possibility of unknowns in our seasonal businesses, including sun, allergy, and cold, cough, and flu.

Paul Ruh: On a like for like basis normalizing for interest expense public company cost share count and tax rate earnings per share grew seven 7% versus last year.

Paul Ruh: Which brings me to the outlook for the remainder of the year.

Paul Ruh: We are maintaining our outlook for organic growth in the range of 2% to 4% on earnings per share to be in the range of $1 10 to $1 20.

Paul Ruh: This range assumes about a <unk> <unk> foreign exchange headwind based on current rates.

Paul Ruh: I'll also balances our solid first quarter, while acknowledging macroeconomic dynamics impacting consumer confidence or <unk>.

Paul Ruh: Guidance also considers a possibility for our loans in our seasonal businesses, including Sun allergy and cold cough and flu.

Paul Ruh: As we talked about, Q2 has a few unique dynamics, including strong compares and expected U.S. retailer trade inventory reduction that will impact our results. We continue to expect an acceleration in the back half of the year as compares ease and we get our planned stakeholds. All other guidance metrics, which can be found in the slides accompanying our remarks, remain unchanged. In summary, I would like to leave you with three key takeaways. We had a strong start to 2024.

Paul Ruh: As we talked about Q2 has a few unique dynamics, including strong compares unexpected U S retailer trade inventory reduction that will impact our results.

Paul Ruh: We continue to expect an acceleration in the back half of the year as compares ease and our plans take hold.

Paul Ruh: All other guidance metrics, which can be found in the slides accompanying our remarks remain unchanged.

Paul Ruh: In summary, I would like to leave you with three key takeaways, we had a strong start to 2024, we're executing against our strategic priorities for the year and we have the right plans talented people and strategic investments in place to deliver our long term algorithm. Thanks.

Paul Ruh: We're executing against our strategic priorities for the year, and we have the right plans, talented people, and strategic investments in place to deliver our long-term strategy. Thank you, and with that, we will take your questions.

Paul Ruh: And with that we will take your questions.

Operator: Thank you. We will be conducting a question and answer session. In the interest of time, we ask that you limit yourself to one question to allow for as many questions as possible.

Speaker Change: Thank you at this time, we will be conducting a question and answer session. In the interest of time, we ask that you limit yourself to one question to allow for as many questions as possible.

Operator: You have a question. Please press star one on your telephone keypad.

Operator: A question simply press Star one again.

Operator: If you have a question, please press star one on your telephone keypad. To withdraw your question, simply press star one again. It may be necessary to pick up your handout before pressing the star key. One moment, please, for your first question. And your first question comes from the line of Andrea Teixeira from J.P. Morgan. Your line is open. Thank you, operator, and good morning.

Operator: Spending your equipment it may be necessary to pick up your handset before pressing the star key one moment. Please for your first question.

Andrea Faria Teixeira: And your first question comes from the line of Andrea to share from J P. Morgan Your line is open.

Operator: Thank you, operator, and good morning, everyone. Thibaut and Paul, you both mentioned that the stocking in the self-care business will likely continue in Q2, and you gave some color on what to expect in organic sales growth. But in terms of how we should be thinking across the divisions in terms of skin health and beauty, is that something we should understand that there is still a job to be done, and it takes time?

Andrea Faria Teixeira: Thank you operator, and good morning, everyone.

Operator: Paul you both mentioned that did this stocking into self care business will likely continue in Q2, and you gave some some color on what you're expecting organic sales growth, but in terms of how we should be thinking.

Operator: Prize the divisions in terms of the skin health and beauty.

Operator: Is that something we should I understand that there is still a job to be done and it takes time and you did you mentioned, Paul a couple of quarters or several quarters. I think was the language, but should we expect things to improve sequentially, how we should be thinking of skin health and beauty as we progress. Thank you.

Thibaut Mongon: All right. Good morning, Andrea. And so many questions in your question. Let me take the first one very quickly on inventory. We mentioned that we saw an impact of inventory reduction in some U.S. retailers in Q1, in self-care, but across categories, I would say.

Operator: And you mentioned, Paul, a couple of quarters or several quarters, I think, was the language. But should we expect things to improve sequentially? How should we be thinking of skin health and beauty as we progress? Thank you. All right, good morning, Andrea, and so...

Speaker Change: Alright, good morning.

Operator: Andrea and.

Operator: Many questions in your question, let me take the first one very quickly on inventory, we mentioned that we saw an impact of inventory reduction in some U S retailers in Q1.

Operator: In self care, but across across categories I would say and we expect this to continue in Q2, but not last beyond Q2 in terms of service.

Operator: Why.

Operator: Okay.

Operator: And we Ladies and gentlemen, we are experiencing some technical difficulties. Please stand by.

Operator: Ladies and gentlemen, we are experiencing some technical difficulties. Please stand by.

Speaker Change: Ladies and gentlemen, we are experiencing some technical difficulties. Please standby.

Operator: Okay.

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Operator: Andrea Teixeira, Thibaut Mongon, Kenvue Inc. Andrea Teixeira, Thibaut Mongon, Kenvue Inc. Ladies and gentlemen, this is the operator. We are experiencing some technical difficulties. Please stand by and we will resume momentarily. Thank you for your patience.

Operator: Ladies and gentlemen, this is the operator, we are experiencing some technical.

Operator: Please standby and we will resume momentarily. Thank you for your patience.

Operator: Okay.

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Operator: Hi, everyone. Apologies for that. We had some technical difficulties in our room. We will just go back to Thibaut answering our first question from Andrea.

Speaker Change: Hi, everyone apologies for that we had some technical difficulties in our room, we will just go back to people entering our first question from Andre.

Thibaut Mongon: All right. So, Andrea, I was responding to your question. I'm not sure how much you got out of my answer.

Operator: Alright.

Thibaut Mongon: So Andrea will serve.

Thibaut Mongon: Responding to your question I'm not sure how much you got from my answer.

Thibaut Mongon: I would start, go back to the beginning, your question about retail inventory reduction and potential impact in Q2. We saw an impact in Q1 of retail inventory reduction with some retailers in the U.S. in self-care, but I would say across categories, and we would expect this impact to continue into Q2, but not last long beyond the first half. Regarding your question on the skin health segment and how, what we should expect moving forward in skin health, our diagnostic has not changed.

Thibaut Mongon: Stop.

Thibaut Mongon: I'll go back to the beginning your question about retail inventory reduction and potential impact in Q2.

Thibaut Mongon: We see we saw an impact in Q1 of the retail inventory reduction with some retailers in the U S. In self care, but I would say across categories and we would expect this impact to continue into Q2, but not belong beyond.

Thibaut Mongon: The first half regarding your question on skin health segment and how.

Thibaut Mongon: We should expect that.

Thibaut Mongon: Moving forward in skin health, all diagnostic has not changed.

Thibaut Mongon: I've always said that our recovery would not happen overnight, and it would not be linear. We have developed a thoughtful plan. It's a priority for us. Jan and his team in the U.S. are laser-focused on executing this plan with the objective to stabilize the brand in 2024 with improving volumes as the year goes on and deliver growth from 2025 onwards. It's early, but I'm encouraged, as you heard in my remarks, by what I call the anecdotal evidence that we are moving in the right direction.

Thibaut Mongon: I've always said that all recovery would not happen overnight would not be linear we have developed a thoughtful plan.

Thibaut Mongon: It's a priority for us and his team in the U S are laser focused on executing this plan.

Thibaut Mongon: With the objective to stabilize the brand in 2024 with improving volumes as the year goes on and deliver growth from 2025 onwards. It's early it's early but I'm encourage as you heard in my remarks with.

Thibaut Mongon: What I call. The anecdotal evidence that we are moving in the right direction.

Thibaut Mongon: We we saw this quarter once again that when we activate our brands properly with its suite dermatologist or consumers, we see a response a pretty quick response.

Thibaut Mongon: We saw this quarter once again that when we activate our brands properly, whether it's with dermatologists or consumers, we see a response, a pretty quick response. Now, we know that we will need more of these activities to have an impact at scale on the business, and we also know that these activities take time to translate into sales and share gains, but we are definitely hyper-focused on executing the plan for the balance of 2024 to stabilize this business through our focus on in-store presence and prominence, our focus on elevating consumer and dermatologist engagement, and on amplifying innovation.

Thibaut Mongon: Now we know that we will need more of these activities to have an impact at scale on the business and we also know that these activities take time to translate into sales and share gains.

Thibaut Mongon: But which we are definitely.

Thibaut Mongon: Hyper focused on executing the plan.

Thibaut Mongon: In the balance of 2024 to stabilize this business through a focus on in store presence and prominence.

Thibaut Mongon: Our focus on elevating consumer and dermatologists to engagement.

Thibaut Mongon: And on amplifying innovation.

Thibaut Mongon: Operator, we'll take the next question.

Speaker Change: Thank you Bill operator, we'll take the next question.

Operator: Your next question comes from the line of Bonnie Herzog from Goldman Sachs. You're live.

Thibaut Mongon: Your next question comes from the line of Bonnie Herzog from Goldman Sachs.

Operator: You're live. All right. Thank you. Good morning, everyone.

Bonnie Herzog: Your line right.

Bonnie Herzog: Good morning, everyone.

Operator: So, I wanted to ask because we're hearing from some of your peers that, you know, they're seeing a step up in promotional intensity and they're expecting this going forward. So, could you talk about what you're seeing in your markets and some of your key categories and if that's consistent, and, you know, basically what your approach will be for the rest of the year? And then how do we think about this in the context of robust gross margin delivery in the quarter? And finally, you know, how does that feed into your expectations for continued contribution from that price realization going forward? Thank you.

Bonnie Herzog: So I wanted to ask because we're hearing from some of your peers that they were seeing a step up in promotional intensity and they're expecting that going forward. So could you talk about what you're seeing in your markets and some of your key categories in it that consistent.

Operator: Basically what you are.

Operator: Our approach will be to the rest of the year.

Operator: And then how do we think about this in the context of robust gross margin delivery in the quarter and finally, how does that feed into your expectations for a continued contribution from net price realization going forward. Thank you.

Thibaut Mongon: Yes, so what do we see in our categories? We see that our categories continue to be resilient. That's probably due to the unique nature of the consumer health categories compared to other stable categories you may be familiar with. In our categories, consumers are looking for efficacious solutions at a compelling value proposition, but that is exactly what we offer at Kenvue. If I look at one indicator, which is the penetration of private label in our categories, we don't see that moving around the world. Actually, penetration was down in the U.S. in the most recent reading.

Speaker Change: Yes, so what do we see in our categories, we see all that all categories continue to be.

Thibaut Mongon: Resilient.

Thibaut Mongon: In.

Thibaut Mongon: And strong.

Thibaut Mongon: Thats, probably unique to the unit linked to the unique nature of the consumer health categories.

Thibaut Mongon: Compared to the staple categories, you may be familiar with.

Thibaut Mongon: In our categories consumers are looking for efficacious solutions.

Thibaut Mongon: Our compelling value proposition, but it is exactly what we offer.

Thibaut Mongon: It can view if I look at one indicator, which is the penetration of private label in those categories. We don't see that moving around the world actually penetration was down in the U S. In the most recent read.

Thibaut Mongon: It's also linked to the fact that our Kenvue brands are strong. We are typically number one and number two in our respective categories. We offer very strong value propositions at different price points for different types of consumers, and so we cater to different needs of different consumers through our portfolio. But, it's not something we take for granted. Every day, our teams are focused on making sure that we increase the relevancy of our brands with consumers and our credibility with healthcare professionals to maintain our leadership position. Let me take the other part of your question.

Thibaut Mongon: It's also linked to the fact that all can view brands are strong we are typically number one or number two in our respective categories.

Thibaut Mongon: We offer a very strong value proposition at different price points for different types of consumers.

Thibaut Mongon: And so we get it to different needs of different consumers throughout our portfolio.

Thibaut Mongon: No it's not something we take for granted every day. Our teams are focused on making sure that we increase our relevancy of our brands with consumers our credibility with health care professionals.

Thibaut Mongon: To maintain.

Thibaut Mongon: A leadership position.

Thibaut Mongon: Let me take that.

Speaker Change: Part of your question when we think about the impact of promotional spend to gross margin, we always look at Paul.

Thibaut Mongon: When we think about the impact of promotional spend on gross margin, we always look at all activation and investment with an eye to return on investment. So when we think about how we deploy our promotional spend as well as our media, we look at how we can maximize the spend in investable propositions. So we do balance growth and profitability. In fact, we're very pleased with how our gross margin is evolving so far.

Thibaut Mongon: Activation and investment with an eye to return on investment. So when we think about how we deploy our promotional spend on <unk> as well as for media. We look at how we can maximize underspent in investable proposition, So we do balance growth and profitability.

Thibaut Mongon: In fact, we're very pleased with how our gross margin is evolving so far I mentioned, the 290 basis points of gross margin expansion that comes from both value realization on the excellent work that our supply chain team is doing across the board and we expect this to.

Thibaut Mongon: I mentioned the 290 basis points of gross margin expansion that comes from both value realization and the excellent work that our supply chain team is doing across the board. And we expect this to continue for the balance of the year.

Thibaut Mongon: To continue in the balance of the year.

Operator: Your next question comes from the line of Steve Powers from Deutsche Bank. Your line is open.

Thibaut Mongon: Our next question comes from the line of Steve Powers from Deutsche Bank. Your line is open.

Operator: Yeah, it's great. Good morning, Paul. Good morning, Thibaut. Thibaut, I wanted to ask about the Our View Forward program. It seems like it was really just approved by the board yesterday. So maybe you could give some perspective on just initial reactions internally across the organization and what steps you've taken to maybe, you know, help ensure that this is a program that's viewed as a program of acceleration that people can rally around versus maybe a potential source of disruption.

Stephen Robert R. Powers: Yes, great. Good morning, Paul Good morning Thibault.

Operator: People I wanted to ask about the our view forward program. It seems like it was really just approved by the board yesterday. So maybe you could give some perspective on just the initial reactions internally across the organization and what steps you take.

Operator: Taken to maybe.

Thibaut Mongon: Help ensure that this is a program that's viewed as a program of acceleration that people can rally around versus.

Operator: Maybe a potential source of disruption.

Operator: And in that vein, if you could talk a little bit about where you see reinvestment to be prioritized as savings are realized over the next couple of years, that would be great as well. Thank you.

Operator: And in that vein, if you could talk a little bit about where you see reinvestments.

Operator: To be prioritized as the savings are.

Operator: Our realized over the next couple of years that that'd be great as well. Thank you.

Thibaut Mongon: So let me take the first part of your question, Steve, and I'll have Paul answer the second one on the reinvestment. Our view forward has always been a key element of our plan. We see the opportunity in executing TSAs to not only clone the ways of working we had as a division of J&J but as an opportunity to reinvent our ways of working to make Kenvue more competitive and a company focused on profitable growth. And that's what our view forward is all about.

Speaker Change: Yeah. So let me take the first part of your question Steve.

Thibaut Mongon: However, Paul answer the second one on the reinvestment.

Paul Ruh: I'll be forward has always been a key element of our plan.

Speaker Change: We see the opportunity of a Canadian Tsa's too.

Thibaut Mongon: Only prolong the way of working we had as a division of J&J.

Thibaut Mongon: As an opportunity to reinvent our ways of working to make can view, a more competitive and a company focused on profitable growth and that's what all of you forward is.

Thibaut Mongon: Is all about.

Thibaut Mongon: We have been thoughtful about putting together a comprehensive program that covers our global operations. As you said, our board formally approved this work this week. And so today we are sharing the details with you. Everybody at Kenvue is mobilized to transform our company. That's something that we started doing from day one, but we are clearly ramping up our efforts in this area as we enter our first full year as an independent company.

Speaker Change: We are.

Paul Ruh: We've been thoughtful about putting together a comprehensive program that covers all global operations as you said our board formally approved this work.

Thibaut Mongon: This week and so today, we are sharing the details.

Thibaut Mongon: With you.

Thibaut Mongon: We are.

Thibaut Mongon: Everybody at Ken view is mobilized to transform.

Thibaut Mongon: A company that is something that we started doing.

Thibaut Mongon: From day one.

Thibaut Mongon: But we are clearly ramping up our efforts in this area as we enter off first.

Thibaut Mongon: First full year as a as an independent company and as I said, everybody understands that and he's excited.

Thibaut Mongon: And as I said, everybody understands and is excited that the TSA exit is really an opportunity for us to reinvent our ways of working and become more nimble, more agile, closer to the consumer with better-defined roles and responsibilities, and having our teams co-located for better collaboration, innovation, and creativity. And that's what we are all going after through this program.

Thibaut Mongon: That the TSA exit is really an opportunity for us to reinvent our ways of working and become.

Thibaut Mongon: More nimble more agile.

Thibaut Mongon: Closer to the consumer.

Thibaut Mongon: Is better defined roles and responsibilities, having our teams co located for better collaboration innovation and creativity.

Thibaut Mongon: And that's what we are all going after through this program, yes, let me provide some more details about how we are spending 275 million.

Paul Ruh: Let me provide some more details about how we're spending the $275 million both in 2024 and 2025. First, a large proportion is going towards streamlining operations, mostly in our functions where we're clarifying roles and responsibilities, simplifying processes, eliminating redundancies, and the associated costs are primarily related to severance and footprint. A second large bucket is related to the upgrade of IT infrastructure that will allow us to be more competitive with our peers, allowing for faster and more informed decision-making.

Paul Ruh: Both in 'twenty four 'twenty five first a large proportion is going towards streamlining operations, mostly in our functions, where we're clarifying roles and responsibilities were simplifying processes, eliminating redundancies and the associated costs are primarily related to severance and footprint a second large bucket is related to the upgrade.

Paul Ruh: Of it infrastructure that will allow us to be more competitive with our peers, allowing for faster and more informed decision, making that is the second part of our investment ultimately all of these investments position can view to be much more agile at a lower cost of infrastructure and allowing us to be more competitive I want to reiterate.

Paul Ruh: That is the second part of our investment. Ultimately, all of these investments position Kenvue to be much more agile at a lower cost of infrastructure, allowing us to be more competitive. I want to reiterate all of this has been contemplated in our guidance, and it bolsters our confidence in delivering on a long-term algorithm of growing income faster than sales. Your next question comes from a line of Nick Mody from RBC Capital Markets. Your line is open. Yeah, good morning, everyone. Thank you. Just a quick clarification.

Nick Mody: Autodesk has been contemplated in our guidance and it bolsters our confidence in to delivering on our long term algorithm on growing income faster than sales.

Operator: Your next question comes from the line of Nick Modi from RBC Capital Markets. Your line is open.

Nick Mody: Your next question comes from the line of Nik Modi from RBC capital markets. Your line is open.

Nick Mody: Yes, good morning, everyone. Thank you.

Nick Mody: Just a quick clarification in terms of how you over deliver just wanted to make sure I understood exactly what the source of the upside was and then people are just.

Nick Mody: When you think about new leadership for skin.

Nick Mody: Health and beauty.

Nick Mody: Are there any specific characteristics you're looking for in terms of the new leadership, just any any perspective around that would be helpful.

Thibaut Mongon: Thank you, Nick. I'll take the first one.

Speaker Change: Thank you Nick I'll, let me take the first one.

Nick Mody: What drove the outperformance in Q1.

Thibaut Mongon: What drove the outperformance in Q1? Remember, we got it to about flat, and the outperformance was driven a little bit by price and a little bit by volume as well. And from a regional perspective, Europe was doing very well, slightly ahead of our expectations. And Essential Health, from a segment perspective, is also performing very well, both in EMEA and LATAM. The rest is performing well within our expectations. So, pockets of strength across the portfolio as we execute against our priorities.

Nick Mody: Remember, we guided to about flat and the outperformance was trailing a little bit by price a little bit by volume as well and from a regional perspective, Europe, who is doing very well slightly ahead of our expectations on essential health from a segment perspective is also performing very well both in <unk>.

Thibaut Mongon: In Latam and the rest is performing in our expectations, so pockets of strength across the portfolio as we execute against our priorities I'll, let you answer the second part of your question.

Thibaut Mongon: I'll let you answer the second part of your question. Yeah. On Skin Health, we have made the decision this quarter to relocate our segment leader position from Asia to the US to work more closely with, again, in the spirit of being co-located with the majority of our teams and foster collaboration and creativity. As we look for a new leader for this segment, you will see a new leader coming in with experience in the dynamic skincare category but also with experience in growing global mega brands, because that's what you are talking about when you So, that's what you will see moving forward.

Thibaut Mongon: Yes.

Thibaut Mongon: Skin health, we have made the decision.

Thibaut Mongon: This quarter to relocate or.

Thibaut Mongon: Segment leader position from Asia to the U S to work more closely with <unk>.

Thibaut Mongon: Again in the spirit of being co located with the majority of our teams and foster collaboration and create TBD.

Thibaut Mongon:

Thibaut Mongon: As we.

Thibaut Mongon: Look for a new leader for this for this segment you will see a new leader coming in with an experience into a dynamic.

Thibaut Mongon: Skincare category, but also his experience in.

Thibaut Mongon: Growing global Mega brands, because that's what you are talking about when you are talking about brands like neutrogena.

Thibaut Mongon: <unk> and others.

Thibaut Mongon: Our Mega brands presence all over the world.

Thibaut Mongon: That's what you will see moving forward.

Operator: And Nick, maybe just to add on because it's an important point just in terms of Q1's outperformance. And, you know, Paul talked through some of the unique dynamics. There are also unique dynamics in the second quarter that will absorb some of that. So overall, for the first half, kind of in line with expectations in terms of performance.

Thibaut Mongon: And then Nick maybe just to add on because it's an important point and just in terms of Q1's outperformance.

Operator: And.

Operator: And Paul talk through some of the unique dynamics also unique dynamics in the second quarter that will absorb some of that so overall for the first half kind of in line with expectations in terms of performance.

Operator: Okay.

Operator: and for the full year, in line with our expectations as well.

Operator: And your full year in line with our expectations as well.

Operator: Your next question comes from a line of Anna Lizzul from Bank of America. Your line is open.

Operator: Your next question comes from the line of Ana <unk> from Bank of America. Your line is open.

Operator: Hi, good morning. Thanks very much for the question. I just wanted to follow up on Bonnie's question.

Anna Jeanne Lizzul: Hi, good morning, Thanks, very much for the question I just wanted to follow up on Bonnie's question I wanted to add.

Operator: I wanted to ask how you plan to split some of the incremental investment in your brand, maybe between marketing and promotion, and how should we think about a potential increase in promotion or trade spend on price mix as we move through the year? And then, in skin health and beauty, how much of the volume weakness was driven by Dr. C. Labo in China? Are you beginning to see a recovery there? And what should we think about the volume performance in skin health and beauty by region this quarter? Thank you.

Anna Jeanne Lizzul: How you plan to play some of the.

Operator: Mental investment in your brand may be between marketing and promotion and how should we think about a potential increase.

Operator: We send our trade band on price mix as we move through the year and then in skin health and beauty and how much of the volume weakness was driven by doctors being labo in China are you beginning to see a recovery there and how should we think about the volume performance in health and beauty by region. This quarter. Thank you.

Paul Ruh: Thank you for the question, Anna. Let me take the first part, and Thibaut will take the second one.

Speaker Change: Thank you for the question and let me take the first part on chemo with the second one.

Paul Ruh: In terms of how we plan to spend our investments in our brands, remember we always take a digital first, ROI-driven approach. We are on track to investing the $300 million more that we mentioned at our Q4 earnings. We began Q1 with a focus on our 15 priority brands, considering what we call investable propositions, and those are the ones where we maximize the return on investment. We are increasing investment across a spectrum of activities from in-store activation to media, digital, influencers, and also HCP endorsements with a focus on amplifying our innovation. Now, the timing of the payback you may ask may vary.

Thibaut Mongon: In terms of how we plan to spend our investments in our brands and remember.

Paul Ruh: We always take a digital first ROI driven approach we are on track to invest in the $300 million more data.

Paul Ruh: We mentioned on our Q4 earnings and we began Q1 with a focus on our 15 priority brands.

Paul Ruh: Considering what we call investable propositions and those are the ones, where we maximize their return on investment we are increasing investment across a spectrum of activities from in store activation to media.

Paul Ruh: And digital Influencers and also HCP endorsement with a focus to amplify our innovation.

Paul Ruh: Now the timing of the payback you may ask.

Paul Ruh: May vary for example in store promotion has a more immediate short lift it payback.

Paul Ruh: For example, in-store promotion has a more immediate but short-lived payback. And when we think about, on the other extreme, HCP engagement generally has a longer-term, more durable impact. But we're balancing all of those activities, focusing on our 15 priority brands, and we're encouraged by what we are seeing in Q1. We'll continue to invest in the balance of the year to maximize reach and return on investment. Thibaut, I will pass on the second question to you.

Thibaut Mongon: Payback on when we think about on the other extreme HCP engagement is generally more of a long term more durable impact, but we're balancing all of those activities.

Thibaut Mongon: Focusing on our 15 priority brands and we're encouraged by what we're seeing in Q1 and will continue to deploy.

Thibaut Mongon: In the balance of the year to maximize reach and return on investment capital. Let me pass on the second question here sure. So your question on <unk>.

Thibaut Mongon: Sure. So your question on volume in China and Dr. Szilabo is a great question because it gives me the opportunity to talk about our China business. I feel that it's not always well understood. So China grew nicely last year and we saw China continuing to do very well in Q1, growing double digits. A couple of facts about our business in China. You may recall that China represents approximately 7% of our business.

Thibaut Mongon: Volume.

Thibaut Mongon: In <unk> in China, and the C level is is a great question because it gives me the opportunity to talk about our China business.

Thibaut Mongon: <unk>.

Thibaut Mongon: I feel that it's not always well understood.

Thibaut Mongon: So China grew nicely last year, and we saw China, continuing to do very well in Q1 growing double digit.

Thibaut Mongon: A couple of facts about our business in China, you may recall that China represents approximately 7% of our business. So it's not an overly developed market for us ample opportunity for <unk> to grow in that market.

Thibaut Mongon: So it's not an overly developed market for us. There is plenty of opportunity for Canview to grow in that market. The other thing is that the majority of our business in China is in the self-care segment. We continue to see the category growing as macro trends in China support growth, especially with a very ambitious Healthy China 2030 agenda by the Chinese government. We see Chinese consumers continuing to be attracted to science-based efficacious solutions like ours.

Thibaut Mongon: Other thing is that the majority of our business in China is in self care segments.

Thibaut Mongon: We continue we continue to see the category growing as macro trends in China supports.

Thibaut Mongon: Growth, especially with a very ambitious.

Thibaut Mongon: In China 2030 agenda by the China government, we see Chinese consumers continuing to be attracted to silence based efficacious solutions like ALS. We are operating in China for many years with a very strong team.

Thibaut Mongon: We have been operating in China for many years with a very strong team. We are investing in our self-care pipeline. Just a fun fact for you, last year we launched more innovation in China than we launched in the past 11 years combined in self-care, and we have a very strong leadership position in that market across analgesics, pediatrics, allergy, and antifungals. So when you hear me talking about our business in China, you will understand why we are pleased with the performance of our teams in China.

Thibaut Mongon: We are investing in self care pipeline.

Thibaut Mongon: Just a fun fact for you last year, we launched more innovation in China, and we launched in the past 11 years combined in <unk> care and we have very strong leadership position in that market across <unk> pediatrics I'd add.

Thibaut Mongon: G Antifungals.

Thibaut Mongon: So when you hear me talking about our business in China, you see that.

Thibaut Mongon: Why we are pleased with the best months of China, Mark a follow up.

Thibaut Mongon: Our teams in in China.

Thibaut Mongon: Then there is a small part of our business that is not self-care; that's where Dr. Sillabo and all the brands are hosted. And here, like everybody else, we saw a deceleration in that part of business. We see the consumer being more cautious. As I indicated at the beginning of the year, we are not investing ahead of the curve. In that part of the business, we have not assumed any recovery in the back half of the year in our plan and our outlook for the year.

Thibaut Mongon: <unk> is a small part of our business that is not self care, so that's where the <unk> and the <unk> brands.

Thibaut Mongon: Our hosted and here as everybody else, we saw a deceleration of that part of business, we see the consumer being more cautious as I indicated at the beginning of the year. We are not investing ahead of the curve in that part of the business, we've not assumed any recovery in the back half of our plan.

Thibaut Mongon: Back half of the year.

Thibaut Mongon: Plan.

Thibaut Mongon: Outlook.

Thibaut Mongon: For the year.

Thibaut Mongon: But, as I've always said, we are committed to a long-term prospect in China, and that view has not changed. China is a positive contributor to our growth, and we expect that to be the case again in 2024.

Thibaut Mongon:

Thibaut Mongon: But as.

Thibaut Mongon: I've always said we are.

Thibaut Mongon: Committed to a long term prospect in China and that view has not changed.

Thibaut Mongon: <unk> is a positive contributor to our growth and we expect it to be as a case again in 2024.

Operator: Your next question comes from the line of Filippo Falorni from Citi. Your line is open.

Thibaut Mongon: Your next question comes from the line of Filippo for Lauren <unk> from Citi. Your line is open.

Operator: Hey, good morning, everyone. First, a quick clarification. In the Q1 results for the 1.9 organic, was there any impact from hyperinflationary pricing? Most of your peers have called it out, so I just wanted to check on that.

Filippo Falorni: Hey, good morning, everyone.

Filippo Falorni: Just a quick clarification in the Q1 results in the one nine organic was there any impact from hyper inflationary pricing most of your peers have called it out so I just wanted to check on that and then.

Paul Ruh: And then a bigger question, you mentioned Q2, you expect low single-digit declines in self-care. Maybe you can give some color for the other segment on expectations as well. And as you think about the second half, what gives you that confidence that volume will accelerate? Some of it is easy comps, is it benefits from your investment action and investment in marketing and advertising?

Paul Ruh: Bigger question you mentioned in Q2, we expect low single digit declines in self care. If you can give some some color for the other segment on expectations as well and as you think about the second house.

Paul Ruh: It gives you that confidence that volume will accelerate some of the easy comps is it.

Paul Ruh: Benefits from your investment action and investment in marketing and advertising any more color there.

Operator: Any more color there would be helpful. Thank you. Yeah, thank you.

Speaker Change: Helpful. Thank you.

Paul Ruh: Yeah, thank you for the question, Filippo. Hyperinflation, particularly in both Argentina and in Turkey, represented about 90 basis points in Q1, with no impact on earnings. We are taking the appropriate pricing, so that's why there's no impact on earnings. Hyperinflation is expected to have about 50% benefits for the top line for the full year, as these 90 basis points in Q1 were particularly high given the comparisons last year. Would you like to take the second one?

Speaker Change: Yes. Thank you for the question Phil level hyper.

Paul Ruh: Hyper inflation.

Paul Ruh: Particularly in both Argentina and.

Paul Ruh: In Turkey represented about 90 basis points in Q1.

Paul Ruh: With no impact to earnings.

Paul Ruh: We are taking the appropriate pricing.

Speaker Change: That's why there's no impact to earnings hyperinflation is expected to have about 50% benefits for it.

Speaker Change: Top line for the full year.

Speaker Change: Uh huh.

Paul Ruh: This 90 basis points in Q1 was particularly high.

Speaker Change: Given the compares versus last year.

Thibaut Mongon: I will take the second one about the unique dynamics of the self-care segment in Q2. Filippo, there are a few dynamics for you to consider in Q2 as you think about Q2 for the self-care segment specifically, and it is difficult to compare it to absorb. We grew.

Speaker Change: We wanted to exit.

Paul Ruh: <unk>.

Speaker Change: I will take the second one about the unique dynamics of self care.

Thibaut Mongon: Segment in in Q2, Filippo there are a few.

Thibaut Mongon: Dynamics for you to consider in in Q2 as you think about.

Filippo: Q2 for self care segments.

Thibaut Mongon: Specifically.

Speaker Change: One we are going to have.

Filippo: Compares difficult compares to.

Thibaut Mongon: <unk> two <unk>.

Thibaut Mongon: <unk> sold.

Thibaut Mongon: Yeah.

Thibaut Mongon: We grew.

Speaker Change: Uh huh.

Thibaut Mongon: Ah.

Operator: [inaudible] We grew double-digits in the second quarter last year, so that will be a strong comparison. The second one is that we do not expect the same seasonal strength that we saw in China in the second quarter when China reopened. We expect the continued impact of trade inventory reduction by some customers in the U.S. And I told you that so far, we saw a slow start to the allergy season, which will weigh on volumes in Q2.

Speaker Change: We grew double digit in.

Operator: The second quarter last year, so that will be a strong compare.

Operator: Just circle around these that we do not expect.

Operator: The same.

Operator: The seasonal strength that we saw in China in the second quarter when China reopened.

Operator: We expect continued.

Operator: Impact of trade inventory reduction in by some customers in the U S.

Operator: And I told you that so far we saw a slow start to the allergy season, which will weigh on.

Operator: On volumes in <unk>.

Operator: In Q2.

Operator: Having said that.

Operator: Having said that, you should also see them as non-operational elements masking the underlying in-market performance of our self-care business. So that's what is driving our current thinking for self-care in Q2. Regarding the back half of the year, we see no change in our expectations for the back half, and that's why we reaffirmed our guidance for 2024 this morning. It's going to be a combination of the easier comparisons, to your point, but also seeing our plans taking hold as we execute our 2024 priorities.

Operator: We.

Operator: You should also see it.

Operator: As non operational elements masking the underlying impulse in market performance of <unk> business. So that's what is driving our current thinking for self care in the in Q2.

Operator: Regarding the back half of the year.

Operator: We see no change in our expectations for the back half and that's why we reaffirmed our guidance for 2024. This morning.

Operator: Going to be a combination.

Operator: Off the easier compares to your point, but also seeing.

Operator: All plans, taking hold as well.

Operator: We execute call 'twenty against 2020 full priorities.

Operator: Okay.

Operator: Your last question comes from a line from Corinne Wolfmayer to Piper Sandler. Your line is open.

Operator: Your last question comes from a line from Corrine Wolfmayer from Piper Sandler. Your line is open. Hey, good morning. Thanks for taking the question. I'd like to touch on a little bit more

Speaker Change: Your last question comes from the line of Korean Wolf Mayor from Piper Sandler Your line is open.

Korinne N. Wolfmeyer: Hey, good morning, Thanks for taking the question I would like to touch a little bit more on the gross margin on it came in a little bit higher this quarter I know you talked a little bit about some of the drivers. There is there any way you can help us quantify the specific drivers and help us better understand which ones are going to be more sticky throughout the course of the year and then any.

Korinne N. Wolfmeyer: Color on how to think about the cadence of the gross margin throughout the remainder of the year.

Paul Ruh: Yeah, Connie, thank you for the question. We're actually very, very proud of the work that the team is doing. Gross margin is a strong muscle for Kenvue, and pricing, that is, value realization, continues to be a component of our gross margin enhancement, along with continuous efficiencies in our operations. The impact of inflation is also moderating, with agrochemicals now a tailwind, and is still offset by some headwinds in labor and energy.

Korinne N. Wolfmeyer: Yes, Tony Thank you for the question.

Paul Ruh: We're actually very very proud of the work that the team is doing gross margin is a strong muscle force can view.

Paul Ruh: And the pricing that is value realization continues to be a component of it.

Paul Ruh: Of our gross margin enhancement, along with continuous efficiencies in our operations.

Paul Ruh: The impact of inflation is also moderating.

Paul Ruh: With agrochemicals, becoming now a tailwind and is still offset by some headwinds in labor and energy and we're mindful of the unique dynamics and the volatility that we still see in the commodity markets, but we're very confident that we will be reaching as I said in my prepared remarks, our stated goals.

Paul Ruh: And we're mindful of the unique dynamics and the volatility that we still see in the commodity markets. But we're very confident that we will be reaching, as I said in my prepared remarks, our stated goal of 59% that we had back in 2021 this year. So we're more optimistic about the gross margin enhancement that will help fuel brand activation and getting closer to our consumers and customers. As to what it means in terms of the cadence of the year, there's always a natural seasonality in our business, but it's fair to assume that our gross margins will be slightly better than we originally anticipated, which will continue to fuel our investments in our brands.

Paul Ruh: 59% by two that.

Paul Ruh: We had back in 2021. This year. So we were more optimistic about the gross margin enhancement that will help fuel.

Paul Ruh: The.

Paul Ruh: Brand Activations.

Paul Ruh: Getting closer to our consumers and customers.

Paul Ruh: Cash throughout what it means in terms of the cadence of the year. There is always a natural seasonality in our business, but I would say, it's fair to assume that our gross margins will be slightly better than we originally anticipated.

Paul Ruh: That will continue to allow us to fuel our investments in our brands.

Speaker Change: We have reached the end of our question and answer session I would now like to turn the floor back over to T. Bill Montgomery for closing remarks.

Thibaut Mongon: We have reached the end of our question and answer session. I would now like to turn the floor back over to Thibaut Mongon for closing remarks.

Operator: So thank you all for participating in today's call and apologies again for the technical glitch at the beginning. As you can see, we are pleased with our solid start to the year. As we have discussed, we are committed to continuing to transform our organization with our three clear strategic priorities, reaching more consumers, freeing up resources to invest in our brands, and fostering a culture of performance and impact at Kenvue. Therefore, our teams are all focused on executing with excellence, and we look forward to updating you on our progress throughout the year. Have a great day, everyone!

Operator: This concludes today's conference. Thank you for your participation. Have a wonderful day. You may disconnect your lines at this time.

Thibaut Mongon: So thank you all for participating on today's call and apologies again for the technical glitch at the beginning where as you can see we are we are pleased with all solid start to the year.

Operator: We have discussed we are committed to continue to transform our organization with our three key strategic priorities.

Operator: Reaching more consumers freeing up resources to invest in our brands and fostering a culture of performance and impact at can view. So our teams are all focused on executing with excellence and we look forward to updating you on our progress throughout the year.

Operator: Have a great day everyone.

Operator: This concludes today's conference. Thank you for your participation have a wonderful day you may disconnect your lines at this time.

Operator: Okay.

Operator: For the quarter.

Operator: [music].

Operator: Okay.

Operator: Yes.

Q1 2024 Kenvue Inc Earnings Call

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