Q2 2025 Kenvue Inc Earnings Call

Hello and welcome to 10, View's second quarter 2025 earnings conference call all lines have been placed on mute to prevent any background noise. 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 Start 1 on your telephone keypad. As a reminder, this conference is being recorded, it is on my pleasure to introduce your host Sophia to send us have an investor relations for kenview.

Good morning everyone and welcome to keny's Second. Florida 2025 earnings conference call. I'd like to extend a special welcome to Kirk Perry interim chief executive officer and Ahmed, banadi Chief Financial Officer as they participate in their first earnings call with us today.

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.

Changes that are difficult to predict and 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.

During this call we will reference 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 the US. Gaap

These non-gaap Financial measures should be viewed in conjunction with the most directly comparable. US gaap Financial measures and are not presented a substitute for or Superior to those most directly comparable US, gaap Financial measures.

Those most directly comparable US gaap Financial measures in a Reconciliation of our non-gaap items to their respective. Nearest US, gaap measures can be found in this morning's earnings press release and our presentation available in our IR page of canvas website. Investors that can view.com with that. I'll turn it over to Kirk.

Thank you, Sophia and good morning, everyone. We appreciate you joining us today.

I'm honored to be speaking with you for the first time as interim CEO.

I've had the pleasure of serving on the kendi board since late last year, it is a privilege to take on this new role. It's such an important time for the company.

Full board is acting with urgency, making changes in leadership, working to be on an accelerated growth trajectory, and progressing our comprehensive review of strategic alternatives.

We clearly see the opportunity where I can step in and make a difference right away drawing on my past experiences.

If more than 30 years in the global cpg, technology and data and analytics, Industries, I am committed to leveraging my knowledge and expertise to make an impact, quickly enabling can be to deliver on its tremendous potential.

During my 23 years at Procter and Gamble. I competed against many of Ken View's iconic Brands and I bring deep consumer customer and operational experience in our categories.

During this time, I spent six years working abroad in South Korea and Japan, gaining important insights into what it takes to win across diverse and dynamic markets outside the U.S.

I was also responsible for running PG's, us operations group, overseeing all the North American Marketing and US operations, teams deeply integrating into our customer teams to grow and win with our largest Retail Partners.

I bring a tech burst understanding of the global consumer Marketplace for my time at Circa in Google.

As CEO of sercana, the Global Tech data and analytics provider for the consumer retail and media sectors.

I led the team that helped Global clients successfully navigate the data and AI Revolution.

At Google. I was president of global client agency Solutions, where we helped the world's largest advertisers and agencies win in the digital first world.

By my time at these companies shaped how I see the modern playbook for Consumer brands.

Something that has transformed dramatically.

And rapidly in a dated driven digitally enabled world and something that cpg companies need to embrace to win with consumers and customers to win. We need to adopt not only the right tools, but the right mindset across everything we do.

The reason I'm so confident that we can be turned around is that I have been part of many over the course of my career.

probably the single biggest and most dramatic was turning around the baby care business at PNG during the time, I was there where I had the opportunity to lead the Northeast Asia and then the North America businesses

Over a 2-year period, we strengthened the performance of a big business that had been losing share for years by focusing on the fundamentals. We executed with excellence and turned it around.

There has been important progress made in the business since kendi was established as a standalone company. With Ken viewers working to transition processes and systems and separate from J&J to create a stronger tailored business foundation and beginning to achieve efficiencies and cost savings along the way.

Of course with the separation. Now behind us we have to find ways to work smarter and be more agile by simplifying work streams and streamlining decision-making. The focus is on improving our execution and financial performance in order to deliver reliable and consistent results.

I am a firm believer that promises made need to be Promises Kept.

To that end. I'll now turn to some of the key points. We want to leave you with today.

The kenview board has taken a set of decisive actions to enable the company to unlock shareholder value and reach its full potential.

The board asked me to step into the CEO role on an interim basis following the earlier CFO transition with the MIT banati joining the company.

Emit is here with us on this first earnings call today, and is now 3 months into his role.

We are very pleased to have someone with a myth skills and relevant experiences. In this critical role

In addition to these leadership changes, the board has previously, initiated a comprehensive review of strategic Alternatives. And we now have a strategic Review Committee in place, which I'm a member of to oversee this ongoing process.

We are considering a broad range of potential Alternatives, including optimizing, the company's brand portfolio.

Emit and I are working closely with other members of the board on this process.

We're moving with rigor and urgency to deliver the best outcome for our shareholders, and will update everyone as the review progresses.

I also want to be clear that while the board's work proceeds, we are not standing still and we are actively and acutely focused on improving our operational and financial performance.

10 view has an iconic brand portfolio with so much potential.

Potential without performance, doesn't matter. We need to enable these Brands to live up to their full potential faster and a sustainable manner.

We will be moving at warp speed to get the business moving in the right direction.

In the 3 weeks since I've been in the interim CEO role, I've been diligently digging into the business to identify what we're doing well and what we need to change to win with consumers and customers, and operate with greater impact and agility.

Well, I'm still in my early days and going through deep Dives across the entire organization. I wanted to share some initial observations which have informed our immediate priorities

There is a significant amount of complexity across the organization.

Whether it comes to skewed brands or even countries,

we can't be everything to everyone and we need to be more choice on where to play and how to win.

Even when it comes to Innovation by focusing on fewer, bigger and better ideas, we can actually execute better and more efficiently. With that said, I do want to acknowledge that in the back. Half of the year, we have the most robust pipeline of innovation. We've had in years,

Second, we should be winning share with Our Brands period.

To make this a reality, we need to transition to a consumer Centric mindset, the consumer should always be at the center.

Of everything we do when you do this. Well, it shows up everywhere from Iconic, brand marketing campaigns to breakthrough, Innovation, that drives category growth to organizing. Everything you do on systems processes and structure to the light. Our boss, the consumer,

As an organization, we need to refocus on household penetration, which is key to driving market share.

Deep consumer, understanding creates, incredible consumer insights that deliver points of difference. We can leverage to drive Big Ideas and needle, Moving Innovation.

We simply haven't done this well enough, when you deeply understand the consumer, you build insights that are the foundation of everything you do.

It leads to Brand building that resonates and allows your brand to move from consumers, liking it to needing it.

Then you build Innovation from the insights that delight and reinforce it through marketing.

And last but certainly not least, Flawless go to market, execution is absolutely critical to Our Success.

Whether it comes to category management, Revenue growth management, perfect store, or how we show up online in particular with e-commerce.

Executing with Excellence is mandatory not optional.

It is something we have not done, but absolutely need to do well everywhere.

Importantly, none of these are insurmountable challenges.

Members of our leadership team. And I have already Run This Place book before and I'm confident we can do it again.

The good news is that over the past few weeks. I've also seen an organization that wants to win. They want us to refocus on fundamentals and make bold choices.

By focusing on the following 4 immediately, I believe we can reach our goals faster.

Our first priority is to strengthen leadership and capabilities.

We are pleased that Andy duska a nearly 30-year Global consumer products industry veteran assumed the leadership of our asia-pacific region in July.

With extensive leadership experience in Health Nutrition and food and beverage sectors. And esl's senior level Regional and Global roles across Europe. The US and Asia Pacific.

And today we announced that Mike 1 dash will serve as our new Chief technology and data officer, effective August 25th. Bringing nearly 30 years of experience at the intersection of Technology digital and data for Global Fortune. 100 companies.

Area for me, with these moves, we've appointed 4, new leaders to kendy's leadership team, over the past 3 months, which is 1/3 of the team.

Second.

We also take a fresh look at our operating strategy. As I mentioned earlier, our Focus will be on making the right choices on where to play and how to win. Unfortunately what has inhibited our ability to do this? Well to date is that we have created self-induced complexity that we need to fix a few examples.

While we have a 115 brands in the company 41, play a role across 1 or more regions and account for over 34 of our sales.

We have a long tale of skus that make up a significant portion of total skus yet account for approximately 1% of our sales.

Finally we have a robust pipeline of innovation but far too many initiatives that can be executed efficiently and effectively we can and we will do better here.

Third and improving the execution will be at the core of everything.

My mentor once told me the only strategy, our consumers and customers ever see is our execution

And I obsess over 3, critical moments of Truth and execution.

It's when consumers hit the zero Moment of Truth, which is where they become aware of Our Brands.

the first moment of truth is, when consumers find us on the shelves or online,

And the second Moment of Truth is when consumers use our product and decide to repurchase it or not.

simply put, we need to win with our biggest brands and our biggest customers in our biggest markets

Because we win here, we win.

For 10 biggest brands in each region account for more than 2/3 of our sales. And our 10 biggest markets, account for more than 3 quarters of our sales.

Lastly, we'll review ways to optimize our structure and operating model.

The limits test. Here is simple.

Does the model we have enable us to make decisions as fast as possible. And when with consumers and customers,

If not, how do we adjust course to be a simpler more agile, higher impact organization.

I am the big believer that lots of different operating models can work. If you are a laser focused on enabling the right decisions at the right level with speed and precision.

All of these priorities need to work in harmony for us to grow our market share. And when in Market,

So while it's not a complicated formula, we're determined to get it right? And I'm energized by the opportunities. We have ahead.

I'll now turn to an overview of Topline results for Q2 before a mitt, does a deeper dive on the financials.

We Face to tell.

Quarter and our Topline results were well below expectations.

While organic sales decline. 4.2% Global consumption, grew year-over-year and outpaced organic sales across each segment.

Results in self-care were disproportionately impacted by unfavorable seasonal and customer inventory, Dynamics, which masked strong market share performance for the business.

For example, in the US 83% of our business held or gained share and analogy, despite the soft season zero Tech didn't just strengthen its leadership position but also grew a household penetration across both adult and children franchises.

And skin health and beauty. While we still have work to do to get back to market, share, gains and consistent Topline growth. We are encouraged by the sequential Improvement in consumption in the US.

Neutrogena face a key platform for the brand return to year-over-year consumption growth in the US during the quarter with market share Trends. Also, improving sequentially.

Globally consumption of our skin Health and Beauty Brands stabilized for the first time in more than a year deal. Back growth, anemia Latin America and asia-pacific.

an essential health we perform well in Latin America but face declines in other regions against a strong year ago quarter

We have stepped up our efforts to increase household, penetration for listing, and in Q2 launched, our Global washer mouths campaign in the US, which has since been activated across other major markets, such as Canada, UK, Germany, and China.

From a regional perspective, we are pleased with our performance in enia and Latin America.

Although, Q2 results were impacted by external Dynamics, ultimately we did not execute at the level we should have.

In light of Q2 results, the current expectations, through the end of the year. We have revised guidance for 2025

Now, I'll turn it over to emit for more on our financial results and Outlook.

Thank you, Kirk, and good morning everyone. I'm pleased to be here for my first earnings call with Ken View.

And continue to be excited about the significant opportunity for Value creation as we unlock the full potential of Our Brands.

Similarly, to Kirk, I have extensive experience in global consumer packaged. Good companies, having spent more than 30 years working in different countries across the globe both in finance and operational leadership roles.

Equally important and relevant to us today is my strong background in leading businesses through transformation and strategy evolution.

Over the past 3 months, I have immersed myself in the business by conducting deep Dives with our teams meeting with both, Ken viewers and external stakeholders, to understand our strengths and opportunities and working closely with our board to advance our ongoing strategic review.

Although it's still early days, I would like to share a few initial observations and the financial priorities that I'll be focusing on which are closely aligned with what Kirk has just discussed.

Clearly, we are not delivering on our growth potential and our results have not been consistent or reliable.

Enhancing operating rigor and discipline will be a key priority for me.

We have a significant opportunity to improve our overall integrated business planning process with a particular Focus On consumption-driven Demand forecasting.

Addressing, this will be critical to driving consistency and reliability in our results.

Another priority will be driving efficiencies and getting to appropriate peer Benchmark levels across the p&l.

This will provide fuel for our growth while also enabling us to expand margins over time.

While our gross margins are at healthy levels. And the company has made good progress over the past years, we can realize further improvements over time by continuing to drive strong productivity across our supply chain through further, procurement Network, optimization planning, and digitization initiatives.

Strengthening our Revenue growth management capability with an immediate focus on our top markets and driving margin enhancing innovation.

On seeing the sizable lift of separation and the fact that we recently became a standalone company, our costs are above comparable benchmarks. This represents an opportunity going forward. Work is underway to identify additional sources of cost savings as we look to get to levels commensurate with the potential of our brands within the categories and regions in which we operate.

While we have increased our investments behind Our Brands closer to peers, we have opportunities to optimize our spend and drive higher Roi on our brand Investments.

Work on. This is underway as we speak.

On cash flow, we have opportunities in working capital as we continue to transform the supply chain, we expect to see benefits across inventory and payables and improve cash flow conversion.

A key enabler will be modernizing and optimizing our systems processes and Technologies through the separation and TSA exits. The company cloned Legacy infrastructure that we are modernizing. As we look to drive our digital and data strategies and realize productivity and efficiency opportunities.

During my short tenure, it is clear to me that while we have significant strengths, there is also substantial work to do, both in support of the review of strategic Alternatives, and to drive, operational improvements that will accelerate profitable and sustainable growth. While providing consistency and reliability for investors.

Now, I will provide additional color on our second quarter results, as well as the revised outlook for the year.

As we shared several weeks ago in quarter 2, organic sales declined, 4.2%, which was below our expectations and I'll discuss the drivers shortly on margins sgna savings helped offset the impact of software gross margins. So that adjusted operating margin contracted 10 basis points versus last year to

22.7% with adjusted diluted EPS coming in at 29 cents versus 32 cents in the year ago. Period.

Let's dive deeper into our Topline performance in the quarter.

Organic sales in quarter 2 declined. 4.2%.

While Global consumption was positive and significantly outpaced organic sales performance, across each segment. This was a disappointing result in what remains a dynamic macro backdrop.

In addition to execution being below expectations, there were 4 other major drivers of our sales performance in the quarter.

First a category is decelerated. Sequentially versus quarter 1 and year-over-year. And our share performance is not where it needs to be.

During the quarter.

Third, there was a negative impact on top line from both trade inventory, fluctuations at certain customers in the US across all segments and changes in shipment timing versus last year in China.

And lastly, strategic investments in price in the US weighed on value realization.

As a result of these factors, both value realization and volumes were unfavorable in quarter 2 Contracting 0.9% and 3.3% respectively.

Looking at the segments are self-care business was most significantly impacted by the inventory and seasonal Dynamics across North America and asia-pacific regions.

Self-care is where we saw the largest gap between consumption, which grew year-over-year and organic sales, which contracted 5.9%, largely due to lower volumes.

From a category perspective while we continue to drive strong momentum on our smoking sensation business, as we built on the rollout of Nicorette lozenger, across Global markets, organic sales declined year-over-year, AC the allergy, as well as cuff, cold and flu and Pain Care. Franchises,

These businesses were not only impacted by a decline in seasonal incidences in quarter 2 of this year, but also lapped against an inventory. Build in China, for the 24th season. Which as you may recall, ended up being very weak.

In allergy a reduction in incident.

Hindered category performance across our 2 key markets, us and China.

In the US allergy incidences in quarter. 2 were the second lowest on record with adults and children's incidences declining, 7.7% and 16.9% respectively.

Despite these category, headwinds which also weighed on replenishment orders. Zoetek continue to strengthen its leadership position, gaining both share and household penetration behind, excellent. Execution, of a packaging, refresh, and strong Promotional, and media support.

In China, while the allergy category was also weak, rynok code gained share.

despite Topline softness, self-care remains a bright spot when it comes to the strength of Our Brands and the underlying health of the business,

In the US.

83% of our business held against share.

Our largest brand in self-care Tylenol continue to gain share. As this was the 12th consecutive quarter of share Improvement in the US for adult Tylenol.

Importantly Tylenol also continues to be at the Forefront of innovation as we leverage and extend, this excellent brand Equity into adjacent categories. For example, we are adding Tylenol precise, nighttime to the precise lineup,

Furthermore, we are all meeting evolving consumer needs. As we recently launched. The new Children's Tylenol natural apple flavor which provides a new Die. Free formula that does not have artificial flavoring.

And Beauty where organic sales decreased.

3.7% versus last year, as value realization and volume declined, 2.3, and 1.4% respectively.

Solid organic sales growth across emia and Latin America regions was offset by declines in North America and Asia Pacific.

Encouragingly Global consumption stabilized for the first time since the third quarter of 2023 with similar drivers behind the sizable Gap, relative to organic sales as I just laid out for self-care.

In our largest market, the US despite weak sunare category performance during the quarter, overall consumption Trends continue to improve sequentially, benefiting from the Strategic prize Investments. The team implemented starting in quarter 4 of last year across some of our brands,

At the same time, the team's brand building efforts behind Neutrogena face and OGX are resonating with consumers as consumption for these 2 platforms, inflected back into positive territory during the quarter.

In fact, the OGX Bond protein repair launch has been the number 1 performing, Innovation from kenview year to date and has helped secure additional distribution for the brand.

While we encouraged by these improvements, we also recognize there is considerable work to do, to get back on a sustainable growth and shared gain trajectory for the US business. As we continue to focus on turning around this important business and bring new product Innovation to the market. This fall, we will be agile and disciplined with our investments to ensure they drive strong returns.

And as volume and value realization contracted 1.8 and 1.6 respectively.

In addition to cycling against the strongest comparison of 2024. As essential health registered, 7.6% organic, sales growth in the year ago, period.

Similarly, to the other segments, there was a disconnect between consumption and Topline performance.

This was most pronounced in wound care, which fundamentally is on a good footing. As Band-Aid branded has bandages, group share with strong performance from the new product lineup such as Band-Aid waterproof and tie-dye.

We're making progress addressing competitive pressures in women's health in asia-pacific and are encouraged by the consumption of our baby care brands.

However, we're not satisfied with the performance of our mouthwash business. In the US, where despite getting share online, we're losing share across the total Universe, even as the brand continues to deliver strong growth on the premium line,

The teams are urgently working through plans to arrest the shared decline which we have slowed relative to last year. Through actions, we have taken to be more competitive on our base business.

The key challenge, our teams are addressing is on our portfolio mix where we are not playing strongly enough in the fastest growing mild alcohol-free segment.

Our first step is our recently. Launched wash your mouth Campaign, which is showing positively reads, there are strong marketing and customer activation plans in place, to support the campaign. And this shift.

The new campaign will be coupled with new product launches as a second step.

But we do expect that it will take some time to get back to share gains.

Moving down the pnl, adjusted gross margin, contracted 70, basis points versus last year to 60.9%.

A supply chain team continued to drive strong productivity, which was more than offset by the headwinds from input costs inflation, unfavorable mix currency and strategic Price investments.

Relative to last year, adjusted operating income declined 4.5%, with adjusted operating margin contracting 10 basis points to 22.7%.

We lapped against a significant Step Up in brand support in the year ago, period and adjusted our crews for incentive compensation which contributed to the sgna, leverage in the quarter.

Gross savings from our view forward. Also continue to track to expectations and contributed to the year-over-year reduction in sgna costs.

Adjusted net income in quarter 2, came in at 560 million, with adjusted diluted EPS, at 29 cents, including about a penny headwind from foreign exchange.

Below the line items were unfavorable year-over-year and contributed to the 8.3% decline in adjusted net income.

Net, interest expense went up about 2 million to 94 million and the adjusted effective tax rate increased to 26.9% from 25.7%. As we lapped, a discrete tax benefit in the year ago, period.

We are revising our outlook for 2025 to reflect the year-to-date results. As well as our current expectations for the second half considering the dynamic external environment and underlying business fundamentals.

For 2025, we currently expect organic sales to be down low single, digits with about neutral impact from currency.

While we continue to plan for greater contribution, from Innovations in the back half of the year, we believe a more muted Outlook is warranted on the base business given year to date performance, fluctuation in retail or Auto patterns and the sequential slowdown in our categories. In quarter 2, we are assuming adjusted operating margin will contract versus last year largely as a result of strategic Price. Investments. Fixed costs de-lever and inflationary pressures.

Which we do not expect to be fully offset with productivity initiatives.

The Tariff backdrop remains very fluid, but based on what is currently in effect, we expect gross analyze impact to be around 150 million and below that in 2025 given the timing of tariffs

Given the Topline shortfall. We are taking urgent actions to curtail our discretionary spend and accelerate productivity measures

Within this Outlook, we plan to continue supporting our brands at a higher level than last year. Although you should fully expect us to be much more choice in our investments. As we are laser focused on redirecting spending towards higher Roi ideas.

Below the line assumptions gets us to a full year, adjusted diluted EPS in the range of a dollar to a dollar and 5 cents, including a low single digit, drag from currency.

We are not satisfied with our performance in the second quarter and the results we currently expect for the full year. We are committed to moving with speed to improve our operating performance and financial results and are making the necessary interventions to strengthen the business.

And now, I'll turn it back over to Kirk for closing remarks.

Thanks Amit for walking through that detail.

Our results are not where we want them to be and we're going to focus on our 4 operating priorities to drive improved performance.

As we move forward I am focusing the team on where we are doing well, what? I'll call glimpses of greatness so that we can search and reapply proven business, building use cases. Let me share a few examples.

We are leveraging our investments with Healthcare professionals through increased and integrated sales forces. Stronger, sampling and more competitive claims to drive share gains.

Tylenol, which is the number 1 health care. Professional recommended brand continues to expand our pain leadership position through impactful brand campaigns and Communications increased Total distribution points and strong innovation.

Another example is our ability to scale successes across geographies through our International Nicorette franchise which is driving Topline growth for the brand. We continue our streak of 7 consecutive quarters of share gains by increasing distribution for losses, and gum, and broader brand activations. And top emia markets and globally.

Lastly but certainly not least we know how to turn businesses around and high growth, competitive markets, our team in Brazil has done exactly that with Johnson's Baby. The world's number 1 baby care brand that elevates precious moments of bonding by launching consumer Centric innovation.

Leveraging revenue growth management to improve competitiveness and strengthen ROI on enhanced communications. We just realized our second quarter of year-over-year share growth in reclaiming the number one pres brand through strong healthcare professional engagement and increased total distribution points.

I want to wrap up with a few important points.

The company's recent performance is below what we believe we can achieve, and the board is committed to taking decisive actions to unlock shareholder value.

We're taking a fresh, look at the business and providing an updated guidance range today that we are confident in.

We've also outlined our immediate operating priorities to get us there.

We're focused on having the right leadership. We're focused on Flawless execution.

And faster, decision-making to enable and Advance the right operating strategy.

Our goal of accelerating profitable growth is not changing. We're just revisiting how we can deliver it.

At the same time, a review of strategic Alternatives is underway and the board is considering a broad range of potential alternatives.

I want to close by saying a huge and heartfelt, thank you to our more than 20,000 can be viewers for the warm welcome in my first few weeks and emits first 3 months

Change is not easy but I love the passion and desire to win. That I sense from this organization. I see it. Hear it and feel it. It's an honor to step into this role at this important time.

I look forward to keeping you updated on progress in the months ahead.

Thank you at this time, we'll be conducting a question and answer session in the interest of time. We ask that you please limit yourself to 1 question to allow us for many questions as possible. If you have a question, please press star 1 on your telephone keypad to withdraw, your questions, simply press star 2 for participants using speaker equipment and may be necessary to pick up your handset before pressing the star, key 1 moment, please for your first question.

Our first question comes from the line of Lauren Lieberman with Barclays. Please proceed with your question.

Great. Um, thanks so much. So, um, that was a lot of great color and I just wanted to talk maybe a little bit about

Timeframe Kirk around the idea of we're identifying key operating goals and things. We can do up front. Um, relative to the evaluation that's going on in the what to do sort of next in the background.

and is it fair to think about the because the complexity piece is a, is a big 1 when I think about sort of the challenges that the Enterprise as a whole,

So, there's a reasonable to think about the, the biggest brands, the biggest countries, the biggest Innovations, Focus the dollars, they're now do that immediately and up the game, and it's really about evaluating. How do we deal with?

And that's the big I guess the biggest element of the the Strategic review work. Thanks.

Thank you, Lauren.

um,

it's good to hear from you again. Um,

So at a high level, what you said is, is absolutely true. Um, you know, we need to focus and as I mentioned, you know, in terms of the number of brands

As an example, that contribute 3 4, 3 course of our sales, the long tail of skus that make up less than 1% of our sales.

Great Innovation pipeline, but just too many initiatives. So you know, I was I was thinking about this last night.

You know, and I was when I was uh, in high school or Russ and Coach made us Russell, someone 2 weight classes up and to prepare for the season, it was always easier in the match because you were wrestling something that's much heavier. And I feel like in a lot of ways, we're wrestling someone, many weight classes above our weight, because we built in this complexity and so, being focused and executing flawlessly on these core things. The biggest brands, the biggest countries, the biggest initiatives to help us grow more quickly, is definitely it. You know what, I'll give you 3 examples, where I think, you know, in terms of executional Excellence,

We can fine-tune these things quickly to be able to see a difference. Um, 1 example is, we need to be where the consumers are

And if you look at what our business split is between brick and mortar and e-com.

We're significantly overdeveloped in brick and mortar, but we're significantly underdeveloped in Ecom. We need to win an Ecom. It's growing faster. If we just grow with the category in e-com, we're going to pick up significantly in our businesses because they are growing there, so we can make that pivot. Make a shift, do that much better and hold ourselves accountable for that on our initiatives, 1 example is our Listerine Total Care recent initiative, it's growing significantly faster than the category, we have user generated content up 245%. Um share a voice is the highest in the category Dennis and hygienist right in King's number 1 yet we're not growing fast enough. We're sequentially improving but we're not growing positively from a share standpoint. The problem there is a leaky bucket, right? The core has to be strong. So while we're launching and supporting initiatives, we need to make sure our core is strong. So we're going to go through and review and make sure

Every 1 of our core Brands is supporting our core, as well as our Innovation to make sure that we grow.

And then the last example I gave you an execution of Excellence so we can get our hands around. Quickly is the media or Roi we are improving.

But that's broken down into a couple components. 1 is our efficiency from a CPM standpoint and the second is our effectiveness

What we're seeing is our efficiency is way better because we're investing in cpms that allow us to get a scale benefit. They're they're less expensive, but our Effectiveness in total is not as strong as it can be. So the net of that is positive, but if we had our efficiency up and our Effectiveness up across our top brands, in our top countries, on our top initiatives, we would be accelerating growth. So those are just a few examples, where our execution can be improved and we will work on that.

And the other thing Lauren I I just I would be remiss to say is um you mentioned this this strategic alternative review

The board and our leadership, team have been hand in hand on this. And, you know, I call this the power of and we are going through this strategic Alternatives review and making sure that we look at every potential possibility. In addition, to operating the company better. It's it's not an or it's an. And so we need to do both these things. Well, as Amit said, in his comments and I mentioned, we need to make sure we're predictable reliable

Consistent.

Thank you. Our next question comes from the line of Peter Graham with UBS, please. Proceed with your question.

Thank you, Peter for that question. Um,

So, what was I?

most surprised about when I came in, I would tell you that and I and I mentioned this when I

When I had my prepared remarks, I was surprised by, you know, what I would call the self-induced complexity that we have created, um, you know, it just it, just it an inhibitor to be able to move faster to the agile and to be able to drive the results, we need to drive on the businesses. But, you know, I I've seen this before. I've experienced this before.

And our ability to move quickly to enable the reduction of that complexity is going to be absolutely crucial because we have incredible brands. That was 1 of the reasons. I initially joined the board and I am even more encouraged by seeing them live and up close. And emit mentioned that, you know, Tylenol has that 12

consecutive quarters of growth, you know, aino baby has had 9 consecutive quarters growth. We have pockets, where we're doing exceptionally well, so where I'm excited is where we're able to focus. We are able to see results and I think, you know, we've seen sequential Improvement in Neutrogena face.

As an example because we've been exceptionally focused there. So it's a proof point that we can win their, you know, we've got, you know, 1 of the challenges we have in skin health and beauty is we have a long tail and so that long tail makes it challenging when you're focused on a few core elements, to get the whole piece. Moving in tandem together up into the right. But as we get in, as we make our assessments and, you know, make choices as I talk about the word to play and how to win, you know, we'll get that right. Um, you know, 1 of the 1 of the great things I've seen so far where am I? Excited is what we've been able to do in emia and latam has been, you know, a encouragement because you see where we've been focused, where we have been more focused on the executional elements and getting the details, right? We've been able to win with consumers. We've been able to win with customers and go up and to the right. I think our challenge is as you've heard from our results, you know, from a

Regional standpoint, we're most challenged in APAC and in North America where we will continue to be focused. And as I talked about those executional elements,

Continue to focus on them and get those pieces. Right? But I I also believe that like I said, even in the APAC in North America regions

Have those Pockets where we're winning. We just have to operate this model at scale, take those learnings and get them across the majority of the business as quickly as we possibly can to get those proof points. That allow us to get that that flywheel moving that we need to get moving.

Thank you. Our next question comes from the line of Javier Escalante with evercore, isi, please proceed with your question.

Good morning, Kirk Ahmed, Sophia, thank you for the, for the, for the question. Um, I want to go back to the theme of complexity Kirk. You were a PNG where the turnaround and the reduction of complexity involved, actually business. Divestitures, uh, in attracted categories, uh, product or divested pet care.

Fragrances. And the concept there was a because of retail and competitive Dynamics where structurally challenged.

Uh, so if you could discuss kind of like your views of the framework. The board is going to be looking into how to unlock value. When you look at, say, skin health,

Where you have the lowest profitability of the portfolio and at the same time you have very tough competitive Dynamics, uh, that intersect, you know, bigger players shifting retail. So if you can give us, I understand the notion of, you know, simplifying, a smaller things. Uh, that is obvious, but I think that the at PNG, you know, there were other elements, not just, you know,

Pulling SQ proliferation. Thank you.

Yeah.

Thank you for that question, Javier. And I think...

you know, the way we have talked about this and we will continue to be focused is

So that that is going to happen. We're not going to obviously comment on any individual business segment, individual individual business or segments while we do that. But but I also know and believe that execution has played a big role in our performance today. Our underperformance and getting that right with strong capabilities is going to go a long way. And you're right in pointing out that you know there are different elements of the PNG turnaround. And I think what's very similar is our iconic and resilient Brands and we have incredible growth potential in that portfolio. We've got to get our consumer understanding, right? That's going to create these product and marketing insights, they're going to deliver points of difference. We've got to translate that into brand, building excellence.

Which is Big Ideas content and media Excellence, digital Ecom. We've got to innovate with fewer bigger and better. We need to scale those things across our brains and platforms and regions, and then go to market Excellence, which is, you know, category management.

Revenue growth management, perfect store. Those are things that that we can control. And I think the important thing too is, is we've been talking to the team and really been focused on what it is that we can control, what we can control is demand creation. That's our job, it's figuring out how to generate those ideas, which resonate with consumers, that are going to grow our businesses.

But we can't control is the macro environment, or what's happening because of that in individual categories, or a Retail Partners decision on working Capital Management and what levels of inventory, they they carry we can obviously influence those things but what we can control is generating demand and that's what we're going to be singularly focused on and making sure that we do that. Well,

thank you. Our next question comes from the line of Andrea tashera with JP Morgan. Please proceed with your question.

Um, thank you all and and clerk coming. I appreciate all. And you and me as well. Um, how you were shaping this restructuring? But as we think about timing and I know you can't, you can talk about timing at this point, but um, thinking about how to measure success, um, in this, in this endeavor.

like you did comment on the success of the Brazilian um, turnaround and and and some of the pockets that you you pointed out in even in skin Health, and Beauty and in baby,

But just to think how you going to be putting your um, your team.

Accountable for in terms of like how uh the skin Health and Beauty. Obviously was the 1 that um that was uh, pointed out as as, as a low hanging fruit. Uh, but it seems like you're being able to to turn around some of the, uh, the pockets there with Neutrogena face, um, how we should be thinking as we progress and you have a CMO who is, um, also looking at, you know, improving on, on that area. How are you going to measure that and how can shareholders and investors? Uh, look at, you know, either be it numerator or, uh, Nielsen how we could be seeing like that success, uh, or even Amazon, the data for for beauty. How we should be monitoring that, that progress.

Yeah, thank you, Andrea for the for the question and I think, you know, in terms of measuring success, I mean the ultimate success is going to be determined by consumers voting for us every day at the Shelf.

And so, we need to be holding ourselves accountable for seeing sequential improvements in that vote. And so, like, I just mentioned, you know, we can't necessarily control what's happening in the macro environment, but we can't control is consumers, voting for Our Brands online at shelf, and coming back and buying them again. And so we are expecting, you know, as we fine-tune our model, you know, I mentioned earlier.

Earlier.

You know what those things are and focus areas for me, and what it's going to take to improve. I think it's making sure we have the right leaders.

In the right chairs and build the right capabilities. You know, we've appointed new leaders on our on for new leaders in the last 3 months and our business about a third of our team, we're building capabilities. And, you know what, I call the modern modern cpg, world in the Marketing sales, digital and AI spaces.

we're going to be much more choice on where to win and

Organization the opportunity to win but at the end of the day, it is very simple. Are we sequentially improving with consumers, voting for us relative to seeing improvement in our share.

Thank you. Our next question comes from the line of Steve Powers with Georgia Bank. Please proceed with your question.

Great, thank you, good morning, uh, Kirk good morning Amit, um, good morning. So

so, as you as you run, um, this this strategy, you prioritize focus and simplicity, um, and reducing complexity,

I guess 2 2 questions are are hanging in my mind if you were to do that or organically. The question number 1 is, you know how big a headwind to

Organic growth would that be as you reduce the complexity and kind of cut the tail. Uh, uh, on complexity is it is it just that, you know, kind of low singular, percentages of excess skus that you need to need to carve out or, or is there kind of, you know, a bigger piece? A bigger a bigger headwind to kind of think about, um, to growth number 1 and number 2 from an operational perspective. Um, as you, you know, build efficiency and reduce complexity in the operational environment, how should we be thinking about? How are you thinking about, um, you know, the the, the, the, you know, in the need for

special incremental restructuring in the in the cash costs associated with, um, you know, getting to an end state that you're you're happy with

I'd say, uh, Steve. This is Amit I, I'd say, uh, you know, I think it's a little premature to comment on on the specifics. Uh, I think as Kirk mentioned right, firstly, you know, uh, right now, the board's under undertaking, a strategic review that's looking at all, uh, you know, potential Alternatives and and you know, it's a broad broad range of Alternatives. Uh, so I think, you know, and we'll keep you posted as that, uh, review, uh, you know, develops, uh, I think there is some operational complexity, uh, that Kirk mentioned, uh, you know, we've got a long tale of skus that we can address fairly quickly.

Uh, and uh, and so I think, you know, we'll get after that. Uh, but I think you know, the overall, uh, you know, once the Strategic review as we progress that, uh, I think, you know, that will then inform, you know, the choices that we make. Uh, and like I said, it's a little premature right now to talk about, you know, the restructuring or Associated cash costs. Uh, I think just on cash. Uh, I think if you see our results, uh, you know, on cash flow this, uh, in the first half, uh, we're ahead of last year, uh, and that's largely driven by timing. Uh, uh, but uh, uh, between last year and this year. Uh, but overall from a, from a cash standpoint, uh, I think, you know, uh, despite the

Call down, uh, in in in earnings. Uh, I think you know, our view is that we should be kind of in the same neighborhood as what where we were lost, lost you.

Thank you. Our next question comes from the line of Filippo for with City, please proceed with your question.

Hi, good morning everyone. Uh I wanted to ask 2 questions on the guide, the updated guidance that you provided. Um maybe first starting on Top Line uh is the expectation of a continuation of this loss single digit decline in the backup, or could you see a return to positive? Uh, a bit modest sales growth and and maybe behind that? What are your expectations in terms of category? Growth inventory, changes are retail, are you assuming a continuation of this this stocking? And then second on the margins, it does imply your guests guidance on quite a bit of margins contractions. So maybe can you expand a bit of? Does it come with tariff? Is it more investment that you've embedded in guidance? Uh, just to give a bit of a shape of the of the p&l. Thank you.

I think, you know, if you look at uh, you know, given that we are giving guiding for a low single-digit, decline for the full year on the top line, and we closed the first half at around minus 2.7. Uh, so, you know, the guidance range includes what we basically, uh, did in the first half and does not have to improve to be within the guidance,

End of the range. Uh, and at the bottom end of the range, you know, the assumption is those would not be incremental. Uh, I think, you know, the categories have softened. Uh, we've seen the categories often in quarter 2.

Uh, and, uh, you know, the sentiment of, uh, consumers is cautious. So, uh, that's kind of what's been factored into the guidance.

Thank you. Our final questions will come from the line of Bonnie, hog with Goldman Sachs. Please proceed with your question.

All right. Thank you. Good morning everyone. I just, um, had a quick question on Q3 trends.

You know, some of the I guess declines, you saw on Q2 you touched on this. That, you know, can be attributed to the later start in the summer which did weigh on your seasonal businesses. So wondering, if you see, if you've seen that pick up in Q3 so far. And, you know, if so how much of a benefit do you see in Q3 a result of this shift? Also, you know, what are the other moving parts that we should keep in mind, you know, for instance, us retailer inventory. Destocking. You know, the China supply chain disruptions that are, you know, ultimately underpinning. Your largely flat to down, you know, organic sales growth guide in 2 H. Thank you.

So I think so far in in July, uh, you know, we're seeing similar Trends to quarter 2, so, you know, consumption is, uh, ahead of organic sales.

Uh, I think you know, the seasons are similar to what we saw. So, you know, Seasons continue to be weak. Uh, now, this has been incorporated into our guidance. Uh, I think, as I mentioned, uh, you know, we have softer comps in quarter 4, uh, when we comp the trade approval, as well as the China weakness. Uh, so I think, you know that those are kind of the

Uh, puts and calls between the quarters.

Thank you. We have reached the end of our question and answer session. I would now like to turn the floor back over to Kirk Perry for concluding comments.

Yeah, thank you all for joining and we appreciate the questions. We know we have work to do on this business and we look forward to continuing to share with you. Um, as we go forward, the choices we're making and, you know, as, as we continue to make these choices improved business results. So thank you, and we will talk to you all very soon.

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