Kenvue Shares Drop 4% Following Morgan Stanley Conference
On Monday, Kenvue Inc. (NYSE: KVUE) shares fell over 4% following a panel discussion at the Morgan Stanley Global Consumer & Retail Conference in New York. During the event, Kenvue's CEO Thibaut Mongon and CFO Paul Ruh discussed the progress the company has made since going public and its future strategies.
Mongon emphasized the significant transformation Kenvue has undergone since separating from Johnson & Johnson, noting that the company has transitioned from a cash-generating segment to an independent firm targeting profitable growth. The financial separation from J&J has been completed, with J&J fully divesting its shares as of May this year. Kenvue has completed approximately 70% of its TSA exit program and expects to finish this process by the second quarter of next year. The CEO also talked about the implementation of the "new Kenvue playbook," which includes reaching more consumers, enhancing efficiencies, and building a performance-driven culture.
Regarding category growth and market share, Mongon pointed out that certain areas have been negatively affected by the return of flu cases to pre-pandemic levels, but stressed that the company’s brands have remained strong and achieved significant market share gains in specific categories. He also noted that the low penetration of consumer health categories presents growth opportunities by increasing household penetration and educating consumers.
Ruh addressed the balance between volume and pricing, explaining that the company is moving towards a growth algorithm of two-thirds volume and one-third pricing. He noted that while the company relied on pricing during periods of high inflation, future growth would be more balanced. Ruh also discussed cost savings opportunities by focusing on gross profit margins and operational efficiencies.
The discussion also covered advertising investments and market share growth. Mongon confirmed that Kenvue is in an investment phase and that advertising spending is expected to continue to rise through 2025. He emphasized the importance of return on investment from advertising and the company's careful monitoring of investment efficiency.
Lastly, Ruh summarized Kenvue’s capital allocation priorities, which include investing in the business, maintaining healthy dividends, reducing debt levels, and potentially developing share buyback programs or considering M&A in the future.