Kenvue — Third Quarter 2026 Earnings Summary

Financial Performance:

• Net sales increased 3.2% year-over-year to $3.886 billion, driven by organic sales growth of 2.9% and a foreign currency benefit of 0.3%.
• Organic sales growth was comprised of volume growth of 1.6% and favorable value realization of 1.3%.
• Gross profit margin improved to 59.5% from 59.1% in the prior year period; adjusted gross profit margin increased to 61.5% from 61.2%.
• Operating income margin expanded to 18.2% from 16.7%; adjusted operating income margin rose to 21.9% from 21.5%.
• Diluted earnings per share (EPS) increased 5% to $0.22, compared to $0.21 in the prior year period.
• Adjusted diluted EPS increased 4% to $0.29, compared to $0.28 in the prior year period.
• Interest expense, net was $89 million, down from $93 million in the prior year period.
• The effective tax rate was 29.4% compared to 24.3% in the prior year period; the adjusted effective tax rate was 24.7% compared to 24.0%.
• For the nine months ended September 27, 2026, net cash flows from operating activities were $1.9 billion versus $1.3 billion in the prior year period.
• Free cash flow increased to $1.6 billion for the nine-month period, up from $1.0 billion in the prior year period.
• Capital expenditures were $0.3 billion for the nine months ended September 27, 2026, compared to $0.4 billion in the prior year period.
• Total debt was $8.2 billion as of September 27, 2026, down from $8.5 billion as of December 28, 2025.
• Cash and cash equivalents were $1.0 billion as of September 27, 2026, compared to $1.1 billion as of December 28, 2025.

Guidance and Future Outlook:

• The company will not provide forward-looking guidance due to the pending transaction with Kimberly-Clark.

Business Segments and Product Lines:

• Self Care: Net sales increased 5.9% (organic growth of 5.4%), driven by volume growth of 3.4% and value realization of 2.0%.
  • Motrin® outperformed the market in Asia Pacific due to rising flu incidences.
  • Smoking Cessation delivered low double-digit organic sales growth, led by Nicorette® in EMEA and APAC.
  • Pepcid® continued to outperform the category.
  • In the U.S., Tylenol® gained market share despite lower seasonal incidences.
• Skin Health and Beauty: Net sales increased 0.1% (organic decline of 0.5%), driven by a volume decrease of 1.7% partially offset by value realization of 1.2%.
  • Hair Care was a key growth driver with low double-digit organic sales growth, led by Rogaine® (fourth consecutive quarter of market share gains) and OGX®.
  • Innovation included the launch of Neutrogena® Cloud Tech™ featuring BEMT and expansion of Neutrogena® Ultra Sheer® Sun.
  • Organic sales were impacted by distribution losses and retailer negotiations in the U.S. and Europe.
• Essential Health: Net sales increased 2.5% (organic growth of 2.5%), driven by volume growth of 2.0% and value realization of 0.5%.
  • Baby Care grew across all regions driven by Johnson's Baby® and social commerce acceleration.
  • Women's Health grew, led by Stayfree® (product launches in India) and o.b.® (growth in EMEA following brand restage).
  • Wound Care gained market share supported by BAND-AID® Brand PRO HEAL® 5 Day Protect.

Market and Competitive Landscape:

• Self Care brands Motrin®, Nicorette®, Pepcid®, and Tylenol® demonstrated market share gains or outperformance in specific regions.
• Rogaine® achieved its fourth consecutive quarter of market share gains in Hair Care.
• o.b.® returned to growth in EMEA following brand restage and pricing actions.
• BAND-AID® Brand PRO HEAL® 5 Day Protect supported market share gains in Wound Care.

Risks and Challenges:

• The pending transaction with Kimberly-Clark presents risks of business disruption, unanticipated costs, and potential adverse effects on stock price if the transaction is suspended or consummated.
• Macroeconomic factors include inflation, interest rate fluctuations, currency exchange rate volatility, and trade constraints such as tariffs.
• Risks include the inability to execute on business development strategies, competition, technological advances, and intellectual property challenges.
• Potential for product efficacy or safety concerns leading to recalls or regulatory action.
• Challenges related to the 2026 Restructuring Initiative and other cost-saving initiatives.
• Risks associated with the separation from Johnson & Johnson and the realization of benefits from that separation.

Management Commentary and Tone:

• CEO Kirk Perry expressed pleasure at delivering the fourth consecutive quarter of net and organic sales growth, citing strong performance in Self Care and Essential Health, margin expansion, and strong cash generation.
• Management highlighted continued momentum from disciplined execution, productivity initiatives, and brand innovation.
• The CEO noted the team is strongly on track to deliver the business transformation begun the previous year.
• Management expressed excitement about the opportunities ahead as they near the completion of the value-creating combination with Kimberly-Clark.
• No quarterly conference call will be hosted due to the pending transaction.

Other Key Points:

• The 2026 Restructuring Initiative, approved on February 17, 2026, aims to optimize the operating model and supply chain, with expected pre-tax restructuring expenses and charges totaling approximately $250 million for fiscal year 2026.
• Restructuring expenses and operating model optimization initiatives for the quarter were $41 million, and $188 million for the nine-month period.
• Pending transaction and other related costs for the quarter were $28 million, and $60 million for the nine-month period.
• Separation-related costs for the quarter were $6 million, and $16 million for the nine-month period.
• The company is the world's largest pure-play consumer health company by revenue, with iconic brands including Aveeno®, BAND-AID®, Johnson's®, Listerine®, Neutrogena®, and Tylenol®.