‘You not only know us, you love and trust us: How J&J spinoff Kenvue is raising its profile

To give its consumer health business the agility to better innovate and grow across its categories, Johnson & Johnson was planning to create two standalone companies. The other needed a new corporate name—one that would build on its rich history of innovation and consumer focus, while providing the scalability to evolve boldly into the future. I started in the company nearly seven years ago in a development program which allowed me to rotate through a few Human Resources positions. From there, I started working on our iconic portfolio of brands in a strategy and operations/chief of staff role for our Global Head of HR.

Healthy Lives Mission

• From best practices to best-in-class products, we learn, test, partner and optimize.
• Kenvue is a compact yet powerful name that stands for the fusion of knowledge and vision.
• Neutrogena, for example, boasts nearly 1 million followers on Instagram alone.
• Their collective influence plays a vital role in the governance and strategic decisions of the company.

In its first quarter, which ended April 2, Kenvue is estimated to have brought in sales of $3.85 billion and net income of roughly $330 million. We put it all together because we believe it’s beneficial to have all external messaging run through the same house,” she said, adding that her department also oversees corporate giving. Figure 4 compares Kenvue’s implied future NOPAT in these scenarios to its historical NOPAT.

Science backed. Care forward.

Emerging markets such as Asia and Latin America have been highlighted as strategic growth areas, reflecting a year-over-year growth rate of approximately 10% in those regions. Through strategic brand management and marketing initiatives, Kenvue aims to improve brand loyalty. Current estimates suggest that Kenvue has a brand loyalty rate of approximately 75% among its key products, which is a crucial driver for repeat sales. In 2022, Kenvue’s revenue reached approximately $15 billion, reflecting a compound annual growth rate (CAGR) of 5% over the past five years. In summary, Kenvue’s rapid development from a J&J spinoff to a major consumer health player illustrates its strategic growth strategies and market adaptation in an evolving landscape.

• Furthermore, Kenvue’s market capitalization has reached approximately $40 billion, which demonstrates robust investor confidence in its long-term business model and growth potential.
• In 2022, NOPAT was up 8% year-over-year (YoY) while revenue was down 1%, per Figure 1.
• As Kenvue continues to leverage its strong brand portfolio and focus on consumer health trends, the company’s financial performance is likely to remain robust, driven by innovation, strategic marketing, and expanding e-commerce presence.
• J&J plans to distribute the remaining shares of common stock to its shareholders later this year.
• However, when I joined the company, it was always with the thought of wanting to work in social impact; I just needed to figure out how to get there.

We put people first

In total, the company has 22,000 workers in 165 countries and 25 in-house manufacturing sites. The company also warns investors that it may continue to be subject to claims that fall outside of the previously indemnified Talc-Related Liabilities given that Kenvue still sells talc products in countries around the globe. The sale of these products will be discontinued in 2023, but the company still warns that litigation that isn’t covered by the indemnity remains a possibility and could adversely impact the newly-formed business. We’ve always believed in the power of new perspectives and insights to drive innovation. That’s why our iconic brands have helped generations take care of themselves and their loved ones for more than 135 years. Thibaut Mongon, J&J’s executive vice president and worldwide chair of consumer health, will serve as CEO of the newly public company.

I met with the team leads and received advice from my mentors and support from my key sponsors. The communications and public affairs staffers working on J&J’s consumer health portfolio transferred over to Kenvue’s corporate affairs division when it became a standalone brand. Ahead of its IPO, Kenvue’s corporate affairs department focused on linking the company’s iconic portfolio with its unfamiliar name, connecting the two for consumers and investors, said Donna Lorenson, chief corporate affairs officer.

As of the latest financial reports, Kenvue offers an array of products, including over-the-counter medications, skincare, and personal care items. Notable brands under Kenvue include Tylenol, Band-Aid, Neutrogena, and Aveeno, contributing significantly to its revenue stream. Kenvue Inc., a prominent player in the consumer health sector, operates with a clear emphasis on its mission to promote health and well-being. The company’s mission statement focuses on empowering people to live their best lives through innovative personal care and health products. According to Kenvue’s latest SEC filings, the company aims to provide solutions that enhance everyday health, which underscores its commitment to consumer welfare and product effectiveness. Johnson & Johnson (JNJ 1.05%) officially spun off its consumer health business this month, creating the largest U.S. initial public offering since 2021.

Suffering from allergies? Try these 3 Kenvue products for relief

This scenario also implies the company would earn $3.1 billion in NOPAT and grow NOPAT 4% compounded annually through 2029. For reference, Kenvue’s NOPAT has fallen 5% compounded annually since 2020. In other words, even if Kenvue improves margins and grows revenue at the high end of management’s estimate, the stock is worth only $18/share. For reference, Kenvue’s economic book value, or no growth value, is $14/share. Kenvue’s direct-to-consumer approach and enhanced e-commerce strategy have been pivotal in driving growth.

Today, as the world’s largest and most broadly-based healthcare company, we are committed to using our reach and size for good. We strive to improve access and affordability, create healthier communities, and put a healthy mind, body and environment within reach of everyone, everywhere. We are blending our heart, science and ingenuity to profoundly change the trajectory of health for humanity. KVUE would be worth just $18/share today – a 16% downside to the midpoint IPO price range. In this scenario, Kenvue’s revenue would still grow to $19.7 billion in 2029, or 4% compounded annually.

In 2022, Kenvue generated 55% of its revenue in regions outside of the United States. While the United States is still the largest market by revenue, Europe, Middle East, and Africa (EMEA) and Asia Pacific (APAC) each represent 21% of revenue in 2022, per Figure 2. Such geographic diversity positions the company to grow strongly as consumers in emerging markets attain greater spending power. J&J faces thousands of allegations that its talc baby powder and other talc products caused cancer.

Kenvue has been profitable in each of the three years for which I have financial data. With some of the most well-known consumer brands in its stable, it will likely be profitable for many years to come. However, the company lacks the margins of its competitors, and a profitable company is not always a good stock. At its expected valuation, KVUE looks fully valued and does not provide investors with much upside potential, as I’ll illustrate with my reverse discounted cash flow (DCF) model below.

Kenvue appoints Penelope Giraud, President of Skin Health & Beauty, Asia Pacific and Latin America

The company’s e-commerce sales surged by best trading indicator 20% in 2022, which now accounts for approximately 15% of total sales. This shift aligns with current consumer trends favoring online shopping, especially in health and wellness categories. Kenvue’s mission statement serves not only as a guiding principle but also as a strategic framework that shapes its operational initiatives and marketing strategies. This alignment of corporate goals with a commitment to consumer welfare is instrumental in driving growth, meeting consumer demand, and enhancing shareholder value. As of October 2023, Kenvue’s stock performance has displayed resilience, with a year-to-date increase of 15%, reflecting investor confidence in its mission-driven approach.

What is Kenvue?

In addition to product sales, Kenvue invests in marketing initiatives, which enhance brand hotforex broker visibility and awareness. The company’s annual marketing expenditure has reached around $1 billion, with a significant focus on digital advertising and influencer partnerships. This investment has yielded a substantial return, with brand loyalty metrics improving by 12% year-over-year. Looking at the competitive landscape, Kenvue holds a strong position in the consumer health market, which was valued at approximately $445 billion in 2022, and is expected to grow at a CAGR of 4.5% from 2023 to 2030. But while that diversification will add safety, it won’t necessarily make for a good growth investment. Kenvue projects that its top line will grow at a compounded annual growth rate of between 3% and 4% through 2025.

Kenvue faces threats from intense competition, regulatory challenges, and economic instability, which can impact consumer spending on health and wellness products. “We believe that daily self-care rituals add up over time and have a profound cumulative impact on your wellbeing. And our work is to put that power into the hands of consumers around the world,” Mongon adds. For example, the creation of BAND-AID® Brand HYDRO SEAL™ acne blemish patches was born out of viral social media skincare trends. The development of this product demonstrates how Kenvue boldly pursues innovative ways to work, creating solutions that can genuinely improve people’s lives.

For reference, I also include the TTM NOPATs for competitors Colgate-Palmolive and Kimberly Clark. The company will have total debt of $8.9 billion, according to the filing. Kenvue noted that its global footprint is “well balanced geographically,” with roughly half of 2022 net sales coming from outside North America. Each of the three divisions was profitable on an adjusted operating income basis, the company said in the filing. J&J will control 91.9% of Kenvue after the IPO — or 90.8% if underwriters exercise pensions & investing their options to purchase additional shares, according to the prospectus filing. Meanwhile, Kenvue is chock full of household names familiar to investors and the larger public, such as Tylenol, Band-Aid, Listerine, Aveeno, Neutrogena, and J&J’s namesake baby powder and shampoo.

The overall financial health of Kenvue is also evidenced by its operating income, which stood at approximately $3.3 billion for the fiscal year 2022, translating to an operating margin of 25%. This reflects effective cost controls and strong product demand in a competitive market. Kenvue also focuses on innovation and product development, launching new products that cater to emerging consumer needs.