Kenvue's earnings volatility in 2024 was primarily due to Revenue Decline in Key Segments and Increased Brand Investment and Tax Rate:
- Revenue Decline in Key Segments: There was a decrease in net sales, which dropped 0.4% to $3.89 billion in Q31. This decline was due to a 1.6% drop in volume, primarily in the Skin Health and Beauty and Self Care segments2. Additionally, sales were affected by a 1.3% headwind from foreign exchange2. The decline in sales was partially offset by growth in the Essential Health segment. This decline in revenue from key segments contributed to the volatility in earnings.
- Increased Brand Investment and Tax Rate: The company's gross profit margin expanded by 100 basis points to 58.5%, reflecting productivity gains and value realization efforts2. However, this was offset by increased brand investment and a higher effective tax rate, which resulted in a reported diluted EPS of $0.20, missing the analyst estimate of $0.252. The increased brand investment and higher tax rate significantly impacted the net income, leading to volatility in earnings.
In summary, KVUE's earnings volatility in 2024 was caused by a combination of revenue decline in key segments and increased brand investment and tax rate.