Kenvue Inc.

05/07/2026 | Press release | Distributed by Public on 05/07/2026 05:51

Quarterly Report for Quarter Ending March 29, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
This discussion contains forward-looking statements that involve risks and uncertainties. The forward-looking statements are not historical facts, but rather are based on current expectations, estimates, assumptions, and projections about our industry, business, and future financial results. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including those discussed in Part I, Item 1A,"Risk Factors," in our Annual Report on Form 10-K for the fiscal twelve months ended December 28, 2025, filed on February 20, 2026 with the SEC (the "Annual Report"), Part II, Item 1A, "Risk Factors," included herein, and the section titled "Cautionary Note Regarding Forward-Looking Statements" included herein.
This discussion should be read in conjunction with our accompanying Condensed Consolidated Financial Statements for the fiscal three months ended March 29, 2026, which have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and the rules and regulations of the SEC for interim financial statements, and our audited consolidated financial statements for the fiscal twelve months ended December 28, 2025, which are included in the Annual Report. In our opinion, the Condensed Consolidated Financial Statements reflect all adjustments, consisting of normal and recurring adjustments, necessary for a fair statement of the financial condition, results of operations, and cash flows for the periods indicated. All currency amounts are expressed in U.S. dollars unless otherwise noted.
Overview
Company Overview
At Kenvue, our purpose is to realize the extraordinary power of everyday care. As a global leader at the intersection of healthcare and consumer goods, we are the world's largest pure-play consumer health company by revenue with $15.1 billion in Net sales in the fiscal year 2025. By combining the power of science with meaningful consumer insights and our digital strategy, we empower consumers to live healthier lives every day. Built on more than a century of heritage and trusted by generations, our differentiated portfolio of iconic brands-including Aveeno®, BAND-AID® Brand, Johnson's®, Listerine®, Neutrogena®, Nicorette®, Tylenol®, and Zyrtec®-is backed by science and recommended by healthcare professionals, which further reinforces our consumers' connections to our brands.
Our portfolio includes Self Care, Skin Health and Beauty, and Essential Health products, allowing us to connect with consumers globally in their daily rituals and the moments that matter most.
Our global scale and the breadth of our brand portfolio are complemented by our well-developed capabilities and accelerated through our digital strategy, allowing us to dynamically capitalize on and respond to current trends impacting our categories and geographic markets.
With a sole focus on consumer health, our marketing organization operates efficiently by leveraging our precision marketing, e-commerce, and broader digital capabilities to develop unique consumer insights and further enhance the relevance of our brands. Similarly, our research and development organization combines these consumer insights with deep, multi-disciplinary scientific expertise, and active engagement with healthcare professionals, to drive innovative new products, solutions, and experiences centered around consumer health.
Our Business Segments
We operate our business through the following three reportable business segments:
•Self Care. Our Self Care product categories include: Cough, Cold, and Allergy; Pain Care; and Other Self Care (Digestive Health, Smoking Cessation, Eye Care, and Other). Major brands in the segment include Benadryl®, Calpol®, Motrin®, Nicorette®, Rhinocort®, Tylenol®, Zarbee's®, and Zyrtec®.
•Skin Health and Beauty. Our Skin Health and Beauty product categories include: Face and Body Care; and Hair, Sun, and Other. Major brands in the segment include Aveeno®, Dr.Ci:Labo®, Le Petit Marseillais®, Lubriderm®, Neutrogena®, OGX®, and Rogaine®.
•Essential Health. Our Essential Health product categories include: Oral Care; Baby Care; and Other Essential Health (Women's Health, Wound Care, and Other). Major brands in the segment include BAND-AID® Brand, Carefree®, Desitin®, Johnson's®, Listerine®, o.b.® tampons, and Stayfree®.
For additional information about our three reportable business segments, see Note 14, "Segments of Business," to the Condensed Consolidated Financial Statements included herein.
Pending Transaction with K-C
On November 2, 2025, our Board unanimously approved the execution of an Agreement and Plan of Merger (the "Merger Agreement") pursuant to which K-C will acquire all of the outstanding shares of the Company for a combination of stock and cash in a series of transactions (the "Pending Transaction"). Pursuant to the terms and subject to the conditions of the Merger Agreement, Company shareholders will receive 1) 0.14625 shares of K-C Common Stock and 2) $3.50 in cash for each share of the Company they own. Upon completion of the Pending Transaction, current Company shareholders are expected to own approximately 46% and current K-C shareholders are expected to own approximately 54% of the combined company on a fully diluted basis.
The Merger Agreement contains customary representations, warranties, covenants, and termination rights. The Pending Transaction is expected to close in the second half of 2026 and is conditioned on the satisfaction or waiver of other customary closing conditions, including the receipt of antitrust clearance in the United States and a number of foreign regulatory approvals. On January 29, 2026, our shareholders approved the adoption of the Merger Agreement and K-C's shareholders approved the issuance of K-C Common Stock in connection with the Pending Transaction, in each case at a special meeting of shareholders held for that purpose. Additionally, the waiting period applicable to the Pending Transaction under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, expired on February 4, 2026.
We are incurring costs in connection with the Pending Transaction, including advisory fees, legal costs, professional service costs, and other related costs (the "Pending Transaction and other related costs").
Separation from J&J
Kenvue was initially formed as a wholly owned subsidiary of J&J. In May 2023, we completed an initial public offering of a portion of our common stock (the "Kenvue IPO"), and in August 2023, completed our transition to being a fully independent public company (the "Separation"). Following the completion of the Kenvue IPO, we entered into a separation agreement and various other agreements with J&J for the purpose of effecting the Separation. These agreements provide a framework for our relationship with J&J and govern various interim and ongoing relationships between us and J&J.
In connection with our establishment as a standalone public company, we are incurring certain non-recurring separation-related costs (the "Separation-related costs"). Separation-related costs associated with information technology and other activities, primarily related to the disentanglement of systems and the discontinuance of certain information technology assets, are substantially completed. Costs related to legal entity name change as well as minimal costs related to other activities are expected to continue for a longer period than originally anticipated.
For additional information about the Separation and our agreements with J&J, see Note 8, "Relationship with J&J," to the Condensed Consolidated Financial Statements included herein.
Recent Developments
Conflict in the Middle East
Economic challenges, including the impact from acts of war, military actions, terrorist attacks, or civil unrest, such as the conflict in the Middle East, may continue to cause economic uncertainty and volatility. The conflict in the Middle East has resulted in volatility in the cost or availability of raw materials, commodities, logistics, transportation, and other inputs for our products due to the increased cost of oil. There is significant uncertainty regarding the duration and potential escalation of this conflict, as well as the risk of further economic disruptions that could impact global trade and supply chains. Given the dynamic nature of these conditions, we expect continued variability in the macroeconomic environment. The impact of these issues may adversely affect prevailing economic conditions and our business, results of operations, or financial condition.
Tariffs
In 2025, the U.S. government issued executive orders imposing tariffs on goods imported into the United States. These actions, as well as retaliatory tariffs imposed by other countries on U.S. exports, are expected to increase supply chain costs in certain geographies and create economic uncertainty for consumers. While the situation is fluid, based on our current analysis of the effects of the tariffs that have been implemented by the United States and retaliatory measures that are in effect as of the
reporting date, we estimate gross tariff exposure of approximately $90 million annualized. In February 2026, the U.S. Supreme Court issued a ruling striking down tariffs previously imposed under the International Emergency Economics Powers Act ("IEEPA"). The ultimate availability, timing, and amount of potential refunds of such tariffs remain uncertain and could be subject to further legal, regulatory, and administrative developments or actions. We continue to monitor the potential impacts that the increased tariffs and other trade restrictions may have on our business, and we continue to focus on internal mitigating actions to partially offset the impact.
Key Factors Affecting Our Results
We believe that our performance and future success depend on a number of factors that present significant opportunities for us but also pose risks and challenges, including those discussed below, in Part I, Item 1A, "Risk Factors," in our Annual Report, Part II, Item 1A, "Risk Factors," included herein, and the section titled "Cautionary Note Regarding Forward-Looking Statements" included herein.
Restructuring
On February 17, 2026, our Board approved an initiative (the "2026 Restructuring Initiative") that aims to optimize our operating model, transform our supply chain, reduce complexity, and drive operational efficiencies, while strengthening core capabilities. See Note 15, "Restructuring Expenses and Operating Model Optimization Initiatives," to the Condensed Consolidated Financial Statements included herein for further information regarding ongoing and previously completed initiatives.
Results of Operations
Fiscal Three Months Ended March 29, 2026 Compared with Fiscal Three Months Ended March 30, 2025
Our results for the fiscal three months ended March 29, 2026 and March 30, 2025 were as follows:
Fiscal Three Months Ended Change in Fiscal Period
March 29, 2026 March 30, 2025 Change 2025 to 2026
(Dollars in Millions) Amount Percent
Net sales $ 3,909 $ 3,741 $ 168 4.5 %
Cost of sales 1,607 1,573 34 2.2
Gross profit 2,302 2,168 134 6.2
Selling, general, and administrative expenses 1,453 1,537 (84) (5.5)
Restructuring expenses 71 60 11 18.3
Other operating expense, net 11 13 (2) (15.4)
Operating income 767 558 209 37.5
Other expense, net - 6 (6) *
Interest expense, net 95 94 1 1.1
Income before taxes 672 458 214 46.7
Provision for taxes 198 136 62 45.6
Net income $ 474 $ 322 $ 152 47.2 %
* Calculation not meaningful.
Net Sales
Net sales were $3.9 billion and $3.7 billion for the fiscal three months ended March 29, 2026 and March 30, 2025, respectively, an increase of $168 million, or 4.5%. Excluding the impact of favorable changes in foreign currency exchange rates of 3.8%, Organic sales (a non-GAAP financial measure as defined in "Segment Results-Organic Sales Change" below) increased 0.7% driven by favorable value realization of 1.0%, partially offset by volume-related decreases of 0.3%. Favorable value realization was driven primarily by new pricing actions. Volume-related decreases were driven by the impact of lower incidences of illnesses primarily affecting pediatric Pain Care as well as Cough and Cold, partially offset by the impact of product innovation
across all three segments. For additional information about the Net sales of our three reportable business segments, see "-Segment Results" below.
The following table presents a reconciliation of the change in U.S. GAAP Net sales to the change in Organic sales for the fiscal three months ended March 29, 2026 as compared to the fiscal three months ended March 30, 2025:
Fiscal Three Months Ended March 29, 2026 vs. March 30, 2025(1)
Reported Net Sales Change Impact of Foreign Currency Organic Sales Change
Total Organic Sales Change
Price/Mix(2)
Volume
Total 4.5 % 3.8 % 0.7 % 1.0 % (0.3) %
(1) Acquisitions and divestitures did not impact Net sales for the fiscal three months ended March 29, 2026 or March 30, 2025.
(2) Also referred to as value realization.
Cost of Sales
Cost of sales were $1.6 billion for both the fiscal three months ended March 29, 2026 and March 30, 2025. For the fiscal three months ended March 29, 2026, Cost of sales increased $34 million, or 2.2%. Gross profit margin expanded 90 basis points to 58.9% for the fiscal three months ended March 29, 2026 as compared to 58.0% for the fiscal three months ended March 30, 2025. Changes in both Cost of sales and gross profit margin were driven by benefits associated with our supply chain optimization initiatives, partially offset by net input cost inflation and the impact of tariffs imposed on goods imported into the United States. Cost of sales was also impacted by unfavorable changes in translational foreign currency exchange rates and volume-related Net sales decreases, and gross profit margin was also impacted by favorable value realization.
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses were $1.5 billion for both the fiscal three months ended March 29, 2026 and March 30, 2025. For the fiscal three months ended March 29, 2026, Selling, general, and administrative expenses decreased $84 million, or 5.5%. Selling, general, and administrative expenses as a percentage of Net sales decreased 390 basis points to 37.2% for the fiscal three months ended March 29, 2026, as compared to 41.1% for the fiscal three months ended March 30, 2025. The decrease in Selling, general, and administrative expenses was primarily attributable to savings from our restructuring initiatives (as described in Note 15, "Restructuring Expenses and Operating Model Optimization Initiatives," to the Condensed Consolidated Financial Statements included herein), a $30 million decrease in Separation-related costs, and lower expenses related to brand support attributable to media cost improvements, offset by unfavorable changes in translational foreign currency exchange rates and Pending Transaction and other related costs incurred in the fiscal three months ended March 29, 2026.
Restructuring Expenses
Restructuring expenses were $71 million and $60 million for the fiscal three months ended March 29, 2026 and March 30, 2025, respectively, an increase of $11 million. Restructuring expenses for the fiscal three months ended March 29, 2026 related to costs incurred under the 2026 Restructuring Initiative, and restructuring expenses for the fiscal three months ended March 30, 2025 related to costs incurred under Our Vue Forward. Costs incurred under each of the initiatives primarily included employee-related costs and information technology and project-related costs. See Note 15, "Restructuring Expenses and Operating Model Optimization Initiatives," to the Condensed Consolidated Financial Statements included herein for additional information.
Other Operating Expense, Net
Other operating expense, net was $11 million and $13 million for the fiscal three months ended March 29, 2026 and March 30, 2025, respectively, a decrease of $2 million. Other operating expense, net for the fiscal three months ended March 29, 2026 and March 30, 2025 was driven by the $6 million and $12 million impact, respectively, of net economic benefit arrangements with J&J in connection with the Deferred Local Businesses (see Note 1, "Description of the Company and Summary of Significant Accounting Policies-Net Economic Benefit Arrangements," to the Condensed Consolidated Financial Statements included herein for additional information), partially offset by $5 million and $4 million, respectively, of royalty income. See Note 9,
"Other Operating Expense, Net and Other Expense, Net," to the Condensed Consolidated Financial Statements included herein for additional information.
Other Expense, Net
Other expense, net was $0 million and $6 million for the fiscal three months ended March 29, 2026 and March 30, 2025, respectively, a decrease of $6 million. Other expense, net for the fiscal three months ended March 30, 2025 was driven by $6 million of currency losses on transactions. See Note 9, "Other Operating Expense, Net and Other Expense, Net," to the Condensed Consolidated Financial Statements included herein for additional information.
Interest Expense, Net
Interest expense, net was $95 million and $94 million for the fiscal three months ended March 29, 2026 and March 30, 2025, respectively, an increase of $1 million. Interest expense, net in both fiscal periods primarily consisted of interest expense, including amortization of discounts and debt issuance costs, recognized on the Senior Notes (as defined in Note 4, "Borrowings," to the Condensed Consolidated Financial Statements included herein) and notes issued under our commercial paper program. See Note 4, "Borrowings," to the Condensed Consolidated Financial Statements included herein for additional information.
Provision for Taxes
Provision for taxes was $198 million and $136 million for the fiscal three months ended March 29, 2026 and March 30, 2025, respectively, an increase of $62 million. The increase in Provision for taxes was primarily the result of higher year-to-date pre-tax income, an increase in unfavorable return-to-provision adjustments, and a shortfall on stock-based compensation recorded during the fiscal three months ended March 29, 2026 as compared to a windfall on stock-based compensation recorded during the fiscal three months ended March 30, 2025. In addition, the worldwide effective income tax rates for the fiscal three months ended March 29, 2026 and March 30, 2025 were 29.5% and 29.7%, respectively. See Note 10, "Income Taxes," to the Condensed Consolidated Financial Statements included herein for additional information.
Segment Results
Segment profit is based on Operating income, excluding depreciation, amortization of intangible assets, Separation-related costs, restructuring expenses and operating model optimization initiatives, the impact of the conversion of stock-based awards, issuance of Founder Shares (as defined below), Pending Transaction and other related costs, Skillman sale-leaseback, Other operating expense, net, and unallocated general corporate administrative expenses (referred to herein as "Segment adjusted operating income"), as the Chief Operating Decision Maker (the "CODM") excludes these items in assessing segment financial performance. General corporate/unallocated expenses, which include expenses related to treasury, legal operations, and certain other expenses, along with gains and losses related to the overall management of our Company, are not allocated to the segments. In assessing segment performance and managing operations, the CODM does not review segment assets.
See Note 14, "Segments of Business," to the Condensed Consolidated Financial Statements included herein for additional information.
Fiscal Three Months Ended March 29, 2026 Compared with Fiscal Three Months Ended March 30, 2025
The following tables present Segment net sales and Segment adjusted operating income and the period-over-period changes in Segment net sales and Segment adjusted operating income for the fiscal three months ended March 29, 2026 and March 30, 2025. See Note 14, "Segments of Business," to the Condensed Consolidated Financial Statements included herein for further details regarding Segment net sales and Segment adjusted operating income.
Fiscal Three Months Ended
Change in Fiscal Period
March 29, 2026 March 30, 2025 Change 2025 to 2026
(Dollars in Millions) Self Care Skin Health and Beauty Essential Health Total Self Care Skin Health and Beauty Essential Health Total Amount Percent
Net sales $ 1,699 $ 1,059 $ 1,151 $ 3,909 $ 1,667 $ 977 $ 1,097 $ 3,741 $ 168 4.5 %
Segment adjusted Cost of sales(1)
578 437 518 1,533 587 413 496 1,496 37 2.5
Other segment expense items(2)
496 454 334 1,284 514 472 362 1,348 (64) (4.7)
Segment adjusted operating income $ 625 $ 168 $ 299 $ 1,092 $ 566 $ 92 $ 239 $ 897 $ 195 21.7 %
Reconciliation to Income before taxes
Less:
Depreciation(3)
78 73
Amortization of intangible assets(4)
65 63
Separation-related costs(5)
3 38
Restructuring expenses and operating model optimization initiatives(6)
78 67
Conversion of stock-based awards(7)
1 3
Founder Shares(8)
2 3
Pending Transaction and other related costs(9)
16 -
Skillman sale-leaseback
2 -
Other operating expense, net 11 13
General corporate/unallocated expenses 69 79
Operating income $ 767 $ 558
Other expense, net - 6
Interest expense, net 95 94
Income before taxes $ 672 $ 458
(1) We define Segment adjusted cost of sales as Cost of sales adjusted for amortization of intangible assets, operating model optimization initiatives, Separation-related costs, Pending Transaction and other related costs, Founder Shares (as defined below), and general corporate/unallocated expenses.
(2) Other segment expense items for each reportable business segment include brand support, employee-related costs, shipping and handling costs, research and development costs, and certain other operating expenses (income).
(3) Depreciation consists of depreciation of property, plant, and equipment and amortization of integration and development costs capitalized in connection with cloud computing arrangements.
(4) Relates to the amortization of definite-lived intangible assets (primarily trademarks, trade names, and customer lists) over their estimated useful lives.
(5) See Note 1, "Description of the Company and Summary of Significant Accounting Policies-Separation-Related Costs," to the Condensed Consolidated Financial Statements included herein for additional information regarding Separation-related costs.
(6) Restructuring expenses and operating model optimization initiatives relate to the 2026 Restructuring Initiative for the fiscal three months ended March 29, 2026 and the 2024 Multi-Year Restructuring Initiative for the fiscal three months ended March 30, 2025. See Note 15, "Restructuring Expenses and Operating Model Optimization Initiatives," to the Condensed Consolidated Financial Statements included herein for additional information.
(7) Segment adjusted operating income excludes the impact of the conversion of stock-based awards that occurred on August 23, 2023. The adjustment represents the net impact of the gain on reversal of previously recognized stock-based compensation expense, offset by stock-based compensation expense recognized in the fiscal three months ended March 29, 2026 and March 30, 2025 relating to employee services provided prior to the Separation.
(8) On August 25, 2023, our Compensation & Human Capital Committee approved equity grants to individuals employed by Kenvue as of October 2, 2023 (the "Founder Shares"). On October 2, 2023, the Founder Shares were granted to all Kenvue employees in the form of stock options and performance stock units to executive officers and either stock options and performance stock units or restricted stock units to non-executive individuals.
(9) Pending Transaction and other related costs consist of expenses incurred in connection with the Pending Transaction, including advisory fees, legal costs, professional service costs, and other related costs.
Fiscal Three Months Ended
Change in Fiscal Period
March 29, 2026 March 30, 2025 Change 2025 to 2026
(Dollars in Millions) Amount Percent Amount Percent Amount Percent
Segment Net Sales
Self Care $ 1,699 43.5 % $ 1,667 44.6 % $ 32 1.9 %
Skin Health and Beauty 1,059 27.1 977 26.1 82 8.4
Essential Health 1,151 29.4 1,097 29.3 54 4.9
Segment net sales $ 3,909 100.0 % $ 3,741 100.0 % $ 168 4.5 %
Self Care $ 625 $ 566 $ 59 10.4 %
Skin Health and Beauty 168 92 76 82.6
Essential Health 299 239 60 25.1
Segment adjusted operating income(1)
$ 1,092 $ 897 $ 195 21.7 %
(1) Refer to the table above for the reconciliation of Segment adjusted operating income to Operating income and Income before taxes in the Condensed Consolidated Financial Statements.
Organic Sales Change
We define Organic sales, a non-GAAP financial measure, as Net sales excluding the impact of changes in foreign currency exchange rates and the impact of acquisitions and divestitures. We assess our Net sales performance by measuring the period-over-period change in Organic sales. Management believes reporting period-over-period changes in Organic sales provides investors with supplemental information that is useful in assessing our results of operations by excluding the impact of certain items that we believe do not directly reflect our underlying operations.
The following table presents a reconciliation of the change in U.S. GAAP Net sales to the change in Organic sales for the fiscal three months ended March 29, 2026 as compared to the fiscal three months ended March 30, 2025:
Fiscal Three Months Ended March 29, 2026 vs. March 30, 2025(1)
Reported Net Sales Change Impact of Foreign Currency Organic Sales Change
Total Organic Sales Change
Price/Mix(2)
Volume
Self Care 1.9 % 4.2 % (2.3) % 1.6 % (3.9) %
Skin Health and Beauty 8.4 3.4 5.0 0.8 4.2
Essential Health 4.9 3.4 1.5 0.1 1.4
Total 4.5 % 3.8 % 0.7 % 1.0 % (0.3) %
(1) Acquisitions and divestitures did not impact Net sales for the fiscal three months ended March 29, 2026 or March 30, 2025.
(2) Also referred to as value realization.
Self Care Segment
Self Care Segment Net Sales
The Self Care Segment Net sales were $1.7 billion for both the fiscal three months ended March 29, 2026 and March 30, 2025. For the fiscal three months ended March 29, 2026, Net sales increased $32 million, or 1.9%. Excluding the impact of favorable changes in foreign currency exchange rates of 4.2%, Organic sales decreased 2.3% driven by volume-related decreases of 3.9%, partially offset by favorable value realization of 1.6%. Volume-related decreases were primarily attributable to the impact of lower incidences of illnesses affecting pediatric Pain Care as well as Cough and Cold. Volume-related decreases were partially offset by product innovation and growth in Smoking Cessation. Favorable value realization was primarily attributable to new and prior fiscal year carry-over pricing actions.
Self Care Segment Adjusted Operating Income
The Self Care Segment adjusted operating income increased by $59 million, or 10.4%, to $625 million for the fiscal three months ended March 29, 2026 as compared to the fiscal three months ended March 30, 2025. The increase was primarily driven by favorable value realization, the benefits associated with our supply chain optimization initiatives, and decreased administrative expenses, partially offset by volume-related Net sales decreases, net input cost inflation, unfavorable changes in foreign currency exchange rates, and the impact of tariffs imposed on goods imported into the United States.
Skin Health and Beauty Segment
Skin Health and Beauty Segment Net Sales
The Skin Health and Beauty Segment Net sales were $1.1 billion and $1.0 billion for the fiscal three months ended March 29, 2026 and March 30, 2025, respectively, an increase of $82 million, or 8.4%. Excluding the impact of favorable changes in foreign currency exchange rates of 3.4%, Organic sales increased 5.0%, driven by both volume-related increases of 4.2% and favorable value realization of 0.8%. Volume-related increases were primarily attributable to product innovation across major need states primarily in North America and Europe, Middle East, and Africa, increases in hair regrowth products, and a strong sun season in Latin America. Volume-related increases were partially offset by current fiscal year competitive pressures in the United States. Favorable value realization was attributable to new pricing actions and lower strategic price investments.
Skin Health and Beauty Segment Adjusted Operating Income
The Skin Health and Beauty Segment adjusted operating income increased by $76 million, or 82.6%, to $168 million for the fiscal three months ended March 29, 2026 as compared to the fiscal three months ended March 30, 2025. The increase was primarily driven by volume-related Net sales increases, favorable value realization, the benefits associated with our supply chain optimization initiatives, and decreased administrative expenses, partially offset by the impact of tariffs imposed on goods imported into the United States and unfavorable changes in foreign currency exchange rates.
Essential Health Segment
Essential Health Segment Net Sales
The Essential Health Segment Net sales were $1.2 billion and $1.1 billion for the fiscal three months ended March 29, 2026 and March 30, 2025, respectively, an increase of $54 million, or 4.9%. Excluding the impact of favorable changes in foreign currency exchange rates of 3.4%, Organic sales increased 1.5% driven by both volume-related increases of 1.4% and favorable value realization of 0.1%. Volume-related increases were primarily driven by distribution gains and strong e-commerce performance in Baby Care as well as product innovation primarily attributable to Oral Care and Wound Care. Volume-related increases were partially offset by Women's Health in Europe, Middle East, and Africa.
Essential Health Segment Adjusted Operating Income
The Essential Health Segment adjusted operating income increased by $60 million, or 25.1%, to $299 million for the fiscal three months ended March 29, 2026 as compared to the fiscal three months ended March 30, 2025. The increase was primarily driven by volume-related Net sales increases, lower expenses related to brand support attributable to media cost improvements, and the benefits associated with our supply chain improvement programs, partially offset by the impact of tariffs imposed on goods imported into the United States, net input cost inflation, and unfavorable changes in foreign currency exchange rates.
Liquidity and Capital Resources
Cash Flows
Summarized cash flow information for the fiscal three months ended March 29, 2026 and March 30, 2025 were as follows:
Change In Fiscal Period
Fiscal Three Months Ended Change 2025 to 2026
(Dollars in Millions) March 29, 2026 March 30, 2025 Amount Percent
Net income $ 474 $ 322 $ 152 47.2 %
Net changes in assets and liabilities $ (203) $ (77) $ (126) *
Net cash flows from operating activities $ 489 $ 428 $ 61 14.3 %
Net cash flows used in investing activities $ (167) $ (167) $ - - %
Net cash flows used in financing activities $ (295) $ (310) $ 15 (4.8) %
* Calculation not meaningful.
Operating Activities
Net cash flows from operating activities were $489 million and $428 million for the fiscal three months ended March 29, 2026 and March 30, 2025, respectively, an increase of $61 million. The increase was primarily attributable to a $187 million increase in Net income after adjusting for non-cash items, partially offset by a $126 million decrease to the net changes in assets and liabilities primarily driven by net changes in working capital balances.
Investing Activities
Net cash flows used in investing activities were $167 million for both the fiscal three months ended March 29, 2026 and March 30, 2025. Net cash flows used in investing activities were primarily driven by purchases of property, plant, and equipment in both the fiscal three months ended March 29, 2026 and March 30, 2025.
Financing Activities
Net cash flows used in financing activities were $295 million and $310 million for the fiscal three months ended March 29, 2026 and March 30, 2025, respectively, a decrease of $15 million. Net cash flows used in financing activities for the fiscal three months ended March 29, 2026 were primarily driven by the $750 million repayment of the 5.35% Senior Notes due 2026 (as defined in Note 4, "Borrowings," to the Condensed Consolidated Financial Statements included herein) and $398 million of dividends paid, partially offset by $870 million of net proceeds from our commercial paper program. Net cash flows used in financing activities for the fiscal three months ended March 30, 2025 were primarily driven by the $750 million repayment of
the 5.50% Senior Notes due 2025, $392 million of dividends paid, and $63 million of payments made to purchase treasury stock, partially offset by $868 million of net proceeds from our commercial paper program.
Sources of Liquidity
Our primary sources of liquidity are cash on hand, which consisted of Cash and cash equivalents of $1,075 million as of March 29, 2026, cash flows from operations, borrowing capacity under a revolving credit facility of $4.0 billion which expires in March 2029, and authorized commercial paper program issuance of $4.0 billion. Also, on February 24, 2025, we filed a registration statement on Form S-3 with the SEC under which, from time to time, we may sell securities.
As of March 29, 2026, total debt was $8,661 million. As of March 29, 2026, we had $6,939 million of Senior Notes (as defined in Note 4, "Borrowings," to the Condensed Consolidated Financial Statements included herein) outstanding, net of related discounts and debt issuance costs of $61 million, no amounts outstanding under our revolving credit facility, and $1,578 million of outstanding balances under our commercial paper program, net of a related discount of $8 million.
Our ability to fund our operating needs will depend on our ability to continue to generate positive cash flows from operations and on our ability to obtain debt financing on acceptable terms or to issue additional equity or equity-linked securities. Based upon our history of generating positive cash flows, we believe our existing cash and cash generated from operations will be sufficient to service our current obligations for at least the next 12 months.
Management believes that our cash balances and funds provided by operating activities, along with borrowing capacity and access to capital markets, taken as a whole, provide adequate liquidity to meet all of our current and long-term obligations when due, including third-party debt, adequate liquidity to fund capital expenditures, and flexibility to meet investment opportunities that may arise. However, we cannot assure you that we will be able to obtain additional debt or equity financing on acceptable terms in the future.
Cash and cash equivalents increased by $13 million during the fiscal three months ended March 29, 2026 to $1,075 million as of March 29, 2026, as compared to $1,062 million as of December 28, 2025. Cash and cash equivalents held by our foreign subsidiaries was $1,057 million and $1,020 million as of March 29, 2026 and December 28, 2025, respectively.
Restructuring
On February 17, 2026, our Board approved the 2026 Restructuring Initiative which aims to optimize our operating model, transform our supply chain, reduce complexity, and drive operational efficiencies, while strengthening core capabilities. The initiative is expected to result in pre-tax restructuring expenses and other charges totaling approximately $250 million in fiscal year 2026. Over the life of the initiative, a majority of the pre-tax restructuring expenses and other charges are expected to be paid in cash and are expected to be funded primarily through cash flows generated from operations. We expect to realize annualized pre-tax gross cost savings of approximately $200 million upon completion of the program. Our estimates of the costs of the initiative and the expected benefits are preliminary estimates and are subject to a number of assumptions, including local law requirements in various jurisdictions. Actual charges may differ, possibly materially, from the estimates provided above. See Note 15, "Restructuring Expenses and Operating Model Optimization Initiatives," to the Condensed Consolidated Financial Statements included herein for further information regarding ongoing and previously completed initiatives.
Senior Notes
On February 13, 2026, we issued a notice of full redemption to the holders of the 5.35% Senior Notes due 2026. All $750 million aggregate principal amount outstanding of the 5.35% Senior Notes due 2026 were redeemed on February 23, 2026 at par plus accrued and unpaid interest to, but not including, the redemption date.
Dividends
Quarterly dividends have been paid to our shareholders since the Kenvue IPO. A summary of cash dividends per share on the outstanding Kenvue common stock declared to shareholders by our Board and paid during the fiscal three months ended March 29, 2026 is presented below:
Declaration Date
Record Date
Payment Date
Per Share Amount
January 28, 2026
February 11, 2026
February 25, 2026
$0.2075
On April 29, 2026, we announced that our Board declared a dividend of $0.2075 per share on our common stock. The dividend is payable on May 27, 2026 to shareholders of record as of the close of business on May 13, 2026.
We expect to continue to pay cash dividends on a quarterly basis. However, the declaration of dividends is subject to the discretion of our Board.
Future Cash Requirements
We expect our future cash requirements will relate to working capital, capital expenditures, restructuring and integration, compensation and benefit-related obligations, interest expense and debt service obligations, litigation costs, the return of capital to shareholders, including through the payment of any dividends, and other contractual obligations that arise in the normal course of business. We may also use cash to enter into business development transactions, such as licensing arrangements or strategic acquisitions.
As of March 29, 2026, we expect our primary cash requirements for fiscal year 2026 to include capital expenditures. We made payments of $139 million for purchases of property, plant, and equipment during the fiscal three months ended March 29, 2026.
Future Litigation
In the ordinary course of business, we are involved in litigation, claims, government inquiries, investigations, charges, and proceedings. See Note 13, "Commitments and Contingencies," to the Condensed Consolidated Financial Statements included herein for further details regarding certain matters that are currently pending. Our ability to successfully resolve pending and future litigation may adversely impact our financial condition, results of operations, or cash flows.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements (as defined under the rules and regulations of the SEC) or any relationships with unconsolidated entities that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, Net sales or expenses, results of operations, liquidity, cash requirements, or capital resources.
Other Information
Provision for Taxes
On December 15, 2022, the European Union (the "EU") Member States formally adopted the EU's Pillar Two Directive, which generally provides for a minimum effective tax rate of 15%, as established by the Organization for Economic Co-operation and Development's (the "OECD") Pillar Two Inclusive Framework ("Pillar Two") that was supported by over 130 countries worldwide. The EU effective dates are January 1, 2024, and January 1, 2025, for different aspects of the directive. On July 17, 2023, the OECD published Administrative Guidance proposing certain safe harbors that effectively extend certain effective dates to January 1, 2027. The OECD continues to release additional guidance, including guidance on safe harbors for which we may qualify, and many countries have already implemented legislation consistent with Pillar Two. Due to these new rules, our provision for taxes could be unfavorably impacted as the legislation becomes effective in countries in which we conduct business. However, based on our current analysis, currently enacted laws for Pillar Two do not have a significant impact on the Condensed Consolidated Financial Statements. We are continuing to evaluate the Model Global Anti-Base Erosion Rules for Pillar Two and related legislation, and their potential impact on future periods. In addition, in January 2025, the United States issued an executive order expressing disagreement with certain aspects of Pillar Two. In June 2025, the Group of Seven issued a statement supporting the exclusion of U.S.-parented groups from certain aspects of Pillar Two in exchange for the United States not imposing certain retaliatory taxes. On January 5, 2026, the OECD announced the Side-by-Side ("SbS") package, implemented as administrative guidance and modifying the operation of the Pillar Two rules. The package introduces simplifications and new safe harbors for U.S. and other multinational companies where domestic and international tax systems meet robust requirements to coexist with Pillar Two, which would fully exempt U.S.-parented groups from the application of the Income Inclusion Rule and Undertaxed Profits Rule Pillar Two top up taxes. The SbS package also extends the current Transitional Country-by Country Reporting Safe Harbor by one year. We will continue to monitor any additional changes to Pillar Two.
Kenvue Inc. published this content on May 07, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 07, 2026 at 11:51 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]