Kenvue shares slide as restructuring pressure mounts
Consumer health company facing declining sales amid broader cost-cutting initiatives
Kenvue shares fell 1.6% to $18.41 on Tuesday, extending their decline below the 200-day moving average as the consumer health company continues to execute a restructuring program amid weakening demand. The stock's performance reflects broader concerns about the company's growth trajectory following negative 3.5% year-over-year revenue growth in its most recent quarter.
The former Johnson & Johnson consumer health division, which completed its spinoff in May 2023, has been implementing a cost optimization initiative dubbed "Our Vue Forward." Under this program, the company announced in May 2024 it would reduce its global workforce by 4%, eliminating more than 900 positions from its approximately 22,000 employees worldwide.
The restructuring aims to achieve $350 million in annual savings by 2026, though the company expects to incur approximately $275 million in pre-tax restructuring costs in both fiscal years 2024 and 2025. The most recent cuts include 69 positions at the company's Summit, New Jersey headquarters, scheduled between October and December 2025.
"The restructuring underscores the operational challenges Kenvue faces as a standalone entity," according to market analysts covering the consumer health sector. The company, with a market capitalization of $35.8 billion, trades at a trailing price-to-earnings ratio of 24.93, though its forward multiple of 17.01 suggests the market anticipates improved profitability.
Analyst sentiment remains cautious. Of the 14 analysts covering Kenvue, 12 rate the stock a hold, with only one buy and one strong buy rating. The consensus target price of $18.92 represents minimal upside from current levels, indicating expectations that the turnaround will be gradual rather than immediate.
Investors are preparing for potential updates when Kenvue presents at the Consumer Analyst Group of New York (CAGNY) Conference on February 19. The presentation may provide clarity on the company's strategic priorities, including potential divestment of some skin health and beauty brands as part of portfolio optimization efforts.
The company's 4.44% dividend yield offers some appeal to income-focused investors, supported by earnings per share of $0.75 and a profit margin of 9.55%. However, the negative revenue trend and ongoing restructuring costs have pressured the stock, which has declined approximately 24% from its 52-week high of $24.13.
The consumer health sector faces headwinds from pricing pressures and cautious consumer spending, particularly in discretionary categories. Kenvue's portfolio includes brands such as Neutrogena, Tylenol, and Listerine, giving it significant market share but also exposing it to competitive pressures in mature categories.