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711
+1.7%
-0.2%
-1.8% -0.1%
$14,467
+2.6%
+1.2%
-0.3%
+1.5%
-0.9%
$15,054
-0.1%
+4.0%
-0.1%
-4.2% -0.3%
$13,000
$13,500
$14,000
$14,500
$15,000
$15,500
$16,000
Source: Company reports.
This document is being provided for the exclusive use of DAVID WANG at MARLOWE PARTNERS LP.
23
Andrea Teixeira, CFA AC
(1-212) 622-6735
andrea.f.teixeira@jpmorgan.com
North America Equity Research
29 May 2023 J P M O R G A N
KVUE Lagged Peers in OSG Due to Delayed Pricing, Improving Recently
As such, in the past three years KVUE􀋖s organic growth trends have underperformed
peers with KVUE􀋖s +3.4% below the median of +5.2% and the average of +9.5%
(+5.8% ex-OLPX). While adjusting for the aforementioned headwinds would have
resulted in KVUE organic growth CAGR just slightly above the median (i.e., +5.4% vs.
median +5.2%), we don􀋖t see it as a fair comparison as peer companies faced many of
the same headwinds as KVUE between supply chain disruptions and COVID-19.
Timing is also a driver of the underperformance vs. peers over the last three years as
KVUE was late vs. peers in putting through pricing actions and at a more moderate level
vs. most of HPC (i.e., KVUE just in 2H22 began putting through pricing in the ~HSD
range overall while HPC peers took multiple rounds of pricing ranging from MSD-LDD
in some cases), although we also aren􀋖t projecting KVUE to grow much faster vs. peers
ahead despite delayed pricing benefit.
Figure 30: Organic Sales 3Y CAGR vs. Peers
CY20-CY22
-5%
0%
5%
10%
15%
20%
25%
ELF HNST RKT OR PG CL CLX HLN ULVR CHD BEI KMB KVUE NWL EL COTY
Organic 3Y CAGR Average Median
Source: Company reports and J.P. Morgan estimates.; *OLPX 3Y Organic CAGR +68.1% removed for ease of comparison
2023 Should Still Be Above Algorithm at ~6% OSG, Normalizing to Peer Average
~+4% in 2024+
Looking ahead, we see KVUE as well positioned for +6% organic top line in 2023 and ~
+4% organic top-line growth over the following two years (3Y CAGR +4.7%) with
potential for upside if elasticities hold up better than expected (we believe KVUE is
modeling internally for elasticities to revert to historical mean vs. relatively more
limited elasticities experienced thus far and positive volume growth of +2.4% in 1Q23
despite +8.8% price/mix). Underpinning the expected top-line growth is the underlying
category growth trends, which we detailed earlier. Within KVUE􀋖s portfolio, we expect
top-line growth to be led by Self Care and Skin Health & Beauty segments, while
Essential Health contributes relatively less given category dynamics.
Specifically, we estimate Self Care to grow at a three-year CAGR of +5.8% and
contribute ~50% to KVUE􀋖s organic growth through 2025, Skin Health & Beauty to
grow at a three-year CAGR of +5.4% and contribute ~33% to KVUE􀋖s organic growth
through 2025, and Essential Health to grow at a three-year CAGR of +2.6% and
contribute ~17% to KVUE􀋖s organic growth through 2025. We note that in the prior
three years (2020-2022), Self Care grew at a +8.6% three-year CAGR and contributed
nearly ~91% to KVUE organic growth, Skin Health & Beauty grew at a +0.1% threeyear
CAGR and contributed ~1% to KVUE organic growth, and Essential Health grew
at a +0.9% three-year CAGR and contributed around ~8% to KVUE organic growth.
This document is being provided for the exclusive use of DAVID WANG at MARLOWE PARTNERS LP.
24
Andrea Teixeira, CFA AC
(1-212) 622-6735
andrea.f.teixeira@jpmorgan.com
North America Equity Research
29 May 2023 J P M O R G A N
Figure 31: Segment Contribution to YOY Organic Growth
3.2%
2.0%
4.1%
3.2%
1.9%
-0.9% 2.0%
0.9%
0.2% 1.7%
1.5%
1.5%
0.6% 0.7%
-0.5%
1.0%
0.6%
0.7%
-2%
-1%
0%