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around two-thirds of KVUE organic growth with price/mix one-third, and looking ahead
past 2023 we expect a return to this top-line growth mix as the company laps materially
higher pricing increases, likely by mid 2024.
For 2023, we estimate that roughly 45% of our +7.6% price/mix forecast results from
carryover pricing actions and that price/mix will contribute +8.2% to the top line in
1H23 and +6.9% in 2H23. We estimate total volumes -1.6% for 2023 with 1H23
volumes roughly flat (+0.2%) and 2H23 volumes down around -3.4%. As noted above,
1Q23 volumes came in +2.4% against +8.8% price/mix with strong volume
performance in Self Care (+7.1%) and Skin Health & Beauty (+4.3%) more than
offsetting the decline in Essential Health (-5.5%). There were a number of drivers to the
stronger than expected volume performance in 1Q23: 1) Self Care benefitted from a
strong cold, cough, and flu season in EMEA, driving higher incidence, and the segment
also benefitted from retailer restocking in the U.S. as most retailers exited 4Q22 with
lower inventory levels; and 2) the Skin Health & Beauty segment benefited from easy
comparisons (lapped -8.6% volume decline in 1Q22) and inventory rebuild at retailers
This document is being provided for the exclusive use of DAVID WANG at MARLOWE PARTNERS LP.
25
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
with strength in Neutrogena (Hydro Boost) and Aveeno. Some of the tailwinds to 1Q23
could continue into 2Q23, including in Self Care as usage occasions likely remained
elevated in EMEA in the weeks following quarter-end, and the company will also
continue to lap material supply chain challenges. We model for a normalization in
volume trends in 2H23 as the comparisons get tougher and the company may not benefit
as much from inventory replenishment and there remains uncertainty on consumer
elasticities ahead, although more conservative 2H estimates could provide a source of
upside should the consumer landscape hold up better than anticipated or if there are
strong allergy seasons in Self Care.
Figure 35: KVUE 1Q23 Organic Growth Performance by Segment
7.1%
4.3%
-5.5%
2.4%
8.2%
8.9%
9.4%
8.8%
-10%
-5%
0%
5%
10%
15%
20%
SELF CARE SKIN HEALTH AND
BEAUTY
ESSENTIAL HEALTH TOTAL
% volume % price/mix
Source: Company reports.
Figure 36: KVUE Organic Growth Drivers 1H23E vs. 2H23E
0.2%
-3.4%
8.2%
6.9%
-4%
-2%
0%
2%
4%
6%
8%
10%
1H23E 2H23E
% volume % price/mix
Source: Company reports and J.P. Morgan estimates.
For 2024 we model for price/mix of +2.2% and volumes of +1.8% and for 2025 price/
mix of +1.4% and volumes +2.8%. We see 2024 as benefiting early in the year from
carryover pricing from 2023 before the drivers of the top-line should normalize more
toward the company􀋖s longer-term algorithm of two-thirds volume and one-third price
mix.
Figure 37: KVUE Forward Estimated Sales Bridge
$ m
$16,973
$14,950
-1.6%
+7.6% $15,662
+1.8% +2.2% $16,289
+2.8%
+1.4%
$13,000
$13,500
$14,000
$14,500
$15,000
$15,500
$16,000
$16,500
$17,000
$17,500
2022 Volume Price/mix 2023E Volume Price/mix 2024E Volume Price/mix 2025E
Source: Company reports and J.P. Morgan estimates.
This document is being provided for the exclusive use of DAVID WANG at MARLOWE PARTNERS LP.
26
Andrea Teixeira, CFA AC
(1-212) 622-6735
andrea.f.teixeira@jpmorgan.com
North America Equity Research