Even after consumer outfit Kenvue split from Johnson & Johnson one year ago, the company has been performing certain services for the pharma and medtech giant as part of a transition process. Now, as that arrangement comes to a close, Kenvue is plotting hundreds of layoffs.
Kenvue’s board of directors on Monday approved a plan to cut 4% of the company’s global workforce, the company said in a press release. The company employed about 22,000 employees at the end of last year, so the layoff initiative could affect some 880 workers.
The cuts come as a “transition service agreement” (TSA) with J&J winds down, Kenvue said in its first-quarter earnings release.
Kenvue plans to realize $350 million in annual pre-tax gross cost savings by 2026 as part of the plan, some of which will be reinvested, the company said. The consumer giant expects $275 million in charges related to the cuts.
“As we exit services under the TSA, these initiatives will structurally position Kenvue for success in the future and create long-term shareholder value,” Paul Ruh, Kenvue’s CFO, said in a statement. “These initiatives will enable Kenvue to adjust its cost structure and ways of working to become more competitive.”
Kenvue’s latest headcount reduction comes after the company said it would lay off 51 workers in New Jersey in February. Prior to that, Kenvue telegraphed 84 job cuts in California set to take effect in April.
J&J first telegraphed plans to separate its consumer health business back in November of 2021. Nearly 18 months after that announcement, the spun-off company, operating under the name Kenvue, leaped onto the New York Stock Exchange with a public offering worth a whopping $41 billion.
The move marked the continuation of a prominent trend in the industry in which other drug majors like GSK, Pfizer and Merck had also exited the consumer health field.
Around the time the IPO closed, J&J held around 90% of the total shares in Kenvue. Following the completion of a share-exchange offer last summer, J&J in August said it was keeping about a 9.5% stake in the company.
As the successor to J&J’s consumer health business, Kenvue markets many popular brands such as Neutrogena, Aveeno, Tylenol, Listerine, Band-Aid and Zyrtec.
For the first three months of 2024, Kenvue’s sales grew marginally, at 1.1%, to $3.9 billion over 2023’s first quarter. While volumes declined by 3.1%, the company was able to eke out some pricing gains.
As for the rest of 2024, Kenvue is projecting net sales growth of 1% to 3%.