Kenvue (NYSE: KVUE) sales rise 3.2% and free cash flow climbs, but no guidance

What happened

Kenvue Inc. (NYSE: KVUE) reported third-quarter net sales up 3.2% and nine-month free cash flow of $1.6 billion, up from $1.0 billion a year earlier.

The quarter ended Sept. 27 was the fourth straight with net and organic sales growth. Because of the pending Kimberly-Clark deal, the company will give no guidance and will not host a quarterly call.

Chief Executive Officer Kirk Perry said the company is strongly on track to deliver its business transformation and is nearing completion of its combination with Kimberly-Clark. With no outlook, holders have only the reported cash and margin figures to judge the quarter.

Key numbers

Metric	Latest	Change	Source
Net sales, third quarter	$3.89 billion	from $3.76 billion, +3.2%	SEC 8-K Exhibit 99.1
Free cash flow, nine months	$1.6 billion	from $1.0 billion, +$0.6 billion	SEC 8-K Exhibit 99.1
Operating income margin, third quarter	18.2%	from 16.7%, +1.5 percentage points	SEC 8-K Exhibit 99.1
Diluted EPS, third quarter	$0.22	from $0.21, +5%	SEC 8-K Exhibit 99.1
Adjusted diluted EPS, third quarter	$0.29	from $0.28, +4%	SEC 8-K Exhibit 99.1
Total debt (prior figure as of Dec. 28, 2025)	$8.2 billion	from $8.5 billion, -$0.3 billion	SEC 8-K Exhibit 99.1

Read more: Kenvue (KVUE) company research

Where the cash came from

Net cash from operating activities for the nine months was $1.9 billion, up from $1.3 billion. The company ties this to higher net income and lower use of working capital. Capital expenditures fell to $0.3 billion from $0.4 billion.

OptimistFi's calculation shows free cash flow rose by $0.6 billion while capital spending fell by only $0.1 billion. Most of the gain came from operations, not from spending less.

The balance sheet moved the same way. Total debt was $8.2 billion at Sept. 27, down from $8.5 billion at Dec. 28, 2025. Cash slipped slightly from $1.1 billion at that date. Net interest expense for the quarter was $89 million versus $93 million a year earlier.

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Where growth and margins came from

Organic sales rose 2.9% and currency added 0.3%. Volume grew 1.6% and value realization, the filing's term for price and mix, added 1.3%. Both were positive, so growth did not rest on price alone.

Self Care led, with net sales up 5.9%. The filing points to Motrin in Asia Pacific, Nicorette in smoking cessation and Tylenol share gains in the U.S. Part of the Asia Pacific gain came from favorable inventory comparisons after prior-year trade inventory depletion.

Skin Health and Beauty was the weak spot. Net sales rose 0.1% but organic sales fell 0.5% on a 1.7% volume decline. The filing blames distribution losses and promotion timing in the U.S. and retailer negotiations in Europe. Essential Health net sales rose 2.5%, all of it organic.

Gross margin was 59.5% versus 59.1% a year earlier. The filing credits savings from supply chain productivity, U.S. tariff refunds and favorable value realization. Inflation and unfavorable transactional foreign exchange partly offset them. Operating margin rose to 18.2% from 16.7%.

Adjusted operating margin rose less, to 21.9% from 21.5%. Restructuring expenses fell to $33 million from $84 million. The adjusted measure excludes them, which helps explain why the GAAP gain is larger.

Net income was $430 million versus $398 million. Diluted EPS rose 5% to $0.22 from $0.21. Adjusted diluted EPS rose 4% to $0.29 from $0.28, even with a higher tax rate. The effective tax rate was 29.4% versus 24.3%, which the filing mainly attributes to fewer favorable return-to-provision adjustments.

Why it matters

OptimistFi has argued that Kenvue works if consumer trust and retail availability protect pricing and margins while management turns a flat revenue base into better cash generation. This quarter supports the cash-generation half of that view, with wider margins and positive volume and value realization.

The caveats are specific. Skin Health and Beauty volume fell, tariff refunds helped gross margin, and the company will not give guidance. The filing also expects approximately $250 million of pre-tax restructuring expenses and other charges in fiscal 2026, so GAAP results still carry transformation costs.

What's next

The next quarterly report is the next test. It will show whether volume growth continues, whether Skin Health and Beauty organic sales return to growth and whether free cash flow holds its gain.

The filing lists an inability to complete the Kimberly-Clark transaction among its risks. It also lists possible harm to Kenvue's stock price from the suspension or completion of the deal.

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