Kenvue Resolves Starboard Value Proxy Battle with New Board Appointments

Strategic Shift to Boost Skin Health and Beauty Performance

Kenvue, a leading consumer health company known for iconic brands like Neutrogena, Aveeno, and Band-Aid, recently finalized a significant agreement with activist investor Starboard Value, culminating in the appointment of three new directors to its board. This resolution ends a months-long proxy contest sparked by Starboard’s acquisition of a 1.1% stake in the company, amounting to roughly 22 million shares, back in October 2024. The hedge fund had voiced concerns over Kenvue’s underwhelming performance, particularly in its skin health and beauty segment, prompting a push for strategic changes to unlock the company’s potential in large, growing markets. The newly appointed directors, Jeffrey Smith (Starboard’s CEO), Sarah Hofstetter (president of e-commerce analytics firm Profitero), and Erica Mann (former head of Bayer’s consumer health division), bring a wealth of expertise aimed at revitalizing Kenvue’s portfolio and addressing shareholder value concerns.

Since its spinoff from Johnson & Johnson in 2023, Kenvue has struggled to maintain momentum, with its stock declining approximately 13% from its debut, resulting in a current market valuation of $44.76 billion. The skin health and beauty segment, a critical part of its business, has been a particular weak spot, experiencing a consistent sales drop over five quarters, including a 4.2% decrease to $1.07 billion in the third quarter of 2024. This shortfall, which missed analyst expectations, fueled Starboard’s campaign for change, spotlighting issues such as inadequate in-store product placement and sluggish demand for sunscreen products. The activist investor’s involvement intensified with a February 2025 nomination of four board candidates, including Smith, setting the stage for a contentious proxy fight. However, the settlement sees Starboard withdrawing its original slate in favor of a collaborative approach, integrating Smith alongside two independent directors chosen to complement Kenvue’s long-term growth strategy.

The appointment of these directors signals a clear intent to tackle Kenvue’s skin health and beauty segment challenges head-on. Jeffrey Smith’s track record at Starboard Value, a hedge fund renowned for driving operational improvements in undervalued firms, suggests a focus on boosting revenue growth and profit margins through targeted initiatives. Analysts anticipate Smith will advocate for increased advertising budgets and enhanced social media engagement to elevate brand visibility, particularly for struggling lines like Neutrogena and Aveeno. Sarah Hofstetter’s expertise in e-commerce and digital marketing, honed at Profitero, positions her to spearhead improvements in Kenvue’s online sales channels, a critical area as consumer shopping habits increasingly shift to digital platforms. Meanwhile, Erica Mann’s extensive experience leading Bayer’s consumer health unit offers deep insights into product innovation and market expansion, potentially guiding Kenvue toward new offerings or refined positioning in competitive categories like skincare and personal care.

Despite the strategic promise of this boardroom shakeup, Kenvue’s stock experienced an immediate 2% dip to $23 per share in late-morning trading following the announcement. This market reaction likely reflects investor uncertainty about the short-term costs associated with the anticipated strategic overhaul, such as ramped-up marketing expenditures or operational restructuring. Kenvue’s financials underscore the urgency of these changes, with third-quarter 2024 net sales of $3.9 billion showing a modest 0.9% organic growth rate, while full-year projections hover between 2.0% and 4.0%. The company’s broader portfolio, spanning Self Care, Skin Health and Beauty, and Essential Health, generated $15.4 billion in net sales in 2023, yet the persistent underperformance of its skincare brands has dragged down overall sentiment. The settlement with Starboard aligns with recent internal moves, such as the November 2024 appointment of Andrew Stanleick as President of Skin Health & Beauty for key regions, indicating a concerted effort to reverse these trends.

For stakeholders, this development carries multifaceted implications. Shareholders may view the collaboration with Starboard as a pathway to unlocking latent value in Kenvue’s globally recognized brands, a sentiment echoed by Smith’s statement emphasizing the “tremendous potential” in the company’s market-leading positions. Employees, particularly those in marketing, digital sales, and product development, could see shifts in priorities and resources as the new board members push their agendas. Consumers, meanwhile, stand to benefit from enhanced product availability and innovation, potentially revitalizing their connection to brands that have lost ground in recent years. The settlement’s emphasis on expertise over confrontation distinguishes it from more aggressive activist campaigns, offering a balanced approach that avoids the disruption of a prolonged proxy battle while still addressing core performance issues.

Looking ahead, Kenvue’s ability to leverage this board refresh will hinge on execution. The combined skills of Smith, Hofstetter, and Mann provide a robust foundation for tackling the skin health and beauty segment’s woes, from bolstering e-commerce infrastructure to refining product strategies in a crowded market. Historical comparisons to Starboard’s successful interventions at companies like AOL and Darden Restaurants suggest a pattern of value creation through disciplined operational focus, though Kenvue’s unique challenges as a newly independent entity add complexity. The initial stock dip notwithstanding, the long-term outlook could brighten if these changes translate into sustained sales growth and improved profitability, aligning with Starboard’s vision of maximizing Kenvue’s potential in the consumer health landscape. For now, the market watches closely as this strategic pivot unfolds, balancing optimism about future gains with caution over near-term hurdles.