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    PRGO
    Earnings call· Jun 2026(Q2 FY26)

    PERRIGO Co Q2 FY26 earnings call PRGO

    Aug 5, 2026 Source

    Executive summary

    Perrigo Q2 FY26 — Market Share Gains Amidst Category Softness, Outlook Reaffirmed

    Perrigo's Q2 FY26 results reflect a period of leadership transition and strategic execution, with Interim President and CEO Albert Manzone reaffirming commitment to the company's mission. Despite continued category softness and retailer destocking, the company demonstrated strong operational progress, achieving market share gains in both the U.S. and Europe. The Three-S plan (Stabilize, Streamline, Strengthen) is driving improvements, and the full-year outlook remains reaffirmed, with expectations for a stronger second half driven by innovation and demand generation.

    Highlights

    5

    • U.S. store brand OTC volumes grew 1.5% in categories declining 1.1%, leading to a 50 basis points market share gain.

    • European key brands grew 3.3% in categories declining 0.6%, resulting in a 50 basis points market share gain.

    • The Dermacosmetics divestiture generated $359 million in proceeds, primarily applied to debt reduction.

    • Infant Formula operating income improved by approximately $60 million year-over-year.

    • The operational enhancement program is on track to deliver $80 million to $100 million in savings by 2027.

    Concerns

    5

    • Core net sales declined 3.1% year-over-year.

    • Core organic net sales declined 3.5% year-over-year.

    • Retailer inventory reductions impacted sales by approximately 1.8%.

    • Core adjusted gross margin declined 250 basis points to 37%.

    • Core adjusted operating margin decreased 160 basis points to 13%.

    Guidance & targets

    4
    CategoryTargetConfidence
    Full-year 2026 Outlook (Core and all-in net sales, margin, EPS)
    Reaffirmed
    high materiality
    High
    Full-year 2026 Effective Tax Rate
    Approximately 18%
    medium materiality
    High
    Full-year 2026 Diluted Shares Outstanding
    139.6 million shares
    medium materiality
    High
    Full-year 2026 All-in EPS Impact from Planned Under-absorption
    Approximately $0.60
    high materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Self-Care
    Operating income declined 16.2%, driven by lower net sales volumes, planned under-absorption from lower prior year sales, unfavorable mix, retailer inventory reductions in Europe, and a slower start to summer categories. Partially offset by operational enhancement program benefits.
    		———Declined $15M
    Specialty Care
    Operating income decreased around 28%, primarily due to lower profitability in Skin Health (slower summer, retailer inventory reductions, lower Minoxidil sales) and higher advertising and promotional investment for H2 growth initiatives, including Opill marketing. Also impacted by planned under-absorption.
    		Declined modestly——Decreased $18M
    Infant Formula
    Net sales grew 23% year-over-year, driven by timing of contract sales and growth in store brand formula. Operating income improved significantly due to capacity rationalization, improved efficiency, business stabilization, and lapping prior year production variability.
    		—23%—Improved by ~$60M
    All Other
    Operating income was consistent, driven by the net recognition of a $10 million tariff recovery and improved profitability in Oral Care, offsetting the impact of the Dermacosmetics divestiture.
    		———Consistent with prior year

    Operational metrics

    34
    U.S. service levels
    91%Up 1,600 bps since 2023
    Q2 FY26

    Improved consistency of operations.

    International service levels
    95%Up 1,000 bps since 2023
    Q2 FY26

    Improved consistency of operations.

    Operational enhancement program savings
    $80M-$100MOn track
    By 2027

    Program is on track to deliver these savings.

    Innovation pipeline value
    Tripled
    Since 2024

    Value of the innovation pipeline has more than tripled.

    Innovation projects leveraging shared platforms
    >55%
    Current

    Makes investment more efficient and scalable.

    Core net sales decline
    3.1%YoY
    Q2 FY26

    Driven by category softness and retailer destocking.

    Core organic net sales decline
    3.5%YoY
    Q2 FY26

    Impacted by category consumption and retailer inventory reductions.

    Retailer inventory reduction impact on sales
    1.8%
    Q2 FY26

    Impacted sales, most notably in Europe.

    Infant Formula net sales growth
    23%YoY
    Q2 FY26

    Driven by timing of contract sales and growth in store brand formula.

    Dermacosmetics divestiture proceeds
    $359M
    Q2 FY26

    Proceeds applied towards debt reduction.

    Tariff recovery benefit
    $10M
    Q2 FY26

    Net recognition of a recovery of a portion of previously paid tariffs.

    CEO transition benefit (OpEx)
    $6M
    Q2 FY26

    One-time benefit related to the second quarter CEO transition.

    Core adjusted gross margin
    37%Down 250 bps
    Q2 FY26

    Primarily due to lower sales volumes, planned under-absorption, and unfavorable mix.

    All-in adjusted gross margin
    35.6%Down 250 bps
    Q2 FY26

    Due to factors impacting Core gross margin and divestitures, partially offset by Infant Formula performance.

    Core adjusted operating margin
    13%Decreased 160 bps
    Q2 FY26

    Reflecting gross margin flow-through, partially mitigated by operational enhancement program and CEO transition benefit.

    All-in adjusted operating margin
    12.2%Decreased 60 bps
    Q2 FY26

    Due to factors impacting Core operating margin and Infant Formula performance, offsetting divestitures.

    Core adjusted EPS
    $0.46Down $0.12 YoY
    Q2 FY26

    Above expectations due to lower operating expenses from accelerated operational enhancement program and CEO transition benefit.

    All-in adjusted diluted EPS
    $0.50Down $0.07 YoY
    Q2 FY26

    Due to lower sales volumes and carryover impact of prior year manufacturing volumes, partly offset by Infant Formula contract business timing.

    Cash from operating activities
    $83MIn line with expectations
    Q2 FY26

    Operating cash flow for the quarter.

    Capital expenditures
    $14M
    Q2 FY26

    Capital expenditures for the quarter.

    Dividends to shareholders
    $40M
    Q2 FY26

    Amount returned to shareholders through dividends.

    Cash and cash equivalents
    $400M
    Q2 FY26

    Balance sheet cash position.

    Total debt
    $3.3B
    Q2 FY26

    Total debt balance.

    Planned under-absorption EPS impact
    $0.26
    Q1 FY26

    Impact recognized in the first quarter.

    Planned under-absorption EPS impact
    $0.18
    Q2 FY26

    Impact recognized in the second quarter.

    Opill repeat rates
    >60%
    Q2 FY26

    Strong repeat rates for Opill.

    U.S. OTC categories volume decline
    1.1%
    Q2 FY26

    Volume decline in categories where Perrigo competes.

    Perrigo U.S. store brand OTC volumes growth
    1.5%
    Q2 FY26

    Volume growth in healthcare and Specialty Care.

    Europe category value decline
    0.6%
    Q2 FY26

    Category value decline in Europe.

    Perrigo Europe key brands growth
    3.3%
    Q2 FY26

    Growth of key brands in Europe.

    U.S. OTC volumes
    positive
    4 weeks ended July 19

    Volumes turned positive in the categories where Perrigo competes.

    U.S. market share gain (store brand OTC)
    50 bps
    Q2 FY26

    Market share gain in U.S. store brand OTC.

    U.S. market share gain (store brand OTC)
    60 bps
    Last 4 weeks in July

    Additional market share gain in U.S. store brand OTC.

    Europe market share gain (key brands)
    50 bps
    Q2 FY26

    Market share gain for key brands in Europe.

    Industry KPIs

    4
    MetricValueDetails
    EPS revenue guidanceReaffirmed
    Pipeline clinical milestonesTripled
    Therapeutic drug market share50 bpsbps
    Geographic regional revenue growthPositive

    Product announcements

    3
    ProductTypeDetails
    Opillmilestone
    Compeedexpansion
    Store brand allergy businessmilestone

    Deals & partnerships

    1
    UndisclosedSale of Dermacosmetics business$359M

    Divestiture of the Dermacosmetics business, generating significant upfront proceeds used to reduce debt.

    Risks & headwinds

    6
    Uncertain consumer and economic environmentOngoing

    Not quantified

    Mitigation: Executing on controllable factors like market share gains, streamlining portfolio, and debt reduction.

    Continued category softnessQ2 FY26, expected to improve in H2

    U.S. categories declined 1.1% in volume; Europe category value declined 0.6%

    Mitigation: Expect category trends to keep improving as comparisons ease through the year; focus on innovation and demand generation.

    Retailer inventory reductionsQ2 FY26, most notably in Europe

    Impacted sales by approximately 1.8%

    Mitigation: Expected to subside as the company moves into the second half of the year.

    Inflation and affordability concerns for consumersSecond half of the year

    Not quantified

    Mitigation: Focusing on providing quality, affordable self-care products and partnering with retailers.

    Planned under-absorption stemming from lower prior year sales volumesFY26

    Unfavorable all-in EPS impact of approximately $0.60 in FY26 ($0.26 in Q1, $0.18 in Q2)

    Mitigation: Partial reduction of under-absorption expected in the second half.

    Macroeconomic pressuresOngoing, particularly in Europe

    Not quantified

    Mitigation: Taking a measured approach for the balance of the year, focusing on clear, quantifiable drivers for H2 improvement.

    What to watch in Q3 FY26

    5

    Infant Formula strategic review outcome

    Next quarter
    CurrentUnder review
    TargetUpdate on optimization, partnership, or divestiture

    Why it matters

    The outcome of this review will significantly impact portfolio focus and shareholder value.

    With regard to our reviews that are going on, they are all proceeding well, and we will update you as soon as we have something to say.

    Q&A highlights

    6

    Can you provide an update on the infant formula strategic review, its progress, and timing for further updates?

    The strategic reviews are proceeding well, and the company will provide updates as soon as information is available. The improved performance of the Infant Formula business provides more optionality for the review.

    “With regard to our reviews that are going on, they are all proceeding well, and we will update you as soon as we have something to say.”

    asked by Ethan Brown · answered by Albert Manzone

    2 min read5 chapters

    Detailed Narrative

    01

    Leadership Transition and Strategic Focus

    Albert Manzone assumed the role of Interim President and CEO, emphasizing his commitment to Perrigo's mission and re-earning investor confidence. Having served on the Board since 2022, he brings over three decades of consumer business leadership experience. The Board was also strengthened with two new directors, Salman Amin and Omer Gajial, to guide value creation. Manzone highlighted the company's unique position as a leader in U.S. store brand OTC and European branded OTC, serving consumers across various price points.

    02

    Progress on the Three-S Plan

    Perrigo reported continued progress on its 'Three-S' plan: Stabilize, Streamline, and Strengthen. Stabilization efforts have significantly improved service levels, with U.S. levels up 1,600 basis points to 91% and international levels up 1,000 basis points to 95% since 2023. Streamlining included $600 million in divestiture proceeds since 2024, mainly for debt reduction, and an operational enhancement program targeting $80 million to $100 million in savings by 2027. Strategic reviews for Infant Formula and Oral Care are ongoing to optimize, partner, or divest.

    03

    Market Dynamics and Share Gains

    While overall consumption remains below historical averages, market trends improved sequentially through Q2 and into Q3. U.S. OTC volumes in Perrigo's categories turned positive in the four weeks ended July 19. Despite category softness, particularly in seasonal segments like cough, cold, pain, and allergy, Perrigo gained 50 basis points of market share in U.S. store brand OTC (volumes grew 1.5% in categories declining 1.1%) and 50 basis points in Europe (key brands grew 3.3% in categories declining 0.6%).

    04

    Q2 Financial Performance Overview

    Core net sales declined 3.1% year-over-year, and Core organic net sales declined 3.5%, primarily due to category softness and retailer inventory reductions impacting sales by approximately 1.8%. All-in net sales declined 3.2%, with strong 23% growth in Infant Formula partially offsetting the Dermacosmetics divestiture. Core adjusted EPS was $0.46 and all-in adjusted EPS was $0.50, exceeding expectations due to one-time📎 cost benefits, including a $10 million tariff recovery and a $6 million CEO transition benefit.

    05

    Strategic Reviews and Capital Allocation

    Strategic reviews for Infant Formula and Oral Care are progressing, with management emphasizing a disciplined approach focused on enhancing shareholder value. The Infant Formula business has seen improved stability and efficiency through capacity rationalization and innovation. The company remains focused on strengthening its balance sheet and de-leveraging, applying Dermacosmetics proceeds to debt reduction. Capital allocation priorities include growth investments, debt reduction, and shareholder returns, with the dividend assessed quarterly.

    AI-generated summary of the company’s earnings call. Not investment advice.