Perrigo Q2 Earnings Call Highlights
Key Points
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- Second-quarter earnings beat internal expectations, but core net sales fell 3.1% and adjusted EPS declined to $0.46 as soft self-care demand, retailer destocking and delayed seasonal activity weighed on results.
- Perrigo continued to gain market share in the U.S. and Europe, supported by Opill, Compeed and store-brand allergy products, while infant formula sales rose 23% and profitability improved.
- The company maintained its full-year 2026 outlook, expecting stronger second-half performance from innovation and operational savings. Perrigo also used proceeds from its $359 million Dermacosmetics sale to reduce debt and is reviewing strategic options for its infant formula and oral care businesses.
Perrigo (NYSE:PRGO) reported second-quarter 2026 results that exceeded its internal earnings expectations, while sales declined amid soft consumer self-care categories, retailer inventory reductions and a slower start to seasonal demand. The company maintained its full-year outlook, citing improving category trends, market-share gains and expected second-half contributions from innovation, distribution and demand-generation efforts.
Core net sales fell 3.1% year over year, while all-in net sales declined 3.2%. Core adjusted earnings per share were $0.46, down $0.12 from the prior-year period, while all-in adjusted diluted EPS was $0.50, down $0.07. CFO Eduardo Bezerra said earnings exceeded expectations primarily because of lower operating expenses, including accelerated operational-enhancement savings and a one-time $6 million benefit associated with the CEO transition.
Interim President and CEO Albert Manzone said the company remains focused on its “Three-S” plan to stabilize operations, streamline the portfolio and strengthen growth capabilities. Manzone, who recently assumed the interim CEO role, said Perrigo’s board and management are working to rebuild investor confidence through consistent execution.
Sales Pressured by Category Weakness and Destocking
Bezerra said continued softness in category consumption reduced core sales by approximately 1.2%, particularly in cough, cold and certain summer seasonal categories. Retailer inventory reductions, most notably in Europe, reduced sales by another approximately 1.8%.
Seasonal demand was particularly weak in Europe, where delayed allergy and sun seasons weighed on self-care sales. Skin-health performance also reflected a slower seasonal start, lower sales of store-brand minoxidil and a difficult comparison for Mederma related to prior-year inventory restocking.
Despite the sales decline, management pointed to improved category conditions later in the quarter and into the third quarter. Manzone said U.S. OTC volumes in Perrigo’s categories turned positive during the four weeks ended July 19. He said the company expects category comparisons to become easier through the balance of the year, though executives remained cautious about consumer demand and macroeconomic conditions.
Infant formula was a notable offset to the broader sales pressure, with revenue increasing 23% year over year. Bezerra attributed the increase to the timing of contract sales and growth in store-brand formula. He cautioned that the timing-related contract-sales benefit is not expected to translate into a higher full-year outlook.
Market Share Gains Continue
Management emphasized that Perrigo gained share in both the United States and Europe. In the U.S., the categories in which Perrigo competes declined 1.1% in volume, while the company’s combined store-brand OTC volumes across self-care and specialty care increased 1.5%, producing a 50-basis-point market-share gain.
In Europe, category value declined 0.6%, while Perrigo’s key brands grew 3.3%, also resulting in a 50-basis-point share gain. Manzone said the company gained another 60 basis points of U.S. share during the latest four-week period discussed on the call.
The company cited performance from Opill, Compeed and store-brand allergy products as examples of its growth strategy. Opill continued to see rising retail velocity, repeat purchases and consumer movement toward larger pack sizes. Manzone said repeat rates for Opill were above 60%. Compeed benefited from earlier seasonal activation and stronger in-store execution in Europe, while store-brand allergy growth was supported by innovation, distribution gains and demand-generation initiatives.
Manzone said Perrigo is expanding demand-generation programs for store brands beyond allergy products and across its categories. He added that e-commerce share growth is advancing faster than brick-and-mortar growth, with similar channel-shift trends occurring in both the U.S. and Europe.
Margins Decline, but Formula Profitability Improves
Core adjusted gross margin declined 250 basis points to 37%, while all-in adjusted gross margin also fell 250 basis points to 35.6%. The company attributed the declines to lower sales volumes, planned under-absorption from lower prior-year manufacturing volumes and unfavorable mix. Divestitures also affected all-in margins.
Core adjusted operating margin declined 160 basis points to 13%, and all-in adjusted operating margin decreased 60 basis points to 12.2%. Self-care operating income fell $15 million, or 16.2%, while specialty-care operating income decreased $18 million, or roughly 28%, as lower sales, seasonal weakness, retailer destocking and investment in advertising and promotional activity weighed on results.
Infant formula operating income improved by about $16 million year over year. Bezerra said capacity rationalization, efficiency improvements and business-stabilization actions helped results, along with the absence of prior-year production variability that had increased scrap. Perrigo reduced drying capacity at its Vermont facility during the quarter, while continuing to review strategic options for the business.
The company is evaluating whether to optimize, partner or divest its infant formula and oral care businesses. Manzone said the reviews are progressing but did not provide a timeline for an update. He said operational improvements in infant formula provide Perrigo with greater optionality regardless of the eventual outcome.
Debt Reduction and Full-Year Outlook Maintained
Perrigo sold its Dermacosmetics business during the quarter for $359 million and applied most of the proceeds to debt reduction, significantly reducing its revolving-credit-facility balance. Since 2024, the company’s divestitures have generated approximately $600 million in upfront proceeds, mainly used to reduce debt.
At quarter-end, Perrigo had $400 million of cash and cash equivalents and $3.3 billion of total debt. Cash from operating activities totaled $83 million, capital expenditures were $14 million and dividends paid totaled $14 million.
The company reiterated its full-year 2026 outlook for core and all-in net sales, margins and EPS. It expects results to be weighted toward the second half, supported by innovation launches, distribution gains, improving category trends, operational-enhancement savings and lower interest expense following debt repayment.
Perrigo expects planned under-absorption from lower prior-year sales volumes to reduce all-in EPS by approximately $0.60 in 2026. About $0.26 of that impact occurred in the first quarter and $0.18 occurred in the second quarter. The company revised its expected full-year effective tax rate to approximately 18% from approximately 20% and updated its diluted-share estimate to 139.3 million shares.
About Perrigo (NYSE:PRGO)
Perrigo Company plc is a global healthcare supplier specializing in over-the-counter (OTC) and self-care products, as well as generic prescription pharmaceuticals and active pharmaceutical ingredients. The company develops, manufactures and distributes a broad array of consumer health products, including analgesics, vitamins and supplements, digestive health remedies, topical treatments, and infant formulas. Perrigo's focus on private-label solutions has made it a leading partner for retailers and pharmacy chains seeking high-quality, value-oriented alternatives to branded medications and health supplements.
Organized across three principal business segments—Consumer Healthcare, Prescription Pharmaceuticals and Active Pharmaceutical Ingredients—Perrigo's operations span research and development, manufacturing, quality assurance and global distribution.
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