Perrigo (NYSE:PRGO) executives outlined “meaningful progress” in 2025 while acknowledging a softer consumer health market and continued challenges in infant formula, according to the company’s fourth-quarter and full-year 2025 earnings call held Thursday.
CEO Patrick Lockwood-Taylor said the company is seeing increasing evidence that its “Three-S plan”—to simplify, streamline, and strengthen the business—is gaining traction, pointing to market share gains and over $100 million in new U.S. store-brand distribution and competitive takeaways. CFO Eduardo Bezerra emphasized disciplined cost management, but also flagged sizable non-cash impairment charges in 2025 and the potential for additional impairment in early 2026 related to reporting segment changes.
2025 results: EPS in line with revised guidance; CORE view emphasized
Lockwood-Taylor said the company delivered earnings per share in line with revised guidance despite soft market conditions. For full-year 2025, Perrigo’s all-in operating income grew 2% and EPS increased 7% to $2.75. On a CORE basis, operating income rose 7% and CORE EPS increased 14%.
In the fourth quarter, continued market weakness weighed on results. CORE organic net sales declined 2%, while CORE operating income declined by $4 million, or 2%. CORE EPS was $0.76, down $0.02 year over year.
Bezerra noted that reported 2025 GAAP results included “non-cash accounting impacts,” including a $1.3 billion goodwill impairment charge. He said the impairment does not affect strategy, cash flows, or the ability to execute, but reflects historic acquisition costs and current market realities.
Market trends: share gains amid weak OTC consumption
Lockwood-Taylor said Perrigo gained market share across most U.S. OTC categories where it competes, with share gains accelerating throughout the year and reversing “years of decline.” He also cited positive momentum in Europe, where key brands gained share despite a soft market environment.
Looking ahead, management described a difficult start to 2026 for category consumption. Lockwood-Taylor said U.S. OTC dollar sales were down 5.1% over the last 13 weeks compared with a year ago, versus a 4.3% decline in the fourth quarter and a 1.2% decline for full-year 2025. He added that retailers are adjusting inventories to current demand, which the company expects to be particularly visible in first-quarter results.
In response to questions about why conditions could improve in the second half of 2026, Lockwood-Taylor said much of the category decline appears “transitory” and driven largely by value effects—including trade-down into smaller units, rollbacks from national brands, and fewer price increases than historically seen. He said Perrigo’s confidence in the second half also reflects the expected timing of several internal drivers, including innovation and distribution gains.
Three-S progress and portfolio actions
Management highlighted several milestones tied to its Three-S plan:
- Stabilize: The company said it stabilized its store brand business through share and distribution gains, and improved infant formula service levels above 90% even as demand recovery slowed and competition increased.
- Streamline: Perrigo announced the sale of its dermacosmetics business, which management expects to close in the second quarter of 2026 pending final antitrust clearance. The company is also “continuing to assess” the role of infant formula and oral care.
- Strengthen: Lockwood-Taylor said key brands gained share and the innovation pipeline “tripled in value versus the prior year,” alongside expanded retailer partnerships and a category-focused operating model.
Beginning with first-quarter 2026 results, Perrigo will report under new segments: Self Care, Specialty Care, and infant formula. Oral care, dermacosmetics, and other smaller distribution brands will be reported in “other.” Bezerra said the company expects to recast selected historical financials under the new segments and furnish them on an 8-K in April, and that the reporting change will not affect consolidated historical financial position, results, or cash flows.
2026 outlook: under-absorption headwind, cost actions, and EPS ranges
Lockwood-Taylor described 2026 as a “transition year,” citing market softness and temporary manufacturing under-absorption from lower 2025 volumes in OTC and infant formula. He said under-absorption translates into an unfavorable EPS impact to all-in Perrigo in 2026 of approximately $0.60, with a “significant portion” expected to be recovered into 2027.
For CORE Perrigo, management guided to:
- Organic net sales growth: -3.5% to +0.5% in 2026 versus 2025
- CORE EPS: $2.25 to $2.55
- CORE gross margin: 39% to 40%
- CORE operating margin: 15% to 16%
For the all-in company outlook—assuming the dermacosmetics divestiture closes in the second quarter and including infant formula—management guided to:
- Net sales growth: -5.5% to -1.5%
- Gross margin: 36.5% to 37.5%
- Operating margin: 12.5% to 13.5%
- EPS: $2.00 to $2.30
Bezerra also laid out a new two-year operational enhancement program targeting annualized pre-tax savings of $80 million to $100 million, with about 80% expected in 2026. Costs to achieve the savings are expected to be approximately $80 million to $90 million, and the program includes a global workforce reduction of approximately 7%, along with supply chain and distribution network cost reductions.
On phasing, Bezerra said CORE EPS is expected to skew to the back half of 2026, with roughly 30% to 35% in the first half and 65% to 70% in the second half, reflecting expected net sales timing, savings program evolution, and under-absorption impacts.
Balance sheet, cash, and infant formula strategic review
Bezerra said Perrigo ended 2025 with $532 million in cash and generated fourth-quarter operating cash flow of $175 million, bringing full-year operating cash flow to $239 million. Net leverage ended the year at 4.0x, which he said was slightly above updated projections due to currency translation on gross debt and lower year-end cash balances.
Management reiterated capital allocation priorities of investing in the business, reducing debt and leverage, and returning value through dividends. Bezerra said proceeds from the dermacosmetics sale are expected to be used for debt reduction. Regarding longer-term leverage, he said the company previously expected net leverage below 3x in 2027, but now anticipates achieving that level over the next two to three years, depending on operational enhancement progress, strategic reviews (infant formula and oral care), and consumption recovery.
On infant formula, management said a strategic review remains ongoing with advisors and includes assessing operational optimization, partnerships, and potential divestments, but said it is too early to comment on progress. Lockwood-Taylor added that the company expects low- to mid-single-digit revenue growth in infant formula in 2026, which management expects will help deplete higher inventory levels and restore gross profit toward 2024–2025 levels. Executives also noted that infant formula has consumed cash over several years and that optimizing plant capacity and costs would be key if the business is retained.
In closing remarks, Lockwood-Taylor said the company is focused on controlling what it can in a “tough market environment,” and expressed optimism that 2027 is “shaping up as a meaningful growth year,” citing share gains, expanded retailer partnerships, operational improvements, and portfolio streamlining.
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.
