Perrigo’s Earnings Call: Growth Amid Challenges

Perrigo Company ((PRGO)) has held its Q1 earnings call. Read on for the main highlights of the call.

Perrigo Company’s recent earnings call painted a picture of both progress and challenges. The sentiment was largely positive, with notable improvements in key areas such as infant formula sales, cost savings from Project Energize, and international business growth. However, the company is also navigating hurdles like lost distribution in the U.S. Store Brand business, tariff-related cost increases, and a challenging macroeconomic environment. Despite these obstacles, Perrigo is actively taking steps to mitigate risks and seize growth opportunities.

Strong Growth in Infant Formula Sales

Perrigo reported a significant 19% increase in net sales for its infant formula segment in the first quarter of 2025 compared to the same period last year. This growth underscores the company’s successful strategies in expanding its market share and meeting consumer demand in this crucial segment.

Project Energize Cost Savings

The company’s Project Energize initiative continues to yield substantial cost savings, achieving an additional $20 million in annual savings. This brings the program’s total annual run rate to an impressive $159 million, highlighting Perrigo’s commitment to operational efficiency and cost management.

Improvement in Global Service Levels

Perrigo’s efforts to enhance service levels have been fruitful, with global service levels now reaching 94%. This improvement is a testament to the company’s focus on optimizing its supply chain and ensuring high-quality service delivery to its customers worldwide.

Expansion in International Business

The international business segment of Perrigo experienced mid-single-digit growth, with net sales increasing by 5% and organic adjusted operating income rising by 10%. This expansion reflects the company’s strategic focus on growing its presence in international markets.

EPS Growth

Perrigo achieved a remarkable 107% growth in earnings per share (EPS) year-over-year, reaching $0.60 per share in the first quarter. This impressive increase is indicative of the company’s strong financial performance and effective cost management strategies.

Gross Margin Improvement

The company reported a 440 basis point expansion in gross margin year-over-year, bringing it to 41%. This improvement was primarily driven by the recovery in the infant formula business, showcasing Perrigo’s ability to enhance profitability.

Challenges in U.S. Store Brand Business

Despite overall positive performance, Perrigo faced challenges in its U.S. Store Brand business, with organic net sales declining by 0.4%. This was attributed to previously disclosed lost distribution, highlighting areas where the company needs to focus on regaining market share.

Tariff-Related Cost Increases

Perrigo anticipates a gross increase of approximately 1% in the global cost of goods sold due to tariffs in 2025, which could rise to about 5.5% on a full-year basis. This presents a potential headwind for the company as it navigates the complexities of international trade.

Uncertain Macroeconomic Environment

The company is operating in a challenging macroeconomic environment, with low consumer confidence in the U.S. and Europe affecting sales across self-care categories. This uncertainty underscores the need for Perrigo to remain agile and responsive to market conditions.

Slower Store Brand Share Recovery

Short-term pricing actions by domestic brands have temporarily narrowed the price gap between national and store brands, slowing the recovery of store brand market share. Perrigo is working to address this issue and strengthen its competitive position.

Forward-Looking Guidance

In its forward-looking guidance, Perrigo reaffirmed its adjusted EPS range and midterm 2027 targets, despite the macroeconomic uncertainties and tariff impacts. The company widened its 2025 net sales projections to accommodate market fluctuations but maintained a positive outlook based on its strategic initiatives and operational efficiencies.

In summary, Perrigo Company’s earnings call highlighted a blend of strong performance and ongoing challenges. The company demonstrated significant growth in key areas while also addressing hurdles in the U.S. market and global economic conditions. With a focus on strategic initiatives and operational efficiencies, Perrigo remains optimistic about its future prospects.