OTC Medicine Player Perrigo Outlines Three-Year Cost Saving Plan, Posts Mixed Q4 Earnings

Perrigo Company plc PRGO reported fourth-quarter 2023 net sales of $1.16 billion, up 0.1% Y/Y, slightly below the consensus of $1.18 billion.

Organic net sales decreased by 0.6%, including a -2.4 percentage points impact from purposeful SKU prioritization actions to enhance margins as part of the company’s Supply Chain Reinvention Program and the final quarter of HRA Pharma distributor transitions.

Organic net sales included strategic pricing actions of +3.9 percentage points and volume/mix of -4.2 percentage points.

Consumer Self-Care America net sales of $744 million decreased 2.8%, including -1.4 percentage points from exited product lines, partially offset by +0.9 percentage points related to one month of inorganic growth from the acquisition of Gateway.

Organic net sales decreased 2.4%, including -3.4 percentage points from purposeful SKU prioritization actions.

Consumer Self-Care International Segment sales growth was 5.9%, including +4.1 percentage points from foreign currency translation and -1.1 percentage points from exited products.

The OTC medicines company reported adjusted EPS of $0.86, up 14.7% Y/Y, beating the consensus of $0.83.

Investment and Efficiency Program: The company is set to launch Project Energize, a three-year program aimed at enhancing its long-term business performance through the One Perrigo growth strategy. 

The initiative, expected to begin in Q1 2024, focuses on increasing organizational agility and fortifying the infant formula business. Anticipated to yield annual pre-tax savings ranging from $140 million to $170 million by 2026, the company plans to reinvest $40 million to $60 million to support its blended-branded business model. 

However, restructuring and associated charges, estimated at $140 million to $160 million, including $20 million to $40 million in investments by the end of 2026, are projected to lead to a net reduction of approximately 6% of total Perrigo roles.

Guidance: Perrigo forecasts fiscal year 2024 organic net sales growth of 1.0% to 3.0% compared to the prior year, with reported net sales flat.

The company expects adjusted EPS of $2.50-$2.65 versus consensus of $3.00.

Price Action: PRGO shares are down 15.3% at $27.25 on the last check Tuesday.