Keith Devas

Keith Devas inquired about Perrigo's 2026 outlook, specifically the drivers behind the anticipated second-half improvement following first-half pressures from cough, cold, and overall consumption. He also asked about the long-term requirements for OTC categories in the U.S. and internationally to achieve stability and growth.

Answer

President and CEO Patrick Lockwood-Taylor explained that the majority of the decline is transitory, caused by trade-downs, national brand rollbacks, and a lack of historical price increases, expecting normalization by Q2 and into H2. He cited H2 drivers including continued share growth, store brand OTC growth, 60% of innovation value, 65% of geographic expansion, and over half of competitive takeaways and demand generation landing in the second half. CFO Eduardo Bezerra reiterated unchanged capital allocation priorities, including investing in the business, reducing leverage with dermacosmetics proceeds, and maintaining dividends, viewing 2026 as a transitory year with significant under-absorption impacts expected to recover in 2027.

Keith Devas asked about Perrigo's 2026 outlook, specifically the drivers for expected second-half improvements in OTC categories, and the longer-term strategy for stabilization and growth in both U.S. and international markets. He also inquired about the company's liquidity and leverage position, the impact of new restructuring program cash charges, and the flexibility to reinvest while maintaining dividend commitments.

Answer

Patrick Lockwood-Taylor, President and CEO, explained that second-half improvements are driven by the transitory nature of market declines, expected share growth in Perrigo and store brand OTC, and the timing of innovation, geographic expansion, competitive takeaways, and demand generation initiatives. Eduardo Bezerra, CFO, reiterated unchanged capital allocation priorities, noting that dermacosmetics sale proceeds will reduce debt. He characterized 2026 as a transitory year with significant under-absorption impacts expected to recover in 2027, supported by operational enhancement programs.

Keith Devas asked for more detail on the puts and takes for widening the net sales guidance, given offsetting factors like consumer uncertainty and store brand gains, and also asked where the company is prioritizing SG&A reinvestment.

Answer

CEO Patrick Lockwood-Taylor explained that widening the sales range was a prudent measure to account for the dynamic macro environment and consumer behavior shifts, which are not yet forecast-grade. He identified key SG&A reinvestments in supporting the launch of 60 new infant formula SKUs and continuing to build the Opill brand in its second year to drive consumption.

Keith Devas asked about the impact of lower-than-expected cash outflows from restructuring on investment priorities and sought context on the cough/cold season and dynamics within the U.S. drug and pharmacy channel.

Answer

CFO Eduardo Bezerra stated that savings from restructuring will be reinvested to strengthen the business, particularly in R&D, A&P, and systems as part of the One Perrigo strategy. CEO Patrick Lockwood-Taylor noted that the cough/cold business is about 10-15% of sales and that channel shifts away from pharmacy could be a slight tailwind for Perrigo due to its higher market share in other channels.

Keith Devas asked how Prestige Consumer Healthcare might adapt its innovation or marketing strategies if the current environment of consumer uncertainty persists throughout the year.

Answer

Chairman, President & CEO Ron Lombardi explained that while consumers tend to stick with trusted, needs-based brands in tough economic times, they may change where they shop. He emphasized the company's agility in pivoting marketing investments to support the channels and value propositions consumers are seeking, citing the successful shift in eye care investment from Clear Eyes to other brands in fiscal '25 as a prime example of this capability.

Keith Devas followed up on the Clear Eyes recovery, asking about potential changes to promotional intensity. He also inquired about the strategic evolution and expected contribution from the Hydralyte brand following the acquisition of remaining global rights.

Answer

CEO Ron Lombardi expressed confidence in retaining Clear Eyes' market share without increased promotions due to strong brand loyalty and consumer behavior. Regarding Hydralyte, he described the global expansion as a long-term, gradual build focused on establishing distribution networks and consumer awareness in new territories where the brand currently has no presence.

Keith Devas questioned the price and trade investments in Skin Health and Beauty, asking if Kenvue is now competitive on price, how competitors might respond, and whether the recent consumption uplift is from new or returning customers.

Answer

CEO Thibaut Mongon responded that consumers are increasingly responding to Kenvue's efforts. He highlighted a significant increase in household penetration with Gen Z consumers for Neutrogena as a key positive indicator. He clarified the strategy is not about being the cheapest, but about hitting key psychological price points (e.g., $9.99) to make shopping easier, which is boosting consumption.

Keith Devas asked how persistent category softness might alter Kenvue's reinvestment plans or the expected timeline for returns, given the significant investments planned for 2024 and 2025.

Answer

Executive Thibaut Mongon expressed confidence in the company's ability to fund brand investments through gross margin expansion and the 'Vue Forward' savings program. He emphasized that Kenvue is not yet at competitive investment levels and will continue a thoughtful, ROI-based approach to increase brand penetration and gain share, irrespective of the current category softness.