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DATE
Wednesday, May 6, 2026 at 8:30 a.m. ET
CALL PARTICIPANTS
- President and Chief Executive Officer — Patrick Lockwood-Taylor
- Chief Financial Officer — Eduardo Bezerra
- Vice President, Investor Relations — Eric Jacobson
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TAKEAWAYS
- CORE Net Sales -- Declined 8.3%, primarily due to lower category consumption in Self Care and retailer destocking; nearly two-thirds of the decline attributed to these factors.
- All In Net Sales -- Decreased 7.2% from the prior year, with headwinds offset in part by improved Infant Formula and Specialty Care segment gains, particularly in women's health, and modest results from Dermacosmetics.
- U.S. Store Brand OTC Volume Share -- Increased 270 basis points, with six out of seven categories gaining share during the period.
- European Key Brands -- Achieved 20 basis points value share gain in a declining market; ellaOne, Jungle Formula, and Physiomer secured value share gains of 200, 140, and 50 basis points, respectively.
- Compeed Market Share -- Gained 550 basis points to 35% in Italy, and 160 basis points to approach 36% in France, reflecting seasonal brand strength.
- Infant Formula Net Sales -- Increased approximately 2%, driven by higher contract manufacturing, despite prior year comparison impact on branded and store brand formula volumes.
- Operational Enhancement Program Savings -- Delivered over $7 million in cost savings in the quarter; annualized program on track for $60 million to $80 million in savings this year, with an extra $20 million to $40 million targeted in 2027.
- CORE Adjusted EPS -- Reported at $0.40, above internal expectations, with upside from tariff recovery recognition and a lower tax rate.
- All In Adjusted EPS -- Reached $0.43, lower by $0.17 due to sales and prior-year manufacturing headwinds in U.S. OTC and Infant Formula.
- First-Quarter Cash Flow -- Net cash from operating activities was an outflow of $114 million, down $49 million, due to lower earnings and higher working capital.
- Goodwill Impairment Charge -- Recorded a non-cash charge of $331 million related to segment realignment, as expected from prior disclosures.
- Dermacosmetics Divestiture -- Completed post-quarter-end, generating approximately EUR 306 million in cash proceeds to reduce debt.
- Total Debt and Liquidity Position -- Ended the period with $3.6 billion in total debt, and $357 million in cash and equivalents.
- Reaffirmed Full-Year 2026 Guidance -- Management continued to forecast results weighted to the second half, with 65%-70% of CORE adjusted EPS expected in that period, and 30%-35% in the first half.
- Key Growth Drivers for Second Half -- Management highlighted consumer-centric innovation, portfolio expansion, distribution gains, amplified demand generation, and operational enhancement as central to back-half performance.
RISKS
- Persistent category headwinds noted as "softer cough and cold incidence and retailer inventory destocking," accounting for nearly two-thirds of the net sales decline.
- Carryover of prior-year manufacturing volume headwinds cited as an estimated $0.60 all-in EPS headwind for 2026, with $0.26 negative impact already reflected in the first quarter.
- Macroeconomic pressures in Europe, and ongoing retailer inventory destocking explicitly cited as negative impacts on first-quarter consumption and sales levels.
- Management specifically referenced "a very challenging market" and transitory headwinds that "will need to be carefully managed."
SUMMARY
Perrigo (PRGO 4.41%) reported segment realignment and a $331 million non-cash goodwill impairment charge that had no effect on cash flows or debt capacity. Management confirmed the completion of the Dermacosmetics divestiture, providing EUR 306 million in cash proceeds targeted for debt reduction. The company reported meaningful market share gains in both U.S. store brand OTC and key international brands, despite volume and consumption pressures in primary categories. Cash outflows were heightened by lower earnings and planned working capital, with the company ending the quarter at $3.6 billion total debt, and $357 million in cash. Outlook for 2026 remains centered on a recovery in the second half, underpinned by innovation launches, operational efficiency, and expectations of improved category demand.
- The operational enhancement program is set to deliver $60 million to $80 million in savings in 2026, with further cost reductions anticipated in 2027.
- Adjusted CORE EPS of $0.40 outperformed internal forecasts, as tariff recovery and a lower effective tax rate offset adverse sales volume effects.
- New category-led operating model and ongoing portfolio simplification—such as the completed Dermacosmetics divestiture, and continued strategic reviews of Infant Formula and Oral Care—form the strategic backbone of management's long-term growth plan.
- Management indicated that inflation and potential pricing actions are under evaluation, particularly regarding cost pressures linked to Middle East geopolitical developments, estimating a $10 million in-year impact on the cost base.
- E-commerce channels in key brands like Opill and women's health experienced double-digit growth in the first quarter, with e-commerce growing almost 30% in women's health and Opill, and Opill sales up more than 12%.
INDUSTRY GLOSSARY
- CORE Sales: Perrigo's non-GAAP revenue metric that adjusts for currency, divestitures, and acquisitions to reflect organic trends within ongoing operations.
- All In EPS: Non-GAAP diluted earnings per share, reflecting all continuing operations and adjustments as defined by the company.
Full Conference Call Transcript
Eric Jacobson: Good morning, and good afternoon, everyone. Welcome to Perrigo's First Quarter 2026 Earnings Conference Call. A copy of the release we issued this morning and the accompanying presentation for today's discussion are available within the Investors section of the perrigo.com website. Joining today's call are Perrigo's President and CEO, Patrick Lockwood-Taylor; and CFO, Eduardo Bezerra. As a reminder, beginning this quarter, we are reporting segments aligned with our new commercial operating model. We have recast historical results under the new structure for comparability as provided in our 8-K filing, and this change had no impact on our consolidated financials or cash flows. Along with our new reporting segments, we have changed our main profitability measure to adjusted operating income.
During this presentation, participants will make certain forward-looking statements. Please refer to the slides for information regarding these statements, which are subject to important risks and uncertainties. We will reference adjusted financial measures that are non-GAAP in nature. See the appendix to the earnings presentation for additional details and reconciliations of all non-GAAP to GAAP financial measures presented. Finally, Patrick's discussion will address only non-GAAP financial measures. Now to the agenda. We have several topics to cover today. First, Patrick will walk through the progress we are making with our Three-S plan and how first quarter results compare to our expectations. He will then provide the market overview and explain how our growth initiatives are expected to drive improved results.
After which Eduardo will cover first quarter segment results, balance sheet and capital allocation and close with further details of our 2026 outlook. With that, I'll turn it over to Patrick.
Patrick Lockwood-Taylor: Thanks, Eric. Good morning, good afternoon, and thank you for joining today's call. We are making steady progress in building a more focused, disciplined and consistent Perrigo. Challenging market environment impacted first quarter results. However, our Three-S plan to stabilize, streamline and strengthen the company is helping us navigate these conditions and positioning the company for long-term growth. The strategy is working as clearly demonstrated by our market share gains even in what we have highlighted as a transition year. Given these factors, we are reaffirming our 2026 outlook.
Consistent with our prior commentary, results are expected to be weighted to the second half, supported by clear quantifiable factors, including stabilizing category consumption, the lapping of prior year manufacturing volume headwinds, benefits from cost-saving initiatives and delivery of our growth drivers. With those takeaways as a backdrop, I'll walk through how the Three-S plan is driving positive change. Our stabilization efforts have turned share losses in U.S. store brand OTC into a 100 basis point improvement in volume share during the quarter, six of seven categories gaining share. To further dimensionalize our performance, we have gained 270 basis points of U.S. store brand OTC volume share in the first quarter alone.
Key brands in Europe also improved, gaining 20 basis points of value share in a challenging consumption environment. We have also stabilized results in Infant Formula with improved service levels and supply reliability. To streamline our business, we completed the divestiture of the Dermacosmetics business in April, an important milestone in further simplifying our operations and enabling debt reduction. Strategic reviews of our Infant Formula and Oral Care business are ongoing.
Efficiencies are an important part of our streamlined pillar and our operational enhancement program generated more than $7 million of cost savings in the quarter and is on track for approximately $60 million to $80 million in savings for the year, with an additional $20 million to $40 million expected in 2027. To strengthen our business, we implemented a new category-led operating model and enhanced our commercial and category leadership, adding experienced talent with the capabilities and perspectives required for the next phase of Perrigo's evolution. These changes reflect a fundamental shift in how we operate.
Our new structure aligns our decision-making, investment priorities and performance goals, enabling us to better leverage one of our most important competitive advantages, our scale. With more than 250 molecules, our deep retailer partnerships, a robust supply chain and our extensive regulatory capability, Perrigo is well positioned to be a leader in this category. And our new structure focuses our investments on fewer, bigger brands to target faster-growing categories where we have the greatest right to win. These changes are working as demonstrated by our strong market share performance.
However, many of the benefits from these initiatives are not yet fully realized and are being somewhat obscured by the headwinds that we expect to ease in the second half of the year. Among those headwinds are softer cough and cold incidence and retailer inventory destocking. Those impacts, along with a $0.26 EPS headwind related to the carryover of prior year manufacturing volume headwinds weighed on first quarter results. As indicated last quarter, prior year manufacturing volume headwinds are expected to result in an unfavorable All In EPS impact of approximately $0.60 in 2026. Again, we believe those headwinds are largely transitory, resulting in 2026 itself being a transition year.
As conditions evolve, consistent with our Three-S plan, we are focused on driving improvement in the areas within our control, streamlining our cost base while strengthening our top line growth. With that in mind, let's turn to the assumptions underlying our view of 2026 as a transition year, which largely played out as expected in the first quarter. Coming into the year, we anticipated market softness to carry over into the first half, followed by sequential improvement in the second half. In the first quarter, reduced cough and cold incidence and the impact of macroeconomic pressures, particularly in Europe, led to lower-than-expected consumption levels. We estimate soft cough and cold incidence was approximately a 3.5% headwind to CORE sales.
In response to lower consumption, retailers in the U.S. and Europe reduced inventory levels, hampering sales further, resulting in an additional 3 points of CORE sales headwind. However, we, in line with other industry commentary, continue to expect sequential improvement in demand, led by stabilizing seasonal incidence of cough and cold. We also expect retailer inventory levels to positively adjust over time, in line with improved consumption. Our second assumption was our ability to build off our strong market share gains in 2025. We delivered on that expectation with solid market share performance in both store brand and branded products.
Third, we expected to grow net sales through four key revenue building blocks: consumer-centric innovation, targeted geographic expansion, continued distribution gains and amplified demand generation. We've made progress across each of these areas in the first quarter, reaffirming our confidence in second half improvement. Turning to our financial results. The first quarter reflects category softness, partially offset by progress in our execution of the Three-S plan. CORE net sales declined 8.3%, driven primarily by softer category consumption in the Self Care segment due to reduced cough and cold incident and retailer inventory destocking. These impacts accounted for nearly 2/3 of the net sales decline.
These impacts were partially offset by share-driven gains in the Specialty Care segment, particularly in the women's health category. All In net sales declined 7.2 points, reflecting similar pressures, partially offset by improved Infant Formula performance. Adjusted CORE EPS of $0.40 was impacted by prior year manufacturing volume headwinds and lower net sales volumes, primarily within our Self Care segment. Adjusted EPS results outperformed our expectations, benefiting from the net recognition of recovery of a portion of previously paid tariffs, a lower effective tax rate and benefits from our operational enhancement program. All In adjusted EPS for the quarter was $0.43. Turning to the market environment. Conditions remain challenging in the first quarter as expected.
In the U.S., the OTC market declined 4.1 points in value, 2.1 points in volume, largely consistent with fourth quarter levels. European markets turned more negative, declining 3.7% in value and 4.4% in volume. Trends in both the U.S. and Europe were driven primarily by softer consumption demand in the cough, cold and pain categories within the Self Care segment. That weakness appears transitory, driven largely by challenging year-over-year comparisons and lower-than-normal illness levels as well as macroeconomic pressures, particularly in Europe. We expect the category to stabilize throughout the year as comparisons ease and more typical seasonal incidence patterns return in the second half of 2026. To mitigate category pressures, we are focusing on areas within our control.
As I noted earlier, in the U.S., Perrigo grew volume share in six of seven OTC categories, and our store brand portfolio extended its streak to 12 consecutive periods of share improvement. Our priority brands gained value share in Europe, driven by strong performance from ellaOne up 200 basis points, Jungle Formula up 140 basis points and Physiomer up 50 basis points. Other areas of strength include Mederma Cold Sore and Opill, which increased 180 basis points and 40 basis points, respectively. Importantly, as we enter the summer period, momentum is building across our seasonal brands in several key European markets.
Compeed is strengthening into peak season with impressive share gains and sellout trends supported by earlier activation and excellent in-store execution. For example, in Italy, Compeed achieved market share growth of 550 basis points to 35%. While in France, it is growing well ahead of the category, with Compeed up 160 basis points and our share approaching 36%. This was led by focused investment, improved activation, stronger retailer execution. And this strong performance gives us confidence in our ability to drive growth as demand builds through the summer. As category demand normalizes, we expect the increasing earnings power enabled by this brand strength to become increasingly visible.
As we've discussed, we are driving share gains by scaling our CORE capabilities consistently across the portfolio. Nicotine replacement therapy is an excellent illustration of our approach to 360-degree innovation. Our process now develops claims, formulations and regulatory platforms once at the category level, then deploys them holistically across national brands and store brands across formats, geographies and price points. Importantly, this innovation expands the addressable market beyond traditional quitters to include vapers and dual users, allowing us to scale faster and unlock incremental demand without adding complexity. Store brand demand generation is another scalable differentiator for Perrigo.
We are the only large-scale store brand supplier bringing national brand demand generation capabilities to retailers, allowing us to partner with retailers and elevate conversations beyond just the procurement price. Retailers are drawn to this program because it builds awareness for their business, it reinforces the perception of quality and equivalents, it drives household penetration and improved retailer profits. Retailers and more and more retailers are asking us to expand these programs across even more OTC categories. Demand generation is highly impactful for Perrigo. When we combine it with strong retail execution, we improve competitive takeaway and share gains.
And these gains can be meaningful with a 1 point increase in U.S. store brand household penetration, representing incremental sales of more than $100 million of store brand OTC at retail. Targeted geographic expansion allows us to extend our existing successful initiatives into new areas. By selectively expanding priority brands into new markets, we can drive incremental growth with lower risk, achieve faster payback and higher returns. As a reminder, this is a long growth runway for Perrigo as today, we only serve approximately 5% of global households. Together, these capabilities form a repeatable and scalable growth model. 360-degree innovation expands our opportunity set.
Store brand demand generation converts that opportunity into sustained consumption and targeted geographic expansion amplifies the impact, allowing us to scale performance across categories and regions. This is translating into early but significant in-market gains. This really is the outcome of what we have been working towards over the past 3 years, Perrigo sustainable growth model based upon a more focused portfolio that better leverages our core strengths, better leverages our unique asset base, underpinned by a much more effective commercial operating model. In summary, results in the first quarter reflect a very challenging market, but also demonstrates the effectiveness of our strategy. As we move forward, we are focused on building a more focused, disciplined and consistent business.
By executing on our Three-S plan, we expect to mitigate current category challenges and drive long-term growth. We are reaffirming our full year 2026 guidance, which we expect to be weighted to the second half. That phasing is supported by clear quantifiable factors already underway. Our strategy is working. We are seeing market share gains. We've achieved a more focused portfolio. We have a more effective and scalable commercial model. I recognize that quarter 1 revenue and adjusted EPS are being driven by external factors that will need to be carefully managed. I'll now turn it over to Eduardo to walk through the financials in more detail.
Eduardo Bezerra: Thank you, Patrick. Appreciate everyone joining us today. Before turning to the details of our first quarter financial performance, I want to provide an update on the goodwill impairment. As we discussed last quarter, the reallocation of goodwill following our move to the new reporting units was expected to result in an additional noncash impairment in the first quarter of 2026. And as expected, we recorded a noncash goodwill impairment charge of $331 million based on our goodwill impairment test as of January 1, 2026, which utilized the same underlying aggregate fair value of the business as the 2025 year-end goodwill test. This charge does not impact cash flows, liquidity or the ability to execute our strategy.
From this point on, my comments will focus on adjusted non-GAAP results unless otherwise noted. As Eric said, beginning this quarter, we're reporting segments aligned with our new commercial operating model, and our new reporting segments include Self Care, Specialty Care and Infant Formula. Turning to our results, starting with the top line. CORE net sales declined 8.3% year-over-year, driven by softer consumption, primarily in cough and cold and retailer inventory destocking in the Self Care segment. Higher Specialty Care net sales partially offset that weakness driven by performance in our women's health category. On an organic basis, CORE net sales declined 11%.
All In net sales declined 7.2%, reflecting the same factors impacting CORE results in addition to modest contributions from Infant Formula and Dermacosmetics business. Currency translation benefited both CORE and All In net sales in the quarter. Looking at adjusted operating income by segment, Self Care was the largest driver of decline due to lower net sales volumes, the carryover impact of prior year manufacturing volume headwinds and unfavorable mix. These factors were partially offset by the net recognition of recovery of a portion of previously paid tariffs and favorable currency translation.
Specialty Care benefited from the lapping prior year Opill investments as well as favorable foreign currency, which more than offset the carryover impact of prior year manufacturing volume headwinds. All In adjusted operating income was primarily driven by the same factors as CORE, along with an $18 million impact from Infant Formula due to the carryover of prior year manufacturing volume headwind. These impacts were partially offset by operating income growth in all other segments. Turning to margins. Drivers of both CORE and All In margin changes were consistent with the segment results just discussed. CORE adjusted gross margin declined 160 basis points to 39.2%, primarily due to lower sales volumes, manufacturing volume headwinds and mix.
These pressures were partially offset by the net recognition of tariff recovery and favorable foreign exchange. All In adjusted gross margin declined 340 basis points to 37.6% due to the same factors impacting CORE gross margin in addition to the manufacturing volume headwinds in Infant Formula we just mentioned. CORE adjusted operating margin decreased 110 basis points to 12.8%, reflecting gross margin flow-through, partially mitigated by lower advertising promotion spend, benefits from the operational enhancement program we announced in Q4 and favorable currency. All In adjusted operating margin decreased 240 basis points to 11.6% due to the same factors as CORE operating margin in addition to the impact from Infant Formula.
First quarter CORE adjusted earnings per share was $0.40, coming in above our expectations primarily to the net recognition of recovery of a portion of previously paid tariffs and a lower effective tax rate. All In adjusted diluted earnings per share declined $0.17 to $0.43 due to the impact of lower sales volumes and the carryover impact of prior year manufacturing volumes in U.S. OTC and Infant Formula. Turning to cash flow. First quarter 2026 cash from operating activities decreased $49 million to an outflow of $114 million due to lower earnings and higher working capital in line with our previous expectations. As a reminder, the first quarter is typically our highest cash usage period amongst the year.
Capital expenditures totaled $14 million, and we returned $40 million to shareholders through dividends. Turning to the balance sheet. Cash and cash equivalents were $357 million and total debt was $3.6 billion. During the quarter, we amended our $1 billion revolving credit facility, extending the maturity to 2031. Borrowings under the revolver were used to repay our $421 million Term Loan A, extending our maturity profile with no significant maturities until 2029. We expect to continue to actively manage and optimize our maturity debt profile going forward. After quarter end, we completed the sale of our Dermacosmetics business for upfront cash proceeds of approximately EUR 306 million, which we expect to use to support debt reduction.
We remain focused on our disciplined capital allocation, balancing growth investments, deleveraging and shareholder returns. Looking ahead, although category dynamics were softer than expected in the first quarter, our guidance incorporates a wide range of outcomes and gives us comfort in reaffirming our 2026 outlook. We're closely monitoring retailer inventory changes, particularly the destocking activity observed in the first quarter, which we believe is largely related to the current consumption environment. As consumption levels improve, we expect inventory trends to stabilize. We're also actively managing the inflationary pressures related to the geopolitical developments in the Middle East and their impact on consumers and our cost base.
To mitigate the estimated incremental in-year impact of $10 million on our cost base, we have implemented sourcing and cost management initiatives, and we will also evaluate pricing actions. As Patrick noted, we continue to expect results to be weighted to the second half of the year with approximately 30% to 35% of CORE adjusted earnings per share in the first half and 65% to 70% in the second half of 2026. This phasing is supported by clear quantifiable drivers, the majority of which are concentrated in the back half. The single largest sales growth contributor in 2026 is expected to be consumer-centric innovation.
Approximately 60% of the benefit from innovation is expected in the second half, including the expansion of our Compeed portfolio and the introduction of new Infant Formula offerings. Several of our other 2026 drivers, including distribution gains amplified by demand generation activity with top retailers, targeted geographic expansion and benefits from our operational enhancement program are all expected to be back half weighted. In addition, we anticipate lower interest expense in the second half as we apply the Dermacosmetics proceeds towards debt reduction.
In conjunction with those drivers, two of the most meaningful first half headwinds, the carryover impact of prior year manufacturing volume headwinds and a softer cough and cold season are transitory and expected to lap in the second half. As indicated last quarter, prior year manufacturing volume headwinds are expected to result in an unfavorable all-in earnings per share impact of approximately $0.60 EPS in 2026. We experienced roughly $0.26 of that impact in the first quarter. In summary, our outlook is based on clear drivers supporting our second half expectations, many of which are already underway while acknowledging the dynamic macro environment.
As Patrick outlined, the Three-S plan is driving tangible improvements, and we're confident that we are positioning Perrigo to generate sustained growth of shareholder value over time. With that, I will turn the call back to Eric.
Eric Jacobson: Thank you, operator. We're now ready for questions.
Operator: [Operator Instructions] And I see our first question is from Chris Schott with JPMorgan.
Ethan Brown: This is Ethan on for Chris Schott. Just to start off, and you touched on this during the call, but as we think about the operating margin recovery for the CORE kind of non-Infant Formula business in the back half of this year and into 2027, can you help level set how much of this is driven by working through higher cost inventory in the near term versus how much will require OTC volumes to rebound and normalize? And then my second question is just any updates you can offer on the Infant Formula strategic review and kind of latest thoughts on the timing more broadly?
Eduardo Bezerra: This is Eduardo here. Thank you for your question. So as we highlighted, our operating margin in the first quarter, then as we provided our guidance in the first half of the year would be significantly impacted by the carryover volume variance that's impacting this first half. But also in the second half, we expect to see significant uptake on the market, right, in terms of the recovery of consumption that we're watching very closely, given some of the dynamics going on. And so we expect margin improvement because of the different activities we have.
So innovation, continued distribution gains that we have there, also amplified demand generation as well as the opportunistic geographic expansion, and also the ramp-up of the operational enhancement program that will benefit our OpEx and operating margin. So overall, as we look into how we're going to see between the first half and the second half, we're going to see a very meaningful improvement on operating margin expansion because of these different factors. To your second question on the Infant Formula, right? So just giving a little bit of perspective, right?
So the business, as we saw today, we had a very -- relatively good performance in the quarter with net sales growing about 2%, driven by higher contract manufacturing and also the store brand and branded formula were a little bit impacted by prior year comparisons, right? So from a market standpoint, we're seeing consumption to be in store brands is slightly improving versus what we had before. So the first thing to your specific question is we're keeping track of the business. And remember, we anticipated that margins would be significantly impacted by the carryover of manufacturing variances. From the overall strategic review that we're carrying and that we started, so the review continues.
We're working with our advisers to assess all available options that we talked before between optimizing our network. And to that purpose, we've recently announced a rationalization of our capacity in one of our facilities that will help streamline the business and reduce our costs. But also, we're looking to the other options in terms of partnership and divestments. There's nothing more to share at this stage, and we continue with that, and we expect to provide further updates as we progress through the year.
Operator: We have our next question from Susan Anderson with Canaccord Genuity.
Susan Anderson: It's nice to see the volume share gains in the store brand in the U.S. I guess maybe if you could give some color on what's driving that share gain? What are you doing differently with retailers than you were doing before? And then also, I think maybe you said it was across most categories, but if you could talk about which categories you're seeing those gains across the portfolio?
Patrick Lockwood-Taylor: Susan, this is Patrick. What's driving those share gains? So we're winning more contracts. So as you know, in 2025, I think it was about $100 million of net contract wins. Some of those are rolling out now. So we're taking a greater share of store brand contract volume. That's number one. Number two is not only do we want a greater share, we want to grow store brand share of the overall category. This basically is where we start to drive equivalents and the value proposition with end consumers, frankly, using brand-building marketing capability that we apply to our national brands. That grows consumer awareness and it grows household penetration of store brand. There's two critical things.
You want a greater share of store brand and you want store brand to have greater share of the marketplace. That provides a double win for us. So that's really what's growing. In terms of -- I think I understood your question of which categories are growing. We compete in seven OTC categories. And I think in the presentation deck, we actually outlined which are growing. And I think -- so we're growing share in all of them with the exception of skin where there was some temporary supply disruption, but it's a very small business for us. The rest, which are the major categories, we're growing our share of store brands.
So allergy is up 180 basis points, pain 110 basis points, digestive health is up 30 basis points, and probably the standout performance is in nicotine replacement therapy. And I heard this referred to by a competitor, where we're actually seeing a 540-point volume share growth this calendar year-to-date. So it's broad-based and it's substantial.
Susan Anderson: Okay. Great. That sounds good. And then maybe if you could talk about how you're planning for cold/cough in the back half of the year. I guess, should we expect that to finally return to growth, particularly as we kind of lap some easier compares from last year calendar year? Or are you kind of thinking about it being more flattish? And then I guess final question, just are you thinking about any pricing for the back half of the year, particularly as we're seeing maybe some more inflationary pressures now?
Patrick Lockwood-Taylor: Thank you. On cough/cold, I've been trying to predict cough/cold season for a quarter of a century, and I get it wrong as many times as I get it right. This was an abnormally weak cough/cold season, both in the U.S. and many countries throughout Europe and therefore, in totality. The rational forecast is always to take an average season. If we take an average season for '26, '27, that's going to be materially stronger than the season we've just been through. I think that's an entirely logical outlook and forecast. And the second part of your question was?
Susan Anderson: Just on pricing, I guess, yes.
Patrick Lockwood-Taylor: Pricing. We are -- so firstly, the inflationary pressures that we've seen from the Middle East have been very moderate for us, and we will just manage those through sort of normal operations. But we are starting to look at pricing depending on what happens with other commodity prices, et cetera. So yes, I would say we're in active consideration of that, both in the international branded business and our store branded business across both regions, yes.
Eduardo Bezerra: I think the important thing as well, just to add to that point, Susan, is in times of inflation, et cetera, what we're going to be watching closely is the potential for pickup on store brands, consumption, right? So it's something that has been erratic over the past years, right, mainly because of the still strong, let's say, household wallet. Only the low-income consumers have been suffering the most. And usually, they are the ones that tend to have a direct correlation with store brand. But if that starts to impact further, the trade down could accelerate. And that's an opportunity that takes place, we're ready to take advantage of that.
Operator: And we have our next question from Keith Devas with Jefferies.
Keith Devas: Maybe just zooming out a little bit and just returning back to the macro picture as it pertains to consumer health. I know you called out some expectations for the second half to be better. Just hoping you can add more context on exactly what's driving that. I think we're seeing across branded and store brand consumption be a little softer than anticipated for longer than we would have thought. And so kind of just want to double-click on what's embedded in your expectations for the second half to be better? And is it maybe better visibility into the contract wins or the destocking easing. But just kind of unpacking that a little bit, I think, would be helpful.
Eduardo Bezerra: Yes. Thanks, Keith. So remember, as we highlighted during our guidance, right, so incorporate a wide range of outcomes there. So as we look into that piece, so there are four key areas that we are driving a lot of consumption opportunities. So from the innovation side, right? So we mentioned a little bit about Compeed portfolio as well as on the Infant Formula side, bringing new offerings, including one focused a lot on the key competitor in the market right now with an organic formulation. Continued distribution gains. So we continue to focus a lot on that in the marketplace with further competitive take rate, and also the demand generation, right?
So remember, we talked last year some of the examples like what we did on the [ Lifix ] in cough and cold and allergy. So we are seeing more and more retailers wanting to amplify that across their portfolio. And so we believe that's going to be a good opportunity to attract more consumers into our specific categories on store brand as well as the geographical expansion on our priority brands, right? But again, we acknowledge the recent developments, right? So we acknowledge some retailer destocking that took place in the first quarter.
We believe that is mainly related to the soft cough and cold that they wanted to be more pragmatic on managing their cash in that sense and adjusted their inventory levels, but that's something we need to track closely. And the other thing as well is to what extent the Middle East geopolitical situation could further evolve into inflation and how could that impact consumption in the second half. So we still believe there will be a recovery because of the comparison last year was a significant decline, but we're watching that closely. I don't know, Patrick, anything you wanted to add as well?
Patrick Lockwood-Taylor: Yes. I think that's right. I mean, fundamentally, there's not been a big shift in incidence across categories. Household penetration is quite stable from one -- for us, one small segment in an area of pain, but consumers are moving to alternate forms in pain from solid pill to creams, et cetera. So no radical change in incidence or household penetration. Plus, as we explained, the effects last year started to be seen in quarter 2. So we're very soon lapping the beginning of that category contraction. And therefore, just as a function of the math, it just stabilizes itself.
There hasn't been a dramatic extraction of value that we can see that's going to continue into the remainder of the year. So again, the critical point, this is always going to be quite an unpredictable range this year. So we constructed guidance with a broad range of outcomes. You've seen what our sales guidance is for the year. And you heard last quarter how much of our demand generation activity and cost-saving activity is weighted into the second half. That helps insulate our outlook. So at the moment, we're confidently reaffirming our '26 guidance.
Operator: We have our next question from Daniel Biolsi with Hedgeye.
Daniel Biolsi: I was wondering if you could speak to the consumers' purchasing behavior in-store versus online for branded versus store label products in Self Care categories. Do you think there's like a notable difference with your largest customers? Are they doing a good job of highlighting store label alternatives in their searches? Because like when I look at the largest retailers, there's quite a big difference between them when I search for Advil versus ibuprofen, for example.
Patrick Lockwood-Taylor: Good question. Some of our higher shares in store brand do tend to be on e-commerce interestingly. I think collectively, we can do a better job on store brand representation on e-commerce with some of our big traditional retailers in terms of landing pages, as you've just said, but also on some of the advertising. As you know, they buy equivalent and they can be a much better value at a time when more and more consumers are seeking value. I think that execution can be stronger. But -- so yes, I think the traditional e-commerce players playing -- doing it better, enjoy higher shares, actually seeing more and more competitive takeaway within that channel as well.
Eduardo Bezerra: Yes. And Daniel, just to give you an important example like in women's health and Opill, right, in Q1, e-commerce grew like almost 30%. So that's an area where it's going very, very well. So we're seeing a very good uptake, while the sales on Opill were double-digit growth of plus 12%. So you see how e-commerce is taking a very important piece of that growth.
Daniel Biolsi: And then can you share what the Board's thoughts are on the dividend currently?
Eduardo Bezerra: Sorry, could you repeat that?
Patrick Lockwood-Taylor: The Board's dividend.
Eduardo Bezerra: Yes. So as we talked in the last quarter, we continue with our capital allocation plans, right, continue to invest into our base business as well as focusing a lot on debt reduction as well in keeping our shareholders' return, right? So we're going to keep that same focus going forward. And the Board will continue to assess that on a quarterly basis, what's our position to make sure we optimize our capital allocation and that they decided to keep that, and we're going to continue to have those discussions for the remaining of the year.
Operator: There are no further questions at this time. I will now turn the call over to Patrick Lockwood-Taylor for closing remarks.
Patrick Lockwood-Taylor: Thank you very much. And again, thank you, everyone, for joining us. So to close, I want to put this quarter into clear perspective. The work we've done over the past several years is driving meaningful change at Perrigo. We are a more focused, disciplined and consistent business, and that stronger foundation is enabling us to manage through a challenging environment more effectively than we could have done in the past. We are delivering on our promises. We completed the Dermacosmetics divestiture and applying those proceeds towards debt reduction. We are executing our cost-saving program in line with to slightly ahead of the expectation. We are simplifying our portfolio. We're strengthening our operations, including continued progress in Infant Formula.
At the same time, we are delivering material share gains, reinforcing that our commercial strategy is working. But this was not a perfect quarter. Softer cough and cold demand, inventory destocking and European consumption pressures weighed on results. But importantly, our improved operating capabilities enabled us to mitigate those pressures and capitalize on opportunities where they emerge as demonstrated by the fact that both EPS and our share gains were ahead of our expectation. As we have moved into the second quarter, we're also encouraged by the continued momentum in market share and in-market execution that we are seeing across the portfolio.
That progress gives us growing confidence as we move through the year and reinforces our conviction in our 2026 outlook and long-term trajectory. We remain focused on disciplined execution, controlling what we can and building enduring value over time. Thank you very much for your continued interest and support.
Operator: Thank you, ladies and gentlemen. This concludes today's conference. We thank you for your participation. You may now disconnect.
