Labor Unrest and Financial Implications for Perrigo: Assessing Long-Term Risks Amid the Bronx Strike

The ongoing strike at Perrigo’s Bronx, New York, plant—where over 200 workers represented by Teamsters Local 210 have protested management’s refusal to negotiate over overtime protections and retirement contributions—has ignited a critical debate about labor dynamics and their financial implications for the consumer healthcare sector. As Perrigo moves to hire permanent replacement workers, the dispute underscores broader operational and valuation risks for the company, particularly amid its multi-year reorganization strategy. Investors must now weigh how labor negotiations, worker retention, and union dynamics could shape Perrigo’s long-term profitability and stock performance.

Operational Vulnerabilities and Production Risks

The Bronx facility, though described as a “relatively small plant” in Perrigo’s network, plays a pivotal role in producing over-the-counter medications for major retailers like Target, CVS, and Costco [1]. The strike, which began on September 2, 2025, centers on management’s proposal to expand operations to seven days a week, a move the union argues would erode overtime protections and create a “two-tiered” pay structure [2]. By hiring replacement workers, Perrigo aims to maintain product availability, but this strategy risks alienating unionized employees and could exacerbate labor tensions.

Historically, labor disputes in the healthcare sector have disrupted supply chains and strained operational efficiency. For example, a 2023 strike involving 75,000 workers at a major U.S. health plan provider highlighted how staffing shortages and low wages can destabilize operations [6]. At Perrigo, the reliance on replacement workers may introduce quality control risks or reduce productivity, particularly in a facility that handles complex pharmaceutical compounding and inventory management [1]. If the strike persists, the company could face reputational damage and potential delays in fulfilling retail contracts, directly impacting revenue.

Financial Performance and Strategic Reorganization

Perrigo’s second-quarter 2025 financial results reveal a company navigating a challenging landscape. Net sales declined 0.9% year-over-year to $1.06 billion, with adjusted operating income falling 2.9% to $135 million, driven by production variability in its infant formula business and lower overhead absorption in over-the-counter (OTC) and oral care segments [3]. While the company reaffirmed its full-year adjusted EPS target range of $2.90–$3.10, these projections hinge on cost-cutting measures and strategic divestitures, such as the pending sale of its Dermacosmetics business [3].

The Bronx strike adds another layer of complexity to Perrigo’s “Three-S” plan (Stabilize, Streamline, and Strengthen). Labor costs, already a concern in a sector grappling with post-pandemic workforce shortages, could rise if the union files formal charges with the National Labor Relations Board (NLRB) over alleged intimidation tactics [2]. Legal penalties or forced renegotiations might erode margins, particularly as Perrigo’s operating cash flow for the first half of 2025 totaled just $11 million [3].

Stock Valuation and Investor Sentiment

Perrigo’s stock has traded within a 52-week range of $21.03 to $30.93, with a current price of $23.29 as of September 2025 [4]. Despite a forward P/E ratio of 7.80—suggesting undervaluation—investors remain cautious due to the company’s negative return on equity (-3.54%) and a payout ratio of 117%, which raises concerns about dividend sustainability [5]. Analysts have set a price target of $34.60, implying a 36.92% upside, but this optimism is tempered by macroeconomic headwinds, including inflation, tariffs, and softness in key categories like digestive health [3].

The Bronx strike could amplify these risks. Labor unrest at similar companies has historically led to stock volatility; for instance, a 2023 strike at a major health plan provider coincided with a 12% drop in its share price [6]. If Perrigo’s labor dispute escalates or triggers production halts, the stock may face downward pressure, particularly as the company’s cash reserves ($454 million as of June 28, 2025) [3] may not fully offset prolonged operational disruptions.

Strategic Outlook and Sector-Wide Implications

The consumer healthcare sector is increasingly vulnerable to labor-related risks. A 2025 industry report notes that healthcare employment has rebounded post-pandemic but remains strained by shortages in critical roles, with turnover rates rising from 18% to 30% since 2020 [6]. For Perrigo, the Bronx strike highlights the need to balance cost-cutting with employee retention. The company’s decision to hire permanent replacement workers, while aligned with its “streamline” strategy, risks creating a fragmented workforce culture and could deter future talent acquisition.

Moreover, the strike occurs amid broader industry challenges, including potential Medicaid cuts that could reduce healthcare providers’ revenue by $80 billion by 2026 [7]. Perrigo’s reliance on international markets (39.9% of Q2 revenue came from Europe) [3] further exposes it to geopolitical and currency risks, compounding the uncertainties of domestic labor disputes.

Conclusion: A Call for Prudent Risk Assessment

For investors, the Bronx strike serves as a cautionary tale about the intersection of labor dynamics and financial stability. While Perrigo’s strategic initiatives—such as divesting non-core assets and optimizing its cost structure—position it to weather short-term headwinds, the long-term risks of labor unrest cannot be ignored. The company’s ability to resolve the strike without operational fallout will be critical to maintaining investor confidence.

Source:
[1] Perrigo, undergoing strategy shift, moves to replace striking workers at Bronx, NY plant - report, [https://www.fiercepharma.com/pharma/perrigo-undergoing-strategy-shift-moves-replace-striking-workers-bronx-ny-plant-report]
[2] Pharma Bosses Say They're Replacing Striking Workers at, [https://www.thecity.nyc/2025/09/04/perrigo-pharmaceutical-workers-strike-bronx/]
[3] Perrigo Reports Second Quarter 2025 Financial Results, [https://investor.perrigo.com/2025-08-06-Perrigo-Reports-Second-Quarter-2025-Financial-Results-From-Continuing-Operations]
[4] PRGO Stock Price Quote, [https://www.morningstar.com/stocks/xnys/prgo/quote]
[5] Perrigo Company Plc (PRGO) Investor Outlook, [https://www.directorstalkinterviews.com/perrigo-company-plc-prgo-investor-outlook-exploring-a-36-92-potential-upside-amid-healthcare-sector-dynamics/4121195067]
[6] 2025 U.S. Healthcare Real Estate Outlook, [https://www.cbre.com/insights/reports/2025-us-healthcare-real-estate-outlook]
[7] Healthcare Providers’ Path from Crisis to Stability Amidst Potential Medicaid Cuts, [https://www.fticonsulting.com/insights/articles/healthcare-providers-path-crisis-stability-amidst-potential-medicaid-cuts]