Perrigo's Q2 2025: Navigating Contradictions in Infant Formula Market Dynamics and Gross Margin Expectations

Infant formula market dynamics and share growth, consumer trading down to private label, infant formula ramp and market share ambitions, and gross margin expectations and impact of infant formula are the key contradictions discussed in Perrigo Company plc's latest 2025Q2 earnings call.



Infant Formula Challenges and Recovery:
- Perrigo's infant formula business saw a 9% year-over-year increase in net sales in Q2, driven primarily by store brand and contract business, which were collectively up over 30%.
- The growth was partially offset by a significant decline in the Good Start brand due to lost distribution. The company is working to ramp up demand generation activities and expects a step change in the second half of the year.

OTC Store Brand Growth and Market Share Gains:
- Perrigo gained market share in U.S. store brand OTC, with new business awards outpacing lost distribution for the first time since 2024.
- The company is focusing on consumer engagement and retailer partnerships to drive volume growth and unit share gains, with a notable example being a 19% year-to-date growth in allergy sales at a top customer.

Financial Performance and Guidance Adjustments:
- Perrigo's organic net sales growth was flat in Q2 compared to the prior year, with a year-to-date flat growth excluding prior year Opill stocking benefits.
- Despite slower-than-expected infant formula recovery and soft consumption trends, the company reaffirmed its full-year EPS guidance, driven by confidence in operational improvements and strategic planning.

Restructuring and Divestiture Impact:
- The company's supply chain reinvention program is on track to deliver between $150 million to $200 million in benefits by the end of 2025.
- The divestiture of the Dermacosmetics business, expected to close in Q1 2026, sharpens strategic focus and is anticipated to deliver up to $200 million in incremental net sales in 2027.