Perrigo's Strategic Resilience and Margin Expansion: A Blueprint for Long-Term Value Creation in the OTC Sector

In an over-the-counter (OTC) market marked by shifting consumer preferences, regulatory pressures, and supply chain volatility, Perrigo Co. (PRGO) has emerged as a case study in strategic resilience. The company's ability to stabilize earnings, expand margins, and reinforce its brand equity through disciplined execution of its "Three-S" Plan—Stabilize, Streamline, and Strengthen—positions it as a compelling long-term investment. By dissecting Perrigo's operational rigor, portfolio optimization, and brand-building initiatives, we uncover how the company is navigating headwinds while laying the groundwork for sustained value creation.

Operational Discipline: The Engine of Margin Expansion

Perrigo's Project Energize, launched in Q1 2024, has become the cornerstone of its operational efficiency strategy. This global initiative, designed to reset SG&A expenses and enhance organizational agility, has already delivered $159 million in gross annual savings as of Q2 2025, with $27 million reinvested into high-impact areas. While restructuring charges of $118 million have been incurred to date, the company projects $140–170 million in annualized pre-tax savings by 2026, with $40–60 million of these funds earmarked for reinvestment.

The results are evident in Perrigo's financials. Despite a 2.9% decline in adjusted operating income year-over-year in Q2 2025, the company's adjusted operating margin of 12.8% reflects disciplined cost management. The Consumer Self-Care International (CSCI) segment, in particular, demonstrated resilience, with a 23.6% adjusted operating margin—a 260-basis-point increase—driven by supply chain reinvention, reduced advertising spend, and favorable currency effects.

Portfolio Optimization: Sharpening Focus for Strategic Growth

Perrigo's decision to divest its Dermacosmetics business underscores its commitment to portfolio streamlining. The pending sale, expected to close in Q1 2026, will generate proceeds to strengthen the balance sheet and accelerate net leverage goals. While Q2 2025 saw a headwind from divestitures and exited products, the company's operating discipline—bolstered by Project Energize—enabled it to reaffirm its full-year 2025 adjusted EPS guidance of $2.90–$3.10.

This strategic pruning aligns with Perrigo's broader focus on high-margin, core categories. The CSCI segment's Pain & Sleep Aids and Upper Respiratory categories, for instance, have seen robust growth due to improved supply of brands like Solpadeine® and Physiomer®. Similarly, the CSCA segment's recovery in infant formula and smoking cessation products highlights the company's ability to capitalize on market gaps.

Brand Building: Sustaining Market Share in a Competitive Landscape

Perrigo's brand-building initiatives are not merely tactical but foundational to its long-term value proposition. In 2025, the company has seen unit and volume share gains in key categories such as cough/cold, allergy, and women's health, driven by enhanced product availability and targeted marketing. The ellaOne® brand's strong performance in the Women's Health category and the recovery of store brand allergy products in the U.S. exemplify this strategy.

The CEO, Patrick Lockwood-Taylor, has emphasized that Perrigo's diversified portfolio—spanning molecules and price points—enables resilience in both U.S. and EU markets. This approach is further supported by Project Energize, which has freed resources to reinvest in brand capabilities while resetting cost structures.

Investment Implications and Forward-Looking Outlook

Perrigo's strategic pillars—operational efficiency, portfolio optimization, and brand strength—position it to outperform in a fragmented OTC market. With $454 million in cash and cash equivalents as of June 28, 2025, and a clear path to deleveraging post-Dermacosmetics sale, the company is well-equipped to fund innovation and shareholder returns.

For investors, the key metrics to monitor include:
1. Progress on Project Energize (savings vs. charges).
2. Margin trends in the CSCI and CSCA segments.
3. Brand share gains in core categories.

While near-term volatility from divestitures and market conditions may persist, Perrigo's long-term trajectory is underpinned by a disciplined approach to value creation. For those seeking exposure to a resilient OTC player with a clear roadmap for margin expansion and strategic reinvention, Perrigo offers a compelling case.

In conclusion, Perrigo's ability to balance cost discipline with brand innovation and portfolio focus makes it a standout in a sector often plagued by commoditization. As the company executes on its Three-S Plan, it is not just stabilizing earnings—it is building a foundation for enduring shareholder value.