Perrigo(US:PRGO)2021-05-11 17:05Financial Data and Key Metrics Changes - Perrigo reported net sales for continuing operations in Q1 2021 of $1.01 billion, down 6.8% year-over-year, with organic net sales down 10.9% [15][34] - Adjusted diluted EPS was $0.50, a decline of $0.17 compared to the previous year, primarily due to pandemic-related pantry loading and weak cough/cold sales [16][31] - Consolidated gross margin for Q1 was 38.8%, a 40 basis point increase from the prior year, driven by favorable pricing and currency impacts [36] Business Line Data and Key Metrics Changes - Consumer Self-Care Americas (CSCA) reported net sales of $641 million, a decrease of $60 million from the prior year, impacted by pantry loading and weak cough/cold season [37] - Consumer Self-Care International (CSCI) reported net sales of $370 million, down $13 million year-over-year, affected by pantry loading and weak cough/cold season [39] - Both segments experienced negative impacts from the previous year's pantry load and the current year's weak cough/cold season, but the rest of the portfolio showed growth [19] Market Data and Key Metrics Changes - The incidence of cough/cold in the U.S. and EU was nearly 40% below the 10-year seasonal average, attributed to COVID-19 related restrictions [21] - The company expects a normalization of cough/cold incidents in the upcoming season, which could lead to significant growth in related categories [21][22] Company Strategy and Development Direction - Perrigo is transitioning to a pure play consumer self-care company, with a focus on consumer products and a growth profile comparable to consumer packaged goods (CPG) peers [14][27] - The company has completed major elements of its transformation plan ahead of schedule, including divesting non-core businesses and enhancing its product pipeline [9][10] - Perrigo aims to utilize over $2 billion in cash for disciplined M&A to drive growth [14][27] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing a strong second half of 2021 driven by expected recovery in cough/cold sales and new product launches [25][28] - The company is in discussions regarding a potential settlement of a significant tax assessment, which could positively impact shareholder value [12][13] Other Important Information - The company has made significant investments in e-commerce and digital capabilities, resulting in a 52% growth in e-commerce sales compared to the previous year [60][62] - Perrigo's cash position at the end of the quarter was $481 million, down from $642 million at the end of Q4 2020, primarily due to lower sales and increased inventory [40] Q&A Session Summary Question: Clarification on gross margins for the Americas business - Management indicated that gross margins are expected to progress back towards the 33% range as the year goes on [44][46] Question: Capital deployment priorities post-RX divestitures - Management confirmed that they have significant cash and will focus on disciplined M&A, with a preference for larger deals within their focus categories [48][49] Question: U.S. private label market share growth potential - Management noted that there are significant opportunities in underpenetrated categories such as oral care and nutrition, with potential revenue growth across their portfolio [51][53] Question: Cough/cold season forecast confidence - Management expressed confidence in IQVIA's forecasting accuracy and noted that they are conservatively projecting a rebound in cough/cold sales [58][60] Question: E-commerce trends and growth - E-commerce sales have grown significantly, with management noting that they are a leader in this space and expect continued growth as in-store shopping resumes [60][62]