Perrigo's Painful Pivot: A $1.3B Hit and Major Restructuring

DUBLIN, IE – February 26, 2026 – Perrigo Company plc (NYSE: PRGO) announced a significant strategic overhaul on Thursday, revealing plans to cut 7% of its workforce as part of a new cost-saving initiative. The move came as the consumer health giant reported a staggering $1.3 billion goodwill impairment charge for the fourth quarter of 2025, driving the company to a massive net loss and underscoring the severe challenges it faces, particularly within its infant formula division.

While Perrigo's full-year adjusted earnings per share of $2.75 met its guidance, the headline figures were dominated by the non-cash impairment, which led to a reported Q4 loss of $(10.20) per share. The company is now embarking on a major restructuring, divesting non-essential assets and reorganizing its business segments to focus on a leaner 'CORE' portfolio, all while issuing a cautious financial outlook for 2026 that signals a difficult transition year ahead.

"Fiscal year 2025 was a pivotal year for Perrigo," said President and CEO Patrick Lockwood-Taylor in the company's earnings release. "Despite soft category consumption and a challenging Infant Formula end-market, we gained share across store brands and in key brands as our team executed with discipline."

A Painful Write-Down

The $1.3 billion goodwill impairment charge was the starkest indicator of the headwinds facing Perrigo. The company attributed the massive write-down to a sustained decrease in its share price, along with lower expected cash flows stemming from adverse infant formula market dynamics and shifting expectations for the broader self-care market. This non-cash charge was the primary reason for the full-year reported net loss of $1.40 billion, or $(10.12) per share.

Adding to the uncertainty, Perrigo warned that it may not be finished with impairments. The company is transitioning to new reporting segments in the first quarter of 2026, and the required reallocation of goodwill across these new units could force it to record additional non-cash impairment charges of up to $350 million. While management noted this accounting move does not affect cash flows or strategy, it highlights the ongoing revaluation of the company's assets amid its strategic pivot.

Streamlining for a Leaner Future

In response to what it calls "near-term industry pressures," Perrigo is launching a new two-year operational enhancement program. The initiative aims to deliver between $80 million and $100 million in pre-tax annualized savings by the end of fiscal year 2027. A significant portion of these savings will come from a planned reduction of approximately 7% of its global workforce.

The program will also target cost reductions in the company's supply chain and distribution network, building on its recently completed "Project Energize" and "Supply Chain Reinvention" programs, which have already delivered substantial savings. Perrigo expects to incur cash costs of $80 million to $90 million to achieve the new program's savings.

This streamlining effort extends to the company's portfolio. Perrigo is in the process of divesting its Dermacosmetics business for up to €327 million, a transaction expected to close in the second quarter of 2026. This move, combined with the restructuring, is part of the company's '3-S Plan' to stabilize, streamline, and strengthen its business.

The Infant Formula Dilemma

At the heart of Perrigo's current challenges is its infant formula business. The segment was a primary driver of the goodwill impairment and has been a significant drag on financial performance. Organic net sales for the full year were down 2.4%, with nearly half of that decline attributed to the infant formula business, which has faced lower contract manufacturing volumes and the loss of distribution for the Good Start® brand.

In November 2025, Perrigo initiated a strategic review of the division to assess a full range of alternatives. The business is now considered "less strategic" and has been a drain on cash, according to company executives. Divestment is a clear option on the table as Perrigo seeks to improve its cash flow and return on invested capital.

Complicating matters further, Perrigo is facing multiple securities class action lawsuits alleging the company made misleading statements about underinvestment and manufacturing deficiencies in the infant formula business it acquired from Nestlé. These legal challenges add another layer of risk and uncertainty to the future of the segment.

Charting a New 'CORE' Course

Looking ahead, Perrigo is asking investors to focus on its go-forward business, which it has branded 'CORE' Perrigo. This new focus excludes the infant formula business and other previously announced divestitures. To reflect this, the company will report under three new primary segments starting in Q1 2026: Self Care, Specialty Care, and Infant Formula.

The financial outlook for 2026 is bifurcated. The 'All In' outlook, which includes the underperforming infant formula business, projects a net sales decline of 1.5% to 5.5% and an adjusted EPS of $2.00 to $2.30. This forecast fell short of market expectations and triggered a drop in the company's stock price.

However, the 'CORE' Perrigo outlook presents a more stable picture, with projected adjusted EPS of $2.25 to $2.55, nearly flat compared to the 2025 CORE result of $2.52. Management attributed the weak overall outlook to continued soft consumer demand in the OTC market and a significant, temporary headwind from plant under-absorption due to lower 2025 sales volumes.

"Our 2026 outlook reflects near-term headwinds, balanced by favorable mix in our base business, disciplined execution of our new operational enhancement program and targeted cost actions to align our structure with current market realities," Lockwood-Taylor concluded in his statement. "We are confident that our disciplined approach is enabling us to navigate the transition year ahead and positions Perrigo to create long-term value for our shareholders."