Prestige Consumer Healthcare Targets $1.1B-$1.115B FY26 Revenue with Pillar5 and Clear Eyes Growth

Overview of Prestige Consumer Healthcare's Q1 2026 Performance

During the first quarter of fiscal year 2026, Prestige Consumer Healthcare Inc. (PBH) reported sales of approximately $250 million, falling short of the projected range of $258 million to $260 million. The primary reason for this shortfall was a longer-than-expected production shutdown in the eye care segment, which significantly impacted Clear Eyes, one of the company’s key brands. CEO Ronald M. Lombardi acknowledged the challenges and outlined steps being taken to address them, including the strategic acquisition of Pillar5, a major supplier for Clear Eyes.

Lombardi emphasized that while the eye care segment faced headwinds, other areas of the business showed resilience. The international segment experienced notable growth, with recovery seen in brands such as Dramamine, Fleet, and Summer's Eve. Additionally, the company achieved a quarterly record for free cash flow, reaching $78 million.

The acquisition of Pillar5 is intended to secure and expand long-term supply capabilities for the eye care division. According to Lombardi, this move will enable the company to accelerate capacity expansion, including the launch of a new high-speed production line expected to start operations in the third quarter. Future capacity additions are also planned to support growing demand in the eye care market.

Financial Highlights and Outlook

CFO Christine Sacco provided additional insights into the financial performance of the quarter. She noted that Q1 revenue totaled $249.5 million, representing a 6.6% decline compared to the same period in the previous year. Excluding the effects of foreign currency, the decrease was slightly lower at 6.4%. EBITDA remained relatively flat, and diluted earnings per share (EPS) increased by approximately 6% due to improved gross margins, timing of marketing expenses, and reduced interest costs.

Sacco also mentioned that the company repurchased around 400,000 shares for $35 million during the quarter and plans to continue evaluating further share repurchase opportunities throughout fiscal 2026. She described the Pillar5 acquisition as "approximately neutral to EPS on a normalized basis."

Looking ahead, management has revised its full-year revenue guidance for fiscal 2026 to a range of $1.1 billion to $1.115 billion, reflecting an expected organic revenue decline of 1.5% to 3% compared to the previous year. Lombardi attributed this revision primarily to anticipated supply constraints in the eye care segment during the first half of the year, along with challenges in the retail environment.

For the second quarter, revenue is expected to be between $256 million and $259 million, with adjusted EPS for the full year projected at $4.50 to $4.58. Free cash flow guidance remains at $245 million or more. Sacco also highlighted that the company still expects a gross margin of 56.5% for the year, with a Q2 gross margin of 55.5%.

Key Financial Metrics and Operational Updates

Q1 revenue came in at $249.5 million, a 6.6% decrease from the prior year. The international segment saw a 7.1% increase in revenue compared to the previous year, while North America revenues declined by 8.4% excluding foreign exchange impacts. Gross margin expanded to 56.2%, up 150 basis points. Free cash flow reached $78 million, and net debt at June 30 was approximately $900 million, with a leverage ratio of 2.4x.

Interest expense for the quarter was about $10 million, and the effective tax rate was approximately 23.2%. Advertising and marketing expenses totaled $35 million, or 14% of sales, while general and administrative expenses were 11.4% of sales.

Analyst Questions and Management Responses

During the earnings call, analysts raised several concerns regarding the company's performance. Rupesh Dhinoj Parikh of Oppenheimer & Co. asked about retail order volatility and inventory destocking. Sacco responded that there had been increased order volatility from retailers in July, with some orders showing significant week-to-week swings that were not aligned with consistent consumption levels. She indicated that the company expects to return to more normalized retail order trends in the second half of the year.

Parikh also inquired about the normalization of Clear Eyes supply and potential market share recovery. Lombardi stated that the company anticipates a gradual recovery of market share as shipments stabilize. Susan Kay Anderson of Canaccord Genuity asked about the impact of bringing eye care manufacturing in-house. Sacco clarified that the company does not expect any meaningful changes to gross margin or other financial metrics.

Glenn West of William Blair sought clarity on the timing of supply recovery. Sacco noted that the third and fourth quarters are expected to see significant improvements compared to the first half. Anthony Chester Lebiedzinski of Sidoti asked about the impact of the Pillar5 acquisition on fiscal 2027. Sacco described the acquisition as largely neutral to the profit and loss statement, emphasizing that it should be viewed differently from a brand acquisition.

Sentiment and Strategic Adjustments

Analysts expressed concerns over retail order volatility, supply chain recovery for Clear Eyes, and the sustainability of international growth. While the tone was slightly negative regarding near-term sales headwinds and margin stability, management remained confident in the company’s fundamentals.

Lombardi acknowledged the disappointing start to the year but reaffirmed confidence in the business. He stated that the actions outlined during the call would help improve Clear Eyes supply. Sacco emphasized a steady margin outlook and disciplined capital allocation.

Compared to the previous quarter, the management tone shifted from positive and growth-focused to cautious optimism, particularly regarding eye care supply challenges and updated guidance. Analysts' questions became more focused on risk mitigation, supply normalization, and capital allocation, rather than innovation and channel growth.

Risks and Mitigation Strategies

Eye care supply constraints remain the central challenge, with production disruptions leading to missed sales and market share declines for Clear Eyes. Retail order volatility and expectations of continued impact on Q2 were also noted. To mitigate these risks, management has implemented strategies such as the Pillar5 acquisition, onboarding additional suppliers, and investing in supply chain capacity.

Tariff costs have been revised down to $5 million, with management expecting to offset this through cost-saving measures and pricing actions.

Final Thoughts

Prestige Consumer Healthcare faced a challenging start to fiscal 2026, driven by supply chain disruptions in the eye care segment and softer retail order patterns. This prompted a downward revision to revenue and EPS guidance. However, the company has taken decisive actions, including the Pillar5 acquisition and new supply partnerships, to restore Clear Eyes supply and position the business for recovery in the second half and beyond.

Despite near-term headwinds, the company maintains steady gross margin and free cash flow guidance, underscoring continued confidence in long-term fundamentals and disciplined capital allocation.