Prestige Consumer Healthcare Earnings: Soft Start to the Year From Supply Issues and Weak Trend

Narrow-moat Prestige Consumer Healthcare reported tepid first quarter earnings, starting fiscal 2025 on soft footing. Total sales of $267 million were down 4.4% year over year as the North America business sees another quarter of top-line decline. The shorter cough and cold season proved a challenge, but this was echoed among Prestige’s peers during the quarter, so we see this as a market-wide and not brand-specific issue. Clear Eyes’ supplier capacity issues continue to be a drag on the firm, but the output level continues to ramp up and management expects disruptions to be largely resolved by the end of next quarter. That being said, the eye and ear category was actually the strongest performer within North America, with sales up 9.7% due to other brands in the category fully offsetting Clear Eyes challenges. Despite today’s numbers, management reiterated full-year sales guidance of $1.125 billion-$1.140 billion, equating to flat to 1.5% sales growth, and we think this is achievable from improving capacity conditions, easier comparisons starting third quarter, and certain volume wins. We maintain our fair value estimate of $68 per share.