Prestige Consumer Healthcare (NYSE:PBH) executives told investors the company delivered “solid” fiscal third-quarter results amid what management described as a highly volatile consumer and retail environment, while continuing to work through supply constraints in its Clear Eyes brand. On the company’s earnings call, leadership also narrowed its full-year fiscal 2026 revenue outlook to approximately $1.1 billion and reaffirmed expectations for free cash flow of at least $245 million.
Quarterly performance shaped by channel shifts and Clear Eyes constraints
For the third quarter of fiscal 2026, Prestige reported revenue of $283.4 million, down 2.4% from $290.3 million a year ago (down 2.2% excluding foreign exchange). CFO and COO Chris Sacco said the decline was driven mainly by lower eye and ear care sales “owing largely to Clear Eyes supply constraints.” CEO Ron Lombardi said sales were “slightly better than forecast,” helped by strength in “growing channels” that offset weakness elsewhere.
Profitability metrics were largely in line with expectations previously communicated. Lombardi said gross margin was 55.5% and adjusted diluted EPS was $1.14, consistent with guidance given on the company’s second-quarter call. Sacco said adjusted diluted EPS declined from $1.22 in the prior-year quarter due to lower sales, the timing of advertising and marketing spending, and higher G&A costs.
Sacco added that quarterly results excluded an “approximate $10 million write-off of a supplier loan.” He explained that the company sometimes extends secured financial support to third-party suppliers to preserve continuity of supply, but in this case the supplier shut down at the end of December after failing to complete a sale process. Prestige wrote off the full balance because it could not estimate recoveries, though Sacco said the loan was secured by the supplier’s assets and some recovery is possible.
Clear Eyes supply expected to improve sequentially through 2026
A major focus of the call was Clear Eyes supply, which management said has been constrained for several quarters but is showing improvement. Lombardi said supply improved sequentially for the second quarter in a row and the company expects additional sequential improvement in the fourth quarter—marking three consecutive quarters of improvement.
Prestige outlined several actions intended to restore supply and support long-term growth in eye care, which management said benefits from demographic tailwinds such as an aging population. Lombardi said the company has:
- Brought on two new third-party suppliers over the last nine months to support near-term production and provide long-term backup.
- Closed its acquisition of Pillar5 in December, which management said enables more direct control over an important element of the supply chain.
- Installed a new high-speed production line that began in December, which Lombardi said should allow Pillar5 to support a majority of eye care production internally over time.
Looking ahead, Lombardi said Prestige expects to “continue sequentially increasing supply through calendar 2026” as efficiency improves and production scales to higher sustainable levels. He also said the company expects one-time investments as it transitions Pillar5 from prior private ownership. As production increases, Prestige plans to expand beyond a current focus on top-selling SKUs (Redness Relief and Max Redness) to a broader assortment, replenish retailer and company safety stocks, and support marketing that could help accelerate demand.
In response to analyst questions, Sacco said the supply ramp “is not a switch that we turn on” and that restocking will take time, likely extending into fiscal 2027. On margins, he said the company has been “relatively stable” and does not expect meaningful gross margin changes tied specifically to the normalization of eye care supply.
Year-to-date results: margin improvement and strong free cash flow
For the first nine months of fiscal 2026, Prestige reported an organic revenue decline of 3.9% versus the prior year. Sacco said North America segment revenue decreased 4.4% excluding FX, while international segment revenue declined 90 basis points. He attributed most of the year-to-date sales decline to the anticipated impact of Clear Eyes supply constraints, with additional pressure from “category softness” in analgesics and cough and cold.
Despite lower sales, the company posted improved profitability. Sacco said total company gross margin for the first nine months was 55.7%, up 50 basis points from the prior year. He also said Prestige anticipates an adjusted gross margin of about 57% in the fourth quarter, and noted the company’s fiscal 2026 tariff outlook remains unchanged at approximately $5 million.
On expenses, advertising and marketing was 14.1% of sales year to date, and Sacco said the company now expects full-year A&M spending at “just under 14% of sales.” Adjusted G&A increased year to date due to timing and a higher bad debt allowance in the third quarter for one specific customer; Prestige expects full-year G&A at “just over 10%” of sales. Adjusted diluted EPS for the first nine months was $3.16 compared with $3.20 in the prior year, with improved gross margin, more favorable interest expense, and lower share count offsetting revenue declines.
Free cash flow remained a highlight. Prestige generated $208.8 million in free cash flow in the first nine months, up 12.9% year over year. Lombardi said free cash flow was $209 million year to date, up 13% versus the prior year. Sacco reaffirmed the company’s full-year expectation of $245 million or more, while noting fourth-quarter free cash flow is expected to be lower year over year due to timing and working capital investments.
Capital allocation: Pillar5 deal and accelerated buybacks
Prestige ended the quarter with net debt of approximately $1 billion, equating to a covenant-defined leverage ratio of 2.6x. Management emphasized flexibility in deploying cash, including investments in brands, M&A, share repurchases, and deleveraging.
During the quarter, Prestige closed the Pillar5 acquisition for “just over $110 million” and repurchased about $46 million in stock. Sacco said the company has repurchased more than $150 million of shares year to date—nearly 5% of shares outstanding—as part of its multi-year authorization, with most repurchases occurring opportunistically in the second and third quarters.
In Q&A, management said investing in brands remains the top priority and M&A remains a key use of capital, but that repurchases have been attractive given the company’s view of its share valuation and its leverage position. Sacco also told analysts that future M&A focus is “going to be focused on brands and long-term brand building value,” rather than vertical or facility acquisitions.
Updated fiscal 2026 outlook and category commentary
For fiscal 2026, Lombardi said Prestige narrowed its sales outlook to approximately $1.1 billion. Management attributed the update to continued momentum in growth channels such as mass and e-commerce, offset by slower order patterns in channels facing shopper headwinds. When asked about the dynamic, Lombardi described it as an ongoing channel shift where Prestige is “picking up the consumption” where shoppers move, while some retailers adjust inventory and ordering patterns.
On earnings, Lombardi said adjusted diluted EPS is expected to be approximately $4.54 for the year, “following” the sales outlook. Sacco provided additional modeling assumptions for the fourth quarter: interest expense of about $11 million, a normalized tax rate of 24%, and a share count of just under 48 million.
Management also discussed category trends during the quarter. Lombardi said GI brands such as Fleet and Dramamine performed well, and skin care was also strong. He said cough and cold shipments were “fairly stable” year over year in the quarter, though incident levels were behind last year, and lice incidents remained down year over year. Lombardi singled out analgesics as an unexpected weak point in the third quarter, citing acetaminophen-related announcements that pressured the category; he said Prestige’s BC and Goody’s brands were down “a couple of points” while other large brands were down as much as 15%, and he expects analgesics to improve in the fourth quarter.
Regarding e-commerce, management said consumption grew more than 10% in the third quarter, attributing growth to shoppers seeking broad selection, pricing transparency, and fulfillment options such as delivery and online pickup. Lombardi said the company is adapting marketing to how consumers shop, and that as more Clear Eyes product becomes available at retail, Prestige expects increased marketing activity for the brand, funded by shifting A&M dollars rather than changing the overall P&L profile.
Prestige said it will provide more details about fiscal 2027 on its May call, including updated expectations for Clear Eyes supply improvements and retail order patterns.
About Prestige Consumer Healthcare (NYSE:PBH)
Prestige Consumer Healthcare, Inc is a leading manufacturer and marketer of branded over-the-counter (OTC) healthcare products. The company focuses on developing, acquiring and commercializing a diverse portfolio of non-prescription remedies designed to address common consumer health needs, including pain relief, cold and cough, digestive health, eye care, skin care and women’s health.
Key brands in Prestige’s portfolio include Clear Eyes (eye health), Carmex (lip care), Chloraseptic (sore throat relief), Dramamine (motion sickness), Rolaids (antacid), Monistat (women’s health), BC Powder (pain relief), Little Remedies (pediatric cold and gas relief) and TheraTears (dry eye therapy).
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