PepsiCo profit misses as U.S. shoppers pinch pennies
PepsiCo beat revenue expectations, but weaker North American demand and higher gas prices weighed on its second-quarter profit.
By Frankie Delgado · News Reporter
3 min read
PepsiCo’s international snack and soda machine kept humming in the second quarter, but U.S. shoppers were in a thriftier mood.
The company on Thursday reported adjusted earnings that came in just below Wall Street’s forecast, even as revenue cleared expectations. PepsiCo said softer demand in its North American food and beverage businesses offset stronger buying in overseas markets.
For the quarter ended June 13, PepsiCo reported adjusted earnings of $2.20 per share, compared with the $2.21 analysts expected, according to LSEG. Revenue reached $24.18 billion, ahead of the $23.95 billion expected.
PepsiCo shares fell more than 4% in morning trading after the results.
CEO Ramon Laguarta said in prepared remarks posted by the company that U.S. food and drink categories slowed as consumers faced tighter budgets from inflation pressures.
On the company’s earnings call, Laguarta pointed in particular to fuel costs. “I think the consumer is worse than what we had anticipated, and it’s driven mainly by gas prices,” he said.
During PepsiCo’s second quarter, global oil prices moved sharply amid the U.S. war with Iran. CNBC reported that the national average gasoline price in the U.S. reached a four-year high of $4.56 a gallon in late May, pressuring household spending.
Net income attributable to PepsiCo was $2.98 billion, or $2.18 per share, up from $1.26 billion, or 92 cents per share, in the same period a year earlier. Excluding restructuring and impairment charges and other items, the company earned $2.20 per share.
Net sales rose 6.4% to $24.18 billion. Organic revenue, which strips out acquisitions, divestitures and currency effects, increased 2.4%.
Volume showed the split in PepsiCo’s business. Globally, food volume rose 3% and beverage volume climbed 2%, a measure the company uses to track demand without the effects of pricing and foreign exchange.
In North America, the picture was weaker. PepsiCo’s food business reported flat volume, while its beverage unit posted a 4% volume decline.
CFO Steve Schmitt said demand was especially soft in convenience stores and gas channels. “We need to see some improvement in the convenience and gas channel, and hopefully we’ll get some tailwinds from gas prices to do that,” he said.
PepsiCo’s two North American divisions have been dealing with weaker demand over the past two years after price increases. In February, the company cut prices on Lay’s, Tostitos, Doritos and Cheetos by as much as 15% in an effort to bring shoppers back.
The company has also been refreshing major brands, including Gatorade and Lay’s, with updated branding to support sales.
Schmitt said in prepared remarks that North America performed below the company’s expectations in the second quarter and that improvement is now expected to come more gradually through the rest of the year.
PepsiCo kept its full-year outlook unchanged. The company still expects organic revenue to grow 2% to 4% and core constant-currency earnings per share to rise 4% to 6%.
This story draws on original reporting from CNBC.