Pepsi bottles are seen at a grocery store in Las Vegas, USA on November 17, 2023.
Jakub Porzycki | Photo only | Getty Images
PepsiCo reported mixed quarterly results on Friday as North American demand for its food and beverage products weakened.
CEO Ramon Laguarta said U.S. sales largely declined in the fourth quarter.
“Part of it is a price-related slowdown [consumers’] “The disposable income situation is improving,” he told investors on the company’s conference call.
He added that U.S. consumers are also changing their behavior from eating and drinking at home to buying more snacks and Gatorade at convenience stores. But Laguarta expressed optimism about the overall situation for consumers, citing low unemployment and hoping that interest rates would fall by summer and wages would rise faster than inflation.
The company’s shares fell 3% in morning trading.
Here’s what the company reported compared to Wall Street’s expectations, based on a Refinitiv analyst survey:
- Earnings per share: $1.78 adjusted vs. $1.72 expected
- Revenue: $27.85 billion vs. expected $28.4 billion
Pepsi reported fourth-quarter net income of $1.3 billion, or 94 cents per share, up from $518 million, or 37 cents per share, a year earlier.
Excluding items, the food and beverage giant earned $1.78 per share.
Net sales fell less than 1% to $27.85 billion. It is the first quarter since 2020 in which the company’s quarterly revenue declined compared to the same period last year. Exchange rates impacted net sales by 1.5%.
Pepsi’s organic sales, which exclude acquisitions and divestitures, rose 4.5% in the quarter, helped by higher prices. But those same increased prices have hurt demand for the company’s food and beverages. Pepsi’s volume, which excludes price and currency changes, fell again this quarter.
PepsiCo executives said in prepared remarks released ahead of the company’s earnings call that high borrowing costs and lower personal savings have squeezed consumers’ budgets, particularly in North America. They also said consumers are increasingly choosing smaller pack sizes for convenience and low price.
Pepsi’s North American Quaker Foods division reported an 8% decline in volumes. A voluntary recall of its granola bars and cereals weighed on sales in the quarter, along with weaker growth in the overall category.
Frito-Lay North America, which owns brands like Cheetos and Doritos, saw volume decline 2%.
Pepsi’s North American beverage division reported a 6% volume decline in the quarter.
For 2024, Pepsi now expects organic sales to increase by at least 4% and constant currency core earnings per share to increase by at least 8%. The company previously forecast organic sales growth in the high range of 4% to 6% and core earnings per share growth in the high single digits in constant currencies.
“Consumers will likely continue to watch their budgets and remain selective in their purchases,” Pepsi executives said in prepared remarks.
Pepsi forecast a weaker first half as product recalls hit its Quaker Oats business in North America and international conflicts hit sales in some regions. Executives expect full-year international organic sales growth to exceed that of North America.
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2024-02-09 15:12:26
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