PepsiCo Reports Mixed Quarterly Results as U.S. Demand Weakens
PepsiCo Inc. reported its quarterly earnings on Thursday, revealing a mixed performance driven by declining consumer demand in North America for its beverages and snacks.
The beverage and snack giant narrowed its revenue outlook for the full year, now expecting organic revenue growth of approximately 4%, down from its previous forecast of at least 4%. Despite this, PepsiCo reiterated its guidance for core constant currency earnings growth of at least 8%.
CEO Ramon Laguarta addressed analysts during the conference call, attributing the revised outlook to challenges specifically related to the U.S. consumer market. “When we’re saying at least 4[%], we were talking more about around 5% in our minds,” Laguarta explained. “Now we’re talking around 4 … it’s related specifically to the consumer in the U.S.”
PepsiCo’s second-quarter results beat Wall Street’s earnings expectations, reporting adjusted earnings per share of $2.28 compared to an expected $2.16. However, its revenue of $22.5 billion slightly missed analysts’ expectations of $22.57 billion.
The company reported a net income attributable to PepsiCo of $3.08 billion, or $2.23 per share, up from $2.75 billion, or $1.99 per share, in the same quarter last year. Excluding items, the adjusted earnings per share were $2.28.
While PepsiCo’s international business contributed positively to its organic revenue growth, with a 1.9% increase, its North American segments faced challenges. Frito-Lay North America saw a 4% decline in volume, while Pepsi’s North American beverage unit experienced a 3% volume decrease, reflecting softer consumer demand.
The company highlighted that consumers have become more value-conscious, impacting purchasing behavior across income levels. Laguarta noted that efforts to attract shoppers, such as higher-margin products and in-store promotions, showed promise, particularly around the July 4th holiday.
Looking ahead, PepsiCo anticipates improvements in its Quaker Foods North America segment, which saw a 17% decline in volume due to recalls earlier in the year. Despite these setbacks, executives remain optimistic about the company’s ability to navigate market challenges and capitalize on growth opportunities in the coming quarters.
