PepsiCo reported mixed quarterly results Thursday, hurt by declining demand in North America for its drinks and snacks.
The company also narrowed its revenue outlook for the full year. Pepsi now expects organic revenue growth of approximately 4%, a more cautious outlook than its previous forecast of at least 4%. The company reiterated its guidance for core constant currency earnings growth of at least 8%.
“When we’re saying at least 4[%], we were talking more about around 5% in our minds,” CEO Ramon Laguarta told analysts on the company’s conference call. “Now we’re talking around 4 … it’s related specifically to the consumer in the U.S.”
Shares of the company fell more than 1% in early trading.
Here’s what PepsiCo reported for the quarter ended June 15 compared with what Wall Street was expecting, based on a survey of analysts by LSEG:
- Earnings per share: $2.28 adjusted vs. $2.16 expected
- Revenue: $22.5 billion vs. $22.57 billion expected
Pepsi posted second-quarter net income attributable to the company of $3.08 billion, or $2.23 per share, up from $2.75 billion, or $1.99 per share, a year earlier.
Excluding items, the company earned $2.28 per share.
Net sales rose nearly 1% to $22.5 billion. The company’s organic revenue, which excludes acquisitions, divestitures and currency changes, increased 1.9% for the quarter, fueled by Pepsi’s international business.
But the company struggled in its home market, hurt by product recalls and shrinking demand for its products.
Executives said in prepared remarks that consumers have become more value conscious. After several years of price increases, shoppers are pushing back by buying fewer bags of chips or switching to cheaper private-label options. Previously, Pepsi’s executives had said that low-income consumers have been struggling the most, but Laguarta said on Thursday’s call that shoppers across all income levels are changing their shopping behavior.
Frito-Lay North America’s volume declined 4%, while Pepsi’s North American beverage unit saw volume shrink 3%. The metric strips out pricing and currency changes to reflect demand.
Executives said volume for Pepsi’s North American drinks has improved sequentially, signaling that its attempts to lure back shoppers have begun working. The company is leaning on higher-margin packaging and products along with in-store promotions for its biggest brands to attract thrifty consumers, particularly for Frito-Lay brands, which include Cheetos and Doritos.
“We have green shoots with some of the activities we’ve been executing, and July 4 has been very strong for us,” Laguarta said.
Quaker Foods North America saw its volume fall 17% in the quarter as the division continues to deal with fallout related to recalls for potential salmonella contamination issued in December and January. Pepsi anticipates the segment’s volume will improve in the second half of the year.