PepsiCo’s Profitability Takes a Hit as Sales Disappoint for Second Consecutive Quarter
The multinational food and beverage corporation, PepsiCo, has revised its full-year outlook for organic revenue growth downward after reporting weaker-than-anticipated sales for the second quarter in a row. According to CEO Ramon Laguarta, the company’s performance was hindered by the repercussions of the Quaker Foods North America recalls, softening demand in the US, and business disruptions in certain international markets.
As a result, PepsiCo now expects a low-single-digit increase in organic revenue for 2024, a significant downgrade from its initial forecast of 4% growth. However, the company reaffirmed its prediction of an 8% rise in core constant currency earnings per share.
Following the announcement, PepsiCo’s shares dipped 1% in premarket trading. The company’s third-quarter net income attributable to shareholders stood at $2.93 billion, or $2.13 per share, a decline from $3.09 billion, or $2.24 per share, in the same period last year. Excluding items, PepsiCo earned $2.31 per share. Net sales decreased by 0.6% to $23.32 billion, while organic revenue rose 1.3%.
The demand for PepsiCo’s snacks and beverages has been declining, with volume for both its food and beverage divisions dropping 2%. Quaker Foods North America reported the steepest decline, with a 13% slide in volume, largely due to the recalls and subsequent plant closure. Frito-Lay North America saw a 1.5% decline in volume, despite efforts to offer more value to consumers and improve in-store availability.
PepsiCo’s North American beverage business also experienced a 3% decline in volume, although brands like Gatorade and Pepsi saw revenue growth during the quarter. The Latin America and Africa, Middle East and South Asia markets also reported shrinking volume for both food and drinks.
CEO Ramon Laguarta and CFO Jamie Caulfield expressed optimism that the impact of the recalls is diminishing, but the company still faces challenges in the current market.
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