PepsiCo reported mixed second-quarter results on Thursday as weak North American demand offset strong international sales. The beverage and snack giant posted earnings per share of $2.20, slightly below the $2.21 analyst estimate, while revenue of $24.18 billion exceeded expectations of $23.95 billion for the quarter ended June 13. CEO Ramon Laguarta attributed the tempered results to tightening consumer budgets driven by rising inflationary pressures in the US food and beverage categories. The consumer spending pullback coincided with surging gas prices during the quarter, with the national average hitting a four-year high of $4.56 per gallon in late May amid the US war with Iran.
PepsiCo Reports $24.18 Billion Revenue With North American Volume Declines
PepsiCo reported second-quarter net income attributable to the company of $2.98 billion, or $2.18 per share, up from $1.26 billion, or 92 cents per share, 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, while organic revenue increased 2.4% in the quarter. Globally, volume for PepsiCo's food increased 3% and volume for its beverages rose 2%, excluding pricing and foreign exchange fluctuations. However, the North American food business reported flat volume for the quarter, and the North American beverage division saw volume drop 4%. Shares of PepsiCo were down more than 4% in morning trading following the announcement.
North American Beverage Volume Drops 4% as Gas Prices Hit Four-Year High
"I think the consumer is worse than what we had anticipated, and it's driven mainly by gas prices," CEO Ramon Laguarta said on the company's earnings conference call. CFO Steve Schmitt noted that demand was particularly weak at convenience stores, stating, "We need to see some improvement in the in the convenience and gas channel, and hopefully we'll get some tailwinds from gas prices to do that." In February, PepsiCo cut prices on Lay's, Tostitos, Doritos and Cheetos by as much as 15% to try to win back shoppers. The company has also been restaging some of its iconic brands, like Gatorade and Lay's, with fresh branding to boost their sales.
PepsiCo Maintains Full-Year Organic Revenue Growth Guidance of 2% to 4%
CFO Steve Schmitt stated in his prepared remarks, "Our North America business was softer than we anticipated in the second quarter, and we now expect a more gradual improvement in performance trends for the balance of this year." For the full year, PepsiCo reiterated its prior forecast that organic revenue will rise between 2% and 4% and core constant currency earnings per share will increase in a range of 4% to 6%. The company expects that its North American volumes will recover, though that will take time, particularly after this quarter's setback.
FAQ
What were PepsiCo's second-quarter earnings results?
PepsiCo reported second-quarter earnings per share of $2.20, slightly below the analyst estimate of $2.21, while revenue of $24.18 billion exceeded expectations of $23.95 billion for the quarter ended June 13.
Why did PepsiCo's North American beverage volume decline 4% in the second quarter?
CEO Ramon Laguarta attributed the decline to tightening consumer budgets driven by rising inflationary pressures, particularly surging gas prices that hit a four-year high of $4.56 per gallon in late May, leading shoppers to reduce spending at convenience stores.
