PepsiCo revenue tops forecasts as U.S. snack rebound stalls
PepsiCo beat quarterly revenue expectations, but North American snack volumes flattened after fuel costs pressured shoppers.
By Hana Yoshida · Markets Reporter
2 min read
PepsiCo reported quarterly revenue above Wall Street’s expectations, helped by growth outside North America even as demand at home stayed under pressure. The company’s results show how higher household costs can blunt a price-cutting push aimed at winning back shoppers.
The Purchase, New York-based company said Thursday that net revenue rose 6.4% to $24.2 billion in the April-to-June quarter. Analysts surveyed by FactSet had expected $23.9 billion.
PepsiCo said North American consumers remained cautious because of economic worries. In February, the company cut U.S. prices by as much as 15% on major snack brands including Lay’s, Doritos, Cheetos and Tostitos ahead of the Super Bowl, a move it made after years of price increases had frustrated shoppers.
The price reductions helped lift North American snack demand in the first quarter, according to the company. That momentum did not carry through the next three months: PepsiCo said snack volumes in North America were flat in the second quarter, while beverage volumes fell 4%.
The Associated Press reported that higher gasoline prices tied to the war involving Iran weighed on consumers during the quarter. AP also reported that U.S. consumer confidence has improved somewhat as gas prices eased, though Americans’ view of the economy remains mostly negative.
Fuel costs have become a renewed concern. AP reported that hostilities involving Iran have escalated again, pushing gasoline prices higher over the past two days.
Overseas sales help offset U.S. softness
PepsiCo said sales were stronger outside North America. Across the company, snack volumes increased 3% and beverage volumes rose 2%.
The company pointed to World Cup-themed products as one contributor to demand. PepsiCo said limited-edition Lay’s flavors, including Portuguese Chorizo and Onion, helped sales.
PepsiCo said it plans to keep investing in ways to make its products more affordable. The company also said it is responding to consumer interest in healthier options; in March, it introduced Gatorade Lower Sugar, which it said contains no artificial flavors or colors.
Net income more than doubled in the quarter to $2.98 billion, PepsiCo said. Excluding one-time items, the company earned $2.18 per share, just below the $2.19 per share analysts polled by FactSet had projected.
PepsiCo shares slipped less than 1% in premarket trading Thursday.
This story draws on original reporting from Fortune.