PepsiCo’s second-quarter profits jumped but its revenue missed Wall Street’s expectations as cash-strapped customers cut back on snack spending amid persistent inflation.
The junk-food conglomerate — which owns brands including Pepsi, Frito-Lay, Quaker and Gatorade — also lowered its fiscal 2024 expectations, predicting organic revenue will reach 4%. While this number technically meets PepsiCo’s initial 4% goal, company executives said it is at the lower end of the range.
When were saying at least 4[%], we were talking more about around 5% in our minds, CEO Ramon Laguarta told analysts on a call. Now were talking around 4…its related specifically to the consumer in the U.S.
Shares fell 3% Thursday after the company announced the lukewarm projections.
The company raised average product prices by 5% in the second quarter falling in line with first quarter price hikes and overall volumes slipped 3% as the CEO cited the effects of inflation.
“Throughout we are seeing much more price sensitivity and consumers looking for more value across all income groups, Laguarta told Reuters. Now that is something that we have to take into consideration.
The disappointing results represent a larger hit across the soda and snack industry. Though product prices pushed up due to a long-lasting inflation surge are starting to come back down, they are still higher than normal, according to analysts.
In an attempt to sway customers, the soda-snack conglomerate will be adding new flavors to its popular brands, including Lays, Doritos and Cheetos. The company is also offering a range of products at different price points.
We have green shoots with some of the activities weve been executing, and July 4 has been very strong for us, Laguarta said.
PepsiCos largest business the North America beverages division saw volumes drop by 3.5%. Its second-largest business Frito-Lay North America saw volumes fall 4%.
PepsiCo did surpass earnings per share expectations, hitting an adjusted profit per share of $2.28 higher than LSEG estimates of $2.16.
While revenue rose up 0.8% to $22.50 billion it came short of analysts expectations of $22.57 billion.
“It’s not a business to sit on its hands and there is a clear focus on profitable growth, so PepsiCo is going to have to pull various levers depending on products to try and stay on top,” an investment analyst told Reuters.
