PepsiCo released a set of quarterly results reflecting a mixed performance, attributing weakened demand for its food and beverages in North America. CEO Ramon Laguarta noted a broad slowdown in U.S. sales during the fourth quarter, citing factors such as pricing and consumers’ disposable income constraints. Laguarta acknowledged a shift in consumer behavior towards acquiring snacks and Gatorade from convenience stores instead of consuming them at home. Despite the challenges, he expressed optimism about the overall consumer landscape, highlighting low unemployment rates and expectations of interest rate reductions and faster wage growth compared to inflation by summer.
PepsiCo’s reported figures, compared to Wall Street expectations, are as follows:
- Earnings per share: $1.78 adjusted (vs. $1.72 expected)
- Revenue: $27.85 billion (vs. $28.4 billion expected)
The company reported fourth-quarter net income of $1.3 billion, or 94 cents per share, up from $518 million, or 37 cents per share, a year earlier. Excluding items, the adjusted earnings per share stood at $1.78. Net sales experienced a slight decline of less than 1% to $27.85 billion, marking the first quarter since 2020 with a year-over-year revenue drop. Currency exchange rates contributed to a 1.5% decline in net sales.
PepsiCo’s organic revenue, excluding acquisitions and divestitures, increased by 4.5% in the quarter, driven by higher prices. However, these raised prices negatively impacted demand for the company’s food and beverages, leading to a decline in volume.
Executives cited high borrowing costs and reduced personal savings squeezing consumer budgets, especially in North America. Consumers are increasingly opting for smaller pack sizes due to their convenience and lower price points.
Specific divisions faced challenges, with the North American Quaker Foods division reporting an 8% decline in volume, impacted by a voluntary recall of granola bars and cereals. Frito-Lay North America saw a 2% drop in volume, and Pepsi’s North American beverage unit experienced a 6% decline in volume during the quarter.
Looking ahead to 2024, PepsiCo expects organic revenue to rise at least 4%, with core constant currency earnings per share climbing at least 8%. This outlook represents a slight adjustment from the previous forecast, with the company previously anticipating an increase in organic revenue on the high end of 4% to 6% and core constant currency earnings per share growth in the high single digits. Executives anticipate a challenging first half of the year, citing product recalls impacting the North American Quaker Oats business and international conflicts affecting sales in some regions. They expect international organic revenue growth to surpass that of North America for the full year.
