PepsiCo Reports Mixed Quarterly Results Amid Weakening North American Demand

PepsiCo has unveiled its quarterly earnings, revealing a mixed performance as North American demand for its food and beverages experiences a downturn. Despite exceeding Wall Street’s earnings expectations, the company’s revenue fell short of estimates, reflecting ongoing challenges in the market.

CEO Ramon Laguarta attributed the slowdown in U.S. sales during the fourth quarter to several factors, including pricing dynamics and consumers’ disposable income constraints. Laguarta highlighted a shift in consumer behavior from home consumption to purchasing snacks and beverages from convenience stores. However, he remained optimistic about the overall consumer landscape, citing low unemployment rates and anticipated improvements in interest rates and wages.

Shares of PepsiCo closed down by 3.5% following the announcement.

Also Read: Divi’s Laboratories Reports 17% YoY Rise in Quarterly Profit

Here’s a breakdown of the company’s reported results compared to analyst expectations:

• Earnings per share: Adjusted earnings of $1.78 versus the expected $1.72.
• Revenue: $27.85 billion versus the anticipated $28.4 billion.

PepsiCo reported a fourth-quarter net income of $1.3 billion, or 94 cents per share, a significant increase from $518 million, or 37 cents per share, in the same period last year. Adjusted earnings per share stood at $1.78.

Net sales experienced a slight decline, dropping less than 1% to $27.85 billion. Currency exchange rates contributed to a 1.5% decrease in net sales.

While PepsiCo’s organic revenue saw a 4.5% increase, driven by higher prices, the company faced challenges with declining demand due to the raised prices affecting its food and beverage products. Volume, excluding pricing and currency effects, continued to decrease for PepsiCo this quarter.

Executives noted that high borrowing costs and reduced personal savings have impacted consumers’ purchasing power, particularly in North America. Consumers are increasingly opting for smaller pack sizes for convenience and affordability.

PepsiCo’s North American Quaker Foods division reported an 8% decline in volume, partly attributed to a voluntary recall of granola bars and cereals. Similarly, Frito-Lay North America experienced a 2% drop in volume, while the North American beverage unit saw a 6% decline.

Looking ahead to 2024, PepsiCo expects organic revenue to increase by at least 4%, with core constant currency earnings per share climbing by at least 8%. However, the company anticipates a weaker first half of the year, influenced by product recalls and international conflicts affecting sales.

Despite these challenges, PepsiCo remains committed to navigating the evolving consumer landscape and delivering sustainable growth in the coming year.