PepsiCo Inc.’s second-quarter profit soared but sales fell short of Wall Street expectations as cash-strapped customers cut spending on snacks amid rising inflation.
The junk-food conglomerate, which owns brands including Pepsi, Frito-Lay, Quaker and Gatorade, also lowered its forecast for fiscal 2024, predicting organic revenue growth of 4%. While that figure technically meets PepsiCo’s original 4% target, company executives said it’s at the low end of the range.
“At least four[%]”We were talking about 5% initially,” Chief Executive Officer Ramon Laguarta said on a conference call with analysts. “Now we’re talking about 4%. And this is particularly relevant for the U.S. consumer.”
Shares fell 3% on Thursday after the company issued its middling guidance.
The company raised average product prices by 5% in the second quarter, in line with increases it had made in the first quarter, leading to a 3% decline in overall sales volume as the CEO cited the impact of inflation.
“There’s more price sensitivity across the board and consumers across all income levels are looking for better value,” Laguarta said. He told Reuters.“That’s something we have to consider.”
The disappointing results were a blow to the entire soda and snack food industry, which analysts say has been hit by a long period of high inflation that has started to ease but remains higher than normal.
The soda and snack conglomerate plans to add new flavors to popular brands like Lay’s, Doritos and Cheetos in an effort to attract customers. It also offers products at a range of price points.
“We’re seeing positive signs with some of the activities we’ve been executing and the Fourth of July was a very strong day for us,” Laguarta said.
Volume at PepsiCo’s North American beverages division, its largest business, fell 3.5%. Volume at its second-largest business, Frito-Lay North America, fell 4%.
PepsiCo beat earnings per share expectations, reporting adjusted earnings per share of $2.28, beating LSEG’s forecast of $2.16.
Revenue rose 0.8% to $22.5 billion, falling short of analyst expectations of $22.57 billion.
“PepsiCo is not a business that can afford to sit back and with a clear focus on profitable growth it will need to take a range of measures depending on its products to maintain its top position,” an investment analyst told Reuters.
