On October 21, 2022, a truck with a Pepsi logo on a semi-trailer is seen on Interstate 95 in Maryland, United States.
Beata Zawrzel | Nurfoto | Getty Images
PepsiCo on Tuesday lowered its full-year organic sales outlook after a second straight quarter of weaker-than-expected sales.
The impact of the Quaker Foods North America recall, weakening demand in the U.S. and business disruptions in some international markets weighed on the company’s performance this quarter, CEO Ramon Laguarta said in a statement.
For 2024, Pepsi now expects organic sales growth in the low single digits, down from its previous guidance of 4% growth. The company reiterated its forecast for at least an 8% increase in its core earnings per share in constant currency.
The company’s shares fell 1% in premarket trading.
Here’s what the company reported, compared to what Wall Street expected, based on a survey of analysts by LSEG:
- Earnings per share: $2.31 adjusted versus $2.29 expected
- Revenue: $23.32 billion vs. $23.76 billion expected
Pepsi reported third-quarter attributable net income of $2.93 billion, or $2.13 per share, compared to $3.09 billion, or $2.24 per share, a year earlier.
Excluding items, the company earned $2.31 per share.
Net sales fell 0.6% to $23.32 billion. Organic sales, excluding acquisitions, divestments and currency changes, increased by 1.3% in the quarter.
Demand for Pepsi’s snacks and drinks fell this quarter. The company reported that volume for both its food and beverage divisions fell 2%. Last quarter, executives said consumers at all income levels are changing their behavior.
Quaker Foods North America reported the strongest decline in volume, down 13%. The company issued its first recall in December for possible salmonella contamination and then expanded it in January. In June, Pepsi officially closed a factory linked to the recalls, even though production had already stopped.
The impact of the recalls is now subsiding, Laguarta and Pepsi CFO Jamie Caulfield said in prepared remarks.
Frito-Lay North America reported a 1.5% volume decline. The company seeks to provide consumers with more value and improve in-store availability with its snacks, including Cheetos, SunChips and Stacy’s pita chips. While the division’s volume is improving incrementally, the broader category has slowed compared to historical performance.
“After outperforming packaged food categories in previous years, salty and savory snacks have underperformed this year,” Pepsi executives said in their prepared remarks.
Volume for Pepsi’s North American beverage business fell 3%. Brands such as Gatorade and Pepsi saw their sales grow this quarter.
The markets of Latin America and Africa, the Middle East and South Asia also reported shrinking volumes for both food and beverages.