PepsiCo Lowers Full-Year Outlook After Weak Sales Performance

PepsiCo announced a reduced full-year outlook for organic revenue on Tuesday, following two consecutive quarters of weaker-than-expected sales. The company’s performance has been affected by several factors, including recalls from Quaker Foods North America, declining demand in the U.S., and disruptions in international markets.

Revised Revenue Expectations

For 2024, PepsiCo now anticipates a low-single-digit increase in organic revenue. This is a significant drop from its previous forecast of 4% growth. Despite this adjustment, the company maintained its expectation for core constant currency earnings per share to rise by at least 8%.

In the third quarter, PepsiCo reported a net income attributable to the company of $2.93 billion, translating to $2.13 per share. This marks a decrease from $3.09 billion, or $2.24 per share, during the same period last year. When excluding certain items, the earnings per share stood at $2.31.

Net sales for the quarter fell by 0.6%, totaling $23.32 billion. Organic revenue, which excludes acquisitions and currency fluctuations, rose by 1.3% during this period.

Declining Demand for Snacks and Beverages

PepsiCo experienced a notable decline in demand for its snacks and beverages this quarter. The company reported a 2% drop in volume across both its food and beverage divisions. Executives noted that shoppers at all income levels are changing their purchasing behaviors.

Quaker Foods North America faced the steepest decline, with volume dropping by 13%. The division issued its first recall due to potential salmonella contamination in December and expanded it in January. Although production had already stopped, Pepsi officially closed a plant related to these recalls in June.

Challenges for Frito-Lay and Beverage Divisions

Frito-Lay North America also reported a 1.5% decline in volume. To combat this, the company has focused on offering better value and improving in-store availability for popular snacks like Cheetos and SunChips. While Frito-Lay’s volume is improving sequentially, it remains below historical performance levels.

“After outperforming packaged food categories in previous years, salty and savory snacks have underperformed year-to-date,” Pepsi executives stated in prepared remarks.

The North American beverage sector saw a volume drop of 3%. However, brands like Gatorade and Pepsi managed to achieve revenue growth during the quarter.