PepsiCo on Thursday reported mixed quarterly results as its international sales offset weaker demand in North America.
The food and beverage giant also cut its forecast for core constant currency earnings per share, citing new tariffs, economic volatility and a more cautious consumer.
“As we look ahead, we expect more volatility and uncertainty, particularly related to global trade developments, which we expect will increase our supply chain costs,” CEO Ramon Laguarta said in a statement. “At the same time, consumer conditions in many markets remain subdued and similarly have an uncertain outlook.”
Shares of the company fell 2% in premarket trading.
Here’s what PepsiCo reported compared with what Wall Street was expecting, based on a survey of analysts by LSEG:
Earnings per share: $1.48 adjusted vs. $1.49 expectedRevenue: $17.92 billion vs. $17.77 billion expected
Pepsi posted first-quarter net income attributable to the company of $1.83 billion, or $1.33 per share, down from $2.04 billion, or $1.48 per share, a year earlier.
Excluding restructuring charges, acquisition costs and other items, the company earned $1.48 per share.
Net sales dropped 1.8% to $17.92 billion. Organic revenue, which strips out acquisitions, divestitures and foreign currency, rose 1.2% in the quarter.
Pepsi’s worldwide volume fell 3% for its convenient foods unit and was flat for its drinks. The metric strips out pricing and foreign exchange changes.
Laguarta said the company is “taking actions” to improve its North American performance. Volume for its domestic food business fell 1%, while its North American beverage unit saw volume decline 3%.
“Consumers have remained value‐conscious across brands and channels as the cumulative impacts of inflationary pressures have strained budgets and altered food shopping patterns,” Laguarta and CFO Jamie Caulfield said in prepared remarks.
Plans to turn around its North America business include expanding further into multicultural and functional products, like its Simply, Sabra and Siete brands. The company also recently bought Poppi, a prebiotic soda brand. And to appeal to consumers using GLP-1 drugs, Pepsi plans to add more protein to its portfolio.
Pepsi is also accelerating its transition toward more natural ingredients. On the heels of the Food and Drug Administration announcing plans to phase out synthetic dyes by the end of the year, Laguarta said Lay’s and Tostito’s will no longer use artificial colors by 2026.
The U.S. ban on petroleum-based colorants would affect Pepsi products like Flamin’ Hot Cheetos and Mountain Dew Baja Blast, but it is unclear what enforcement actions the agency would take if food and beverage companies do not comply according to its timeline. Pepsi’s overall transition will take longer than the FDA’s schedule, although 60% of its products do not use artificial dyes.
“In the next couple of years, we’ll have migrated all the portfolio into natural colors, or at least provide the consumer with natural color options, and obviously, every consumer will have the opportunity to choose what they prefer,” Laguarta said.
Pepsi is also working on engaging with consumers and ensuring better in-store availability and placement of its products.
The company’s North American businesses saw some bright spots. Pepsi Zero Sugar helped the company gain market share, and Miss Vickie’s chips and Quaker’s rice cakes were among the snacks that delivered net revenue growth.
For the full year, Pepsi now expects its core constant currency earnings per share to be roughly unchanged from the prior year, down from its previous forecast projecting mid-single-digit growth.
The company reiterated its outlook for a low-single-digit increase in organic revenue.
