PepsiCo’s quarterly revenue drops for the first time in almost four years, while the company’s revenue top estimates

PepsiCo released mixed quarterly results on Friday, citing a decline in North American demand for its beverages and food products.

According to CEO Ramon Laguarta, the fourth quarter saw a general decrease in US sales.

In a conference call with investors, he said, “Part of that is a slowdown due to pricing and [consumers’] disposable income situation.”

He continued by saying that American customers are changing their behavior from staying home to eat and drink more snacks and Gatorade from convenience stores. Despite this, Laguarta was upbeat about the general state of consumers, pointing to the low unemployment rate and expressing optimism that interest rates will drop by summer and salaries will grow more quickly than inflation.

The company’s stock ended Friday 3.5% down.

Here is how the company’s report and Wall Street’s estimates differed, according to a Refinitiv survey of analysts:

$1.78 adjusted earnings per share compared to $1.72 projected
Revenue: $27.85 billion in contrast to the projected $28.4 billion

In comparison to the same period last year, Pepsi’s fourth-quarter net income increased to $1.3 billion, or 94 cents per share, from $518 million, or 37 cents per share.

The massive food and beverage company made $1.78 per share when items were eliminated.

At $27.85 billion, net sales decreased by less than 1%. When compared to the same period last year, the company’s quarterly revenue has decreased for the first time since 2020. Net sales decreased by 1.5% as a result of currency exchange rates.

A 4.5% increase in Pepsi’s organic revenue during the quarter—which does not include acquisitions or divestitures—was facilitated by increased prices. The company’s food and drink sales have suffered due to the same price increases. This quarter, Pepsi’s volume decreased once more when pricing and exchange rate adjustments are taken out.

In prepared statements provided before to the company’s conference call, PepsiCo executives stated that rising borrowing costs and declining personal savings have put pressure on consumers’ budgets, especially in North America. They added that because of its affordability and convenience, consumers are increasingly selecting smaller pack sizes.

Quaker Foods, Pepsi’s North American division, reported an 8% drop in volume. Along with a weakened growth for the category as a whole, a voluntary recall of its cereals and granola bars affected company sales during the quarter.

Cheeto and Dorito brands are among those sold by Frito-Lay North America, which reported a 2% decrease in volume.

The volume of Pepsi’s North American beverage business decreased by 6% during the quarter.

Pepsi currently predicts that core constant currency profits per share will increase by at least 8% in 2024 and that organic revenue will increase by at least 4%. The company had previously projected growth in core constant currency earnings per share in the high single digits and an increase in organic revenue in the range of 4% to 6%.

In the prepared statements, Pepsi executives stated, “Consumers are likely to remain watchful with their budgets and choiceful with their purchases.”

Pepsi expects a less successful first half of the year as product recalls damage its Quaker Oats business in North America and sales in some places are impacted by geopolitical crises. For the entire year, executives expect that organic sales growth outside of North America will surpass that of North America.