PepsiCo Posts Higher Quarterly Sales, Withdraws Guidance -- 2nd Update
April 28 2020 - 9:55AM
Dow Jones News
By Jennifer Maloney and Dave Sebastian
PepsiCo Inc. is grappling with a drop in beverage sales caused
by coronavirus lockdowns, as fewer people grab sodas on the go at
convenience stores and gas stations. The decline in the company's
beverages has been only partially offset by an increase in sales of
potato chips, oatmeal and pancake mixes, as consumers eat breakfast
at home and snack more throughout the day.
"The negative impact on beverages is more significant than the
positive impact on snacks and foods," Chief Executive Ramon
Laguarta said in prerecorded remarks posted on the company's
website Tuesday. PepsiCo posted higher sales for the first quarter
of the year but withdrew its full-year guidance citing the
uncertainty caused by the Covid-19 pandemic.
The maker of Doritos, Lays potato chips, Quaker oats and Aunt
Jemima syrup said its food brands have benefited as consumers
sheltering in place look for comfort in trusted, well-known brands.
That trend may continue even as economies reopen, Finance Chief
Hugh Johnston said in an interview.
"For a long time, craft, niche-y brands got quite popular," he
said. "It wouldn't surprise me, I would say, if brands that have
made a comeback...sustained some of that as people got reacquainted
to them."
Rival Coca-Cola Co. last week reported revenue was down 1% for
the March quarter and cautioned that its global beverage volumes
had dropped by 25% in April. Coke executives warned that consumer
spending is unlikely to bounce back immediately as countries begin
to reopen, and said they expect the biggest impact on the company's
second-quarter results.
Mr. Johnston declined to say by how much PepsiCo's beverage
volumes had dropped in April. He said he expects to see sales
rebound in restaurants and convenience stores before they come back
to larger venues such as movie theaters and sports stadiums. He
added that he didn't know how the pandemic might change consumer
behavior over the long run. "It's a great question and one that we
wrestle with every day," he said.
PepsiCo also is leaning hard into energy drinks. A month after
buying Rockstar Energy Beverages for $3.85 billion, the
soda-and-snacks giant said Tuesday it had signed a deal to
distribute another energy drink: Bang, the third-largest in the
U.S. behind Monster and Red Bull.
For the first quarter, PepsiCo reported sales rose 7.7% from a
year ago to $13.88 billion. Excluding the effect of currency swings
and acquisitions, so-called organic revenue rose 7.9% for the first
three months of the year.
Revenue at its North American beverage division, the company's
biggest contributor, rose 7.3% to $4.84 billion. In its Frito-Lay
North America division, which produces potato chips and other
snacks, sales rose 6.8% to $4.07 billion.
Net income fell to $1.34 billion from $1.41 billion in the
comparable quarter last year. Adjusted earnings were $1.07 a share,
ahead of the $1.03 a share analysts polled by FactSet were
expecting.
Write to Jennifer Maloney at jennifer.maloney@wsj.com and Dave
Sebastian at dave.sebastian@wsj.com
(END) Dow Jones Newswires
April 28, 2020 09:40 ET (13:40 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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