PEP PepsiCo Inc

By Allison Prang 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (October 4, 2019).

PepsiCo Inc.'s sales climbed in its latest quarter as increased spending on advertising drove growth while also damping earnings.

Ad spending was up 12% so far this year, Chief Financial Officer Hugh Johnston said in an interview. "We're seeing returns on the investment."

The food-and-beverage company reported organic revenue growth of 4.3% for the latest period and said it expects growth of at least 4% for the year. The metric -- which strips out the effect of currency swings and acquisitions -- has topped 4% for five straight quarters.

PepsiCo posted $17.19 billion in net revenue for its fiscal third quarter ended Sept. 7, rising from $16.49 billion a year earlier on increases across all divisions. Analysts polled by FactSet were expecting revenue of $16.93 billion.

Shares of PepsiCo rose 3% on Thursday.

Net revenue at its North American beverage division -- the company's biggest contributor -- rose 3.4%. Chief Executive Ramon Laguarta said on the company's earnings call that recent investments in advertising have helped the division.

Mr. Laguarta said Gatorade logged sales growth in the mid-single digits in the quarter. PepsiCo has tried to bolster the sports-drink brand, including last year's launch of sugar-free Gatorade Zero, and Mr. Laguarta said that effort continues.

PepsiCo earlier this year also rolled out three different flavors of Pepsi that are made with real juice.

Strong results from potato-chip brands helped propel a 5.5% rise in sales for PepsiCo's Frito-Lay North America division.

"The business is not only growing but winning in the marketplace versus competition," Mr. Laguarta said of the snack division.

PepsiCo's costs climbed as the company invested more in areas such as advertising and distribution. Selling, general and administrative costs rose more than 8% in the latest period.

Mr. Johnston said the investment in advertising spanned PepsiCo's different brands.

He said the company has also invested to add new lines at its manufacturing plants.

Net income fell to $2.1 billion in the third quarter, from $2.5 billion a year earlier. The company's income-tax provision almost tripled, contributing to the drop in profit.

Per share profit fell to $1.49 from $1.75. Adjusted earnings came to $1.56 a share, beating FactSet's analyst consensus estimate by 6 cents.

Write to Allison Prang at allison.prang@wsj.com

(END) Dow Jones Newswires

October 04, 2019 02:47 ET (06:47 GMT)

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