Investors will be thirsty for evidence of a top-line turnaround when PepsiCo (PEP:NASDAQ) serves up third-quarter results on 8 October.
The sodas-to-snacks powerhouse pushed the inflation-pinched consumer to the limit with price rises with the result second quarter sales missed expectations for only the second time since 2017 and has shifted its focus from margin-protecting price hikes to driving volumes and promotions.
New York-headquartered PepsiCo’s flat one-year share price performance reflects intense competition and weak consumer spending in key markets, not to mention investors’ concerns over the long-run impact of anti-obesity drugs on demand for sugary snacks and drinks. The company will also need to allay fears that a recent snacking slowdown is temporary as cost-of-living pressures weigh on consumer spending across the pond.
On 11 July, second quarter results from PepsiCo, whose brands includes the namesake fizzy pop as well as Doritos, Gatorade, Mountain Dew and Quaker, revealed weaker than expected organic sales growth of 1.9%, possibly the result of hard-pressed shoppers switching to cheaper own label versions of its products.
PepsiCo has suffered from a broader snacking slowdown with volumes in its Frito-Lay North America arm proving weak, although management intends to return the segment to 4% to 5% growth by accelerating productivity initiatives and promotions.
And with the international business delivering another quarter of strong sales growth and margin expansion, PepsiCo’s second quarter EPS (earnings per share) beat guidance and CEO Ramon Laguarta said management had ‘a high degree of confidence in delivering at least 8% core constant currency EPS growth for full-year 2024.’
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