PepsiCo turned in a stronger-than-anticipated second quarter, posting net revenue of $24.2 billion for the April through June period — a 6.4% increase that beat the $23.9 billion analysts surveyed by FactSet had predicted. The results came even as the company acknowledged that North American shoppers were watching their wallets more carefully due to economic uncertainty.
Earlier this year, ahead of the Super Bowl in February, PepsiCo cut prices on several of its most popular chip brands — Lay’s, Doritos, Cheetos, and Tostitos — by as much as 15%. The move was a direct response to growing frustration among consumers who had endured years of price increases. That strategy helped lift snack sales in North America during the first quarter.
The momentum didn’t carry into the second quarter, however. As gas prices climbed following the outbreak of war in Iran, North American snack sales volumes went flat, and beverage volumes dropped 4%. Consumer sentiment has improved modestly as pump prices pulled back, but the overall outlook among Americans remains largely pessimistic. Adding to the concern, renewed hostilities in Iran have pushed gas prices back up over the past two days.
International markets offered a brighter picture. PepsiCo’s global snack volumes climbed 3% and beverage volumes grew 2%. The company credited World Cup-themed merchandise, including limited-edition Lay’s flavors such as Portuguese Chorizo and Onion, with helping drive those overseas gains.
The Purchase, New York-based company said it plans to keep working on making its products more budget-friendly. PepsiCo is also responding to demand for healthier options — in March, it launched Gatorade Lower Sugar, a version of the sports drink that contains no artificial flavors or colors.
On the bottom line, net income more than doubled in the second quarter, reaching $2.98 billion. Excluding one-time items, earnings came in at $2.18 per share, just a penny below the $2.19 analysts had anticipated.
PepsiCo’s stock slipped less than 1% in premarket trading on Thursday following the announcement.
