PepsiCo forecasts weak annual profit as soda, snacks demand slows
Business
PepsiCo forecasts weak annual profit as soda, snacks demand slows
(Reuters) - Pepsico forecast annual profit below expectations and missed quarterly revenue estimates on Tuesday, as the Quaker Foods maker faces weakening demand for its sodas and snacks such as Lay's in the U.S., its largest market.
Shares of the company fell 2% in premarket trading.
Americans are still paring back spending on soft drinks and salty treats to save their dollars for essential purchases, forcing PepsiCo to tap promotions for volume growth after several quarters of slowdown wrought by price hikes.
The target is to bring back consumers leaning towards smaller pack sizes or picking up cheaper alternatives from retail aisles following a post-pandemic increase in prices of PepsiCo's products.
"We expect our North American performance to gradually improve as the year progresses, and our commercial activities take hold," executives said in the company's prepared remarks.
PepsiCo's largest unit, North American beverages, reported a 1% increase in organic revenue in the fourth quarter, compared with a 7% rise a year ago.
Frito-Lay North America, its second-largest unit, posted a 0.5% fall, compared with 9% growth last year.
The company's total organic volume slipped 1% for the quarter ended Dec. 28, while average prices jumped 3%.
PepsiCo also promised heavy investments into overhauling its existing products and introducing new items to spur slowing demand from lower-income customers.
The company expects a low-single-digit increase for fiscal 2025 core earnings per share, compared with analysts' estimates of a 4.73% rise to $8.53 per share, according to data compiled by LSEG.
Its quarterly net revenue fell 0.2% to $27.78 billion, missing estimates of $27.89 billion. On an adjusted basis, PepsiCo earned $1.96 per share, above expectations of $1.94.
