AP NEWS

Pepsi beats 1Q forecasts but says outlook is grimmer

April 28, 2020 GMT

PepsiCo — which makes Frito Lay chips and Quaker cereals — is getting a boost as more U.S. consumers eat breakfast and snack at home.

The Purchase, New York-based company said Tuesday its organic sales — which don’t include acquisitions — grew 7.9% in the first quarter. Shoppers in the U.S. and elsewhere bought more than usual during fewer grocery trips. They also bought more online; Pepsi said e-commerce sales jumped 45% in the quarter.

Pepsi said its SodaStream business — which lets users make carbonated drinks at home — also saw revenue jump 20% in the January-March period.

“In most developed markets, we’ve moved beyond the preparation and prevention phase and appear to be in the later stages of confinement, in which shelter in place and social distancing have become a new way of life,” Pepsi Chairman and CEO Ramon Laguarta said in a prepared statement.

But the company is losing highly profitable sales at gas stations, movie theaters, stadiums and other venues as fewer people leave their homes. Pepsi’s North American beverage profits fell 24% in the first quarter.

Chief Financial Officer Hugh Johnston said Pepsi expects organic revenue to fall in the second quarter because of continuing restrictions. Consumers in developing markets may also have less discretionary income to spend on snacks and beverages, the company said.

Rival Coca-Cola Co. said last week that its sales volumes are down 25% in April.

Johnston said Pepsi is withdrawing its financial outlook for this year.

For the first quarter, Pepsi reported a profit of $1.34 billion, down 5% from the same period a year ago. Earnings, adjusted for non-recurring costs and restructuring costs, came to $1.07 per share.

The results surpassed Wall Street expectations. The average estimate of seven analysts surveyed by Zacks Investment Research was for earnings of $1.02 per share.

The food and beverage company posted revenue of $13.88 billion in the period, also surpassing analysts’ forecasts.

Pepsi shares rose 1% to $136.32 in afternoon trading.