PepsiCo Sales Surges as Shoppers Stock Up. It's Going to Get Worse But Snacks Will Ease the Pain. -- Barrons.com
PepsiCo stock climbed in premarket trading as the soda and snack giant reported surging sales in the first quarter.
The beverage maker, which also owns Lay's and Doritos, said organic sales grew 7.9% in the first three months of the year as consumers stocked up due to lockdown measures and shelter-in-place orders. The stock rose 1.5% before the open. Chief financial officer Hugh Johnston told analysts he expected second- quarter sales to decline at a low single-digit rate as restaurants, movie theaters and other venues remain closed around the world.
The company also withdrew its 2020 guidance due to the uncertainty surrounding the coronavirus pandemic and expected second-quarter sales to decline at a low-single digit rate
"Despite a strong first quarter, there is still a great deal of uncertainty that exists in relation to COVID-19, including how geographies, retail channels and consumer behaviors will evolve over time," the company said in a statement. Despite the uncertainty, PepsiCo said it still expects to return $7.5 billion to shareholders in this financial year and repurchase $2 billion in shares.
Net revenue rose 7.7% to $13.881 billion in the first quarter, ahead of the FactSet consensus of $13.192 billion, while net income fell to $1.338 billion -- 96 cents per share -- but adjusted earnings per share of $1.07 beat estimates of $1.03.
Pepsi performed better than its rival Coca-Cola, whose sales volumes fell 1% in the quarter despite shoppers stockpiling ahead of the lockdowns internationally. Approximately half of Coca-Cola's revenues come from its away- from-home channels, which include restaurants, bars and movie theaters -- all of which have been closed in countries around the world. Last week, Coca-Cola warned the second quarter would be worse and had started with a 25% slump in volumes so far in April.
Pepsi's more diversified snack offering has helped it outperform its rival during the coronavirus pandemic, with its Frito-Lays and Quaker Foods North America businesses achieving 7% organic revenue growth.
Chief Executive Ramon Laguarta said: "With consumers spending more time at home, we've seen an increase in eating breakfast and a tendency to snack more during the day. The Frito and Quaker food businesses are well positioned to capitalize on these changes. And as a result, we've seen higher household penetration across a variety of our products." He added that the negative impact on beverages is more significant than the positive impact on snacks, but that PepsiCo had shifted its advertising and revenue management, as well as promotions, in a bid to capitalize.
The U.S. beverage business has conversely been impacted by a shift away from some channels, such as gas stations and food services, he added.
Looking ahead. Pepsi has certainly capitalized on pantry loading in recent months but the path ahead is less clear. Consumer habits have drastically changed in a short space of time and it is difficult to predict how they will further evolve as the pandemic progresses. Laguarta said he expects gradual improvement in sales at gas and convenience stores as people return to work but said revenue from restaurants, movie theaters and sporting events would take longer. As with Coca-Cola, the second quarter will undoubtedly be worse but Pepsi's snack offering will ease the pain.
(END) Dow Jones Newswires
04-28-20 0937ET
Copyright (c) 2020 Dow Jones & Company, Inc.
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