There was a 10 per cent growth in the first-quarter adjusted earnings of PepsiCo as consumers stocked up on its drinks and snacks in preparing in anticipation of the need to spend more time locked up at home because of the coronavirus pandemic.
However the company retracted its outlook for fiscal 2020 because of “the uncertainties associated with the magnitude and duration of the Covid-19 pandemic on our business.”
The company now expects a drop by low-single digits in its second quarter organic revenue, according to PepsiCo’s Chief Financial Officer Hugh Johnston, because of the hit to its business due to the closure of restaurants, movie theaters and sports stadiums.
During the quarter ended March, the company reported adjusted earnings per share of $1.07 against revenues of $13.88 billion.
The net income of the company for the fiscal first quarter was reported at $1.34 billion, or 96 cents per share which was lower than the $1.41 billion, or $1.00 per share, that the company had reported a year ago.
There was however a growth of 7.7 per cent in the net sales of the company to touch $13.88 billion. The company reported organic revenue growth of 7.9%.
According to a survey of analysts by Refinitiv, analysts at Wall Street anticipated earnings per share of the company to come in at $1.03 on revenue of $13.21 billion.
There was a 7 per cent organic revenue growth in Quaker Foods North America Frito-Lay North America, during the latest ended quarter.
There was also a growth of 6 per cent in the company’s North American drinks business. However, according to the company’s CEO Ramon Laguarta, the profits of the company were hit during the quarter because of change in buying habits of consumers.
There was an increase in demand in March in the company’s US and Canada markets even while consumers shifted where they were buying Pepsi’s food and drinks as shelter-at-home orders went into place. The meeting of higher demand for Pepsi products also meant higher labor and transportation costs for the company, Johnston said.
Consumers are eating breakfast more and snacking more during the day, Laguarta said. despite this, the lift to snack sales was outweighed by the negative impact on the beverage business.
“The key uncertainty that we are facing is around timing and when consumers may shift back to restricted recovery and a new normal,” Laguarta said.
Consumers are expected to shift back to their old patterns, said Laguarta, but there will be some exceptions. once consumers begin returning to work, the company expects a pick up in sales at gas stations and convenience stores. But it will take much longer for sale at restaurants, movie theaters and sports stadiums to bounce back.
(Adapted from CNBC.com)