PepsiCo Inc. lowered its profit outlook, with the snacks and beverage company's recovery in North America taking longer than expected.
The maker of Doritos, Lay's and Gatorade now expects core constant currency earnings per share to grow between 1% and 2% this fiscal year, after previously forecasting growth at the low end of 4% to 6%. The company faces higher costs in North America in particular that are weighing on margins.
PepsiCo is working to revitalize sales of its salty snacks while contending with higher costs and consumers under economic pressure. In February, the company lowered prices on certain medium, grocery-store sized bags of its marquee brands. However, it will be raising some prices in the coming months, a sign the cuts failed to spur sufficient sales growth.
Organic revenue declined slightly in North America for both food and beverages in the third quarter. Still, strong international sales helped PepsiCo beat analyst estimates for earnings per share in the period.
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Shares of PepsiCo swung between gains and losses in premarket trading in New York. They were down 14% this year through Wednesday's close, compared with a 14% increase in the S&P 500 Index.
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Chief Executive Officer Ramon Laguarta said PepsiCo would be seeking areas to cut costs, and that the underperforming North America business “represents a meaningful opportunity for improvement.”
The company will continue to offer more products with protein and fiber, as well as those with simpler ingredients and different oils, including avocado oil, he said. Many big food companies are grappling with how to recapture consumers shifting their spending away from packaged food to less-processed options.
PepsiCo also needs to “revitalize our performance” within carbonated soft drinks, Laguarta said, where its zero-sugar and flavored options have been doing better than full-sugar versions.
The cost of PepsiCo's chips, in particular, came into focus earlier in the year after the company lost grocery store shelf space because they'd gotten too expensive — with some topping $7 a bag. The company cut prices, but Chief Financial Officer Steve Schmitt said the reductions had cut into its margins.
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
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