PepsiCo posted single-digit revenue growth in its first quarter 2024 earnings Tuesday morning despite its Quaker Foods business reporting GAAP operating profit loss of -126%.
The company’s earnings were buoyed by positive growth in its international business segments that raised total organic revenue to $18.2 billion, 2.7% growth in Q1 2024 versus $17.8 billion during the same period last year. Operating profit was $2.7 million this quarter driven down by losses from Quaker Foods and softer results in its Frito-Lay business.
The company “remained agile and performed well” in the quarter, PepsiCo chairman and CEO Ramon Laguarta said in prepared remarks. “We delivered a sequential improvement in our volume trends, and year-over-year growth in our net revenue, operating profit margin and EPS – despite the impact of certain product recalls at Quaker Foods North America and a difficult net revenue growth comparison from the prior year.”
PepsiCo told employees at the beginning of the month that it would be closing the Danville, Illinois Quaker Oats facility permanently after a series of salmonella outbreaks led to product recalls. PepsiCo leadership reported that GAAP revenue for the Quaker segment was down 24% in the quarter with operating profit falling -$49 million.
Looking at its other domestic business segments, volume trends continued to improve in the Frito-Lay (-2%) and Beverages North America (-5%) businesses despite still being below the what they were in Q1 2023.
Core gross margin expanded about 37 basis points in Q1.
Guidance remained steady for FY2024 with at least 4% increase in organic revenue expected and total cash returns to shareholders of approximately $8.2 billion through dividends and share repurchases.
Company leadership said that it is building more capacity and has been continuing to make investments internationally to fuel its growth. Latin America led the segments with revenue of $2.6 billion, up 16% year-over-year.
“Our ability to understand local rituals and local food and beverage occasions is better than ever,” Laguarta said in the question-and-answer section of the call. “We are adapting our portfolio to our ability to attract the best talent in the markets where we participate and build really capable teams.”
Laguarta wouldn’t directly comment on the new distribution agreement between Celsius and PepsiCo but he did say that “the partnership is strong” but the new contract provided more scale in volume so Pepsi could “justify some of the economics of the calls.”
In light of the inflationary pressure experienced in all its categories in recent years, PepsiCo leadership was expecting consumers to come back to the company’s brands “at the same level of frequency that they have in the past.”