The beverage and snack giant cuts its profit outlook and says it will look to cut costs with 'a high sense of urgency'
PepsiCo CEO Ramon Laguarta says that everything at the company that is not related to growth "will not be part of the company."
PepsiCo's latest quarterly results showed that its North American food and drinks businesses are still struggling. While sales have improved, higher costs to support those sales prompted the company to cut its full-year profit outlook.
To improve profitability, PepsiCo (PEP) said that, with "a high sense of urgency," it was identifying structural cost-cuts that it plans to act on in the coming months. The aim is to shift resources from areas that aren't contributing to growth to those that are.
While CEO Ramon Laguarta was speaking to Wall Street analysts, the message to employees was pretty clear. "I would say urgency means we're going to look at every cost with aggressive lenses and with the lenses that everything that is not related to growth will not be part of the company," he said, according to a FactSet transcript of the post-earnings call.
'I would say urgency means we're going to look at every cost with aggressive lenses and with the lenses that everything that is not related to growth will not be part of the company.'PepsiCo CEO Ramon Laguarta
He followed that up by saying the company was "raising the bar on what is expected from everyone in the company," including in "levels of granularity," such as in every customer negotiation and at every point of sale.
The company has not yet responded to a request for comment.
Keep in mind that PepsiCo had recently filed WARN notices, on Sept. 14 for the layoffs of 143 employees in Hyattsville, Md., and on Aug. 18 for the permanent layoffs of 105 employees in Columbia, S.C. A WARN Notice, or a Work Adjustment and Retraining Notification, is an early warning filed with states of an impending plant closure or layoffs.
Laguarta's comments came after PepsiCo reported profit and sales for the fiscal third quarter that ended Sept. 5 that rose above expectations. However, while the company also raised its growth outlook for full-year revenue to approximately 6%, from a previous estimate of 4% to 6%, it cut its guidance for growth in earnings per share to 2.5% to 3.5% from the "low end" of 5% to 7% as rising costs reduced the profitability of its North America businesses.
Despite this downbeat outlook, the stock rose 3.7% on Thursday, after closing the previous session at the lowest price since April 2020. Shares have dropped 10.6% in 2026 to put them on track for the fourth straight yearly loss, and the biggest yearly decline since 2008.
-Tomi Kilgore
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