Consumers who are worried about the economy are retreating, and this anxiety translates into lower sales and profits for some consumer-facing companies in the country.
Pepsi cut its guidance outlook for the full year on Thursday, citing the company's reduced impact on global tariffs and the impact the company feels.
PepsiCo's chief financial officer Jamie Caulfield told Wall Street analysts and investors on a profit call Thursday morning.
The company produces Pepsi and Gatorade beverages, as well as popular snacks like Doritos and Cheetos, cut its annual profit forecasts to cut its earlier guidance, which expects earnings growth to be in the middle. It reported revenues fell 1.8% to $17.9 billion in the March 22 quarter, and net revenues fell 10% to $1.8 billion a year ago.
By the afternoon, Pepsi shares were down more than 4% to $136.
Comments on Pepsi's earnings call with what executives at other consumer companies have said in recent days about concerns in the global economy are key to reducing consumer spending. The pullback has begun weighing some companies’ revenues and weakening the outlook for the coming months, especially as they try to calculate the costs incurred by the Trump administration’s new or increased tariffs on imported goods.
The chain reported this week that at Chipotle, same-store sales fell for the first time since 2020. The company said shortly after President Trump's inauguration that uncertainty about the path forward of the U.S. economy began to affect spending in February – a trend that continued until April.
“It all revolves around the idea of saving money, economic uncertainty, and they eat more frequently at home than they eat out,” Scott Boatwright, CEO of the burrito chain, said when asked about the behavior of consumers. He added that the underlying trend “is indeed connected to consumers sitting on the sidelines.”
Chipotle also lowered its year-round guidance. The chain said it expects Mr. Trump to impose tariffs in April (with 10% liability for many imports and tariffs on aluminum) to increase the company's food, beverage and packaging costs this year.
Another painful signal among shoppers: Consumers’ laundry reduces the shrinking of detergent, which is purchased by Procter & Gamble executives, which makes household staples like Tide Datergent tell Yahoo Finance.
On Thursday, P. &g. Andre Schulten, the company's chief financial officer, said it cuts out the outlook for the full year and said the whip of tariff policies has been included in the “pause” of consumption as consumers also try to make sense for stock market volatility and job market uncertainty.
Signs that economic problems are beginning to affect consumer spending are also emerging in the aviation industry. American Airlines canceled its full-year guidance Thursday, reflecting the move from Delta Airlines last month. American Airlines CEO Robert Isom told CNBC on Thursday that family leisure travel had “a massive drop” since February.
The latest survey by the conference committee showed that consumer confidence rose to its lowest level since January 2021 in March.
Pepsi executives want to attract consumers who tighten their wallets, he said it offers cheaper prices, under $2, separate snack bags, and smaller snack bags in the store.
Pepsi said it has calculated its lower profit estimates, with higher costs associated with tariffs. “We also considered some mitigation plans, some of which we will be able to execute faster than others,” Mr. Caulfield said on a phone call on Thursday.
Analysts have been closely watching the impact of tariffs on the food and beverage industry, especially the 25% tariff on imported aluminum.
While Wall Street analysts have been paying attention to the potential impact of the Trump administration on U.S. brand sales in major international markets, especially in Europe and China, Pepsi said its global market performed well in the first quarter.
Pepsi CEO Ramon Laguarta told analysts that in the U.S., the popularity of using Ozempic and other weight loss drugs has curbed sales of snacks and moved purchases to smaller segments.
Pepsi is also on Health Secretary Robert F. Kennedy Jr.
Mr. Laguarta said Pepsi was an industry leader in reducing sodium and sugar in products, with more than 60% of its business coming from products without artificial colors. He added that over the next few years, the company will “move all its portfolios into natural colors, or at least provide consumers with natural colors options.”
