* Q1 adj. profit of $0.94/shr vs est $0.92
* Adj. gross margins contract 45 basis points
* Expects margin pressure to continue in Q2
* Q1 N. America beverage volume sales down 1 pct
* Shares fall as much as 2.3 pct
(Adds comments from conf call; updates shares)
By Sruthi Ramakrishnan
April 26 PepsiCo Inc's quarterly revenue
and profit beat estimates on demand for its healthier drinks and
snacks and higher pricing in North America, but a contraction in
the company's gross margins weighed on shares.
Shares of the company, which also warned that margins will
remain under pressure in the current quarter, fell as much as
2.3 percent to $111.50. They had gained 9 percent this year.
Pepsi's first-quarter gross margins contracted 45 basis
points to 55.97 percent, missing analysts' average estimate of
56.4 percent, according to Thomson Reuters I/B/E/S.
Margins were squeezed by the company's decision to pass on
commodity prices to consumers in developing and emerging markets
in a staggered manner.
"We don't like to sticker shock the consumers in those
markets because we want to keep them in the category," Chief
Financial Officer Hugh Johnston said on a post-earnings
conference call on Wednesday.
Gross margins had expanded 160 basis points in the
The Doritos and Gatorade maker said it expected gross
margins to rise in the second half of the year.
"The quality of the quarter was disappointing as organic
revenue, gross margin, and operating margin all came in weaker
than we anticipated," J.P. Morgan Securities analysts wrote in a
Revenue in PepsiCo's North America beverage business, the
company's biggest, rose 2.3 percent to $4.46 billion, propped up
by a 1.5 percent increase in pricing, helping offset a 1 percent
drop in volume sales.
PepsiCo and rival Coca-Cola Co have focused on
selling smaller, high-margin packs in developed markets while
pulling back on promoting large discount packs as they look to
cushion the impact of falling demand for fizzy drinks.
Under Chief Executive Officer Indra Nooyi, PepsiCo has been
investing heavily to cater to consumers' increasing preference
for healthier snacks such as unsweetened tea and baked chips.
PepsiCo said it now gets more than 45 percent of its net
revenue from what it calls "guilt-free" products - beverages
that have fewer than 70 calories per 12 ounces and snacks that
have lower amounts of salt and saturated fat.
These include snacks such as Baked Lays, Quaker Breakfast
Flats and new versions of Mirinda and 7UP, which have 30 percent
PepsiCo's revenue rose 1.6 percent to $12.05 billion,
beating analysts' estimate of $11.98 billion.
Excluding items, the company earned 94 cents per share,
beating the average analyst estimate by 2 cents.
Coca-Cola on Tuesday reported a smaller-than-expected
quarterly profit on higher costs of franchising its bottling
operations and announced job cuts to boost savings.
(Reporting by Sruthi Ramakrishnan in Bengaluru; Editing by