Key Points

  • PepsiCo Chief Financial Officer Steve Schmitt said on Thursday's earnings call that the company's filedtariff refundsare expected to contribute approximately 1 percentage point to earnings per share growth this year, providing a necessary boost as the company navigates rising costs and shifting consumer spending patterns.
  • The beverage and snack giantreported second-quarternet revenue of $24.2 billion, up 6.4% year-over-year; core earnings per share of $2.20, up 4% year-over-year. Despite reaffirming its 2026 outlook, profitability and demand trends showed divergence: core operating margin fell 40 basis points to 16.8%, and North American convenient foods revenue declined. The company also expects higher input cost inflation in the second half of the year.
  • "We do expect more pressure on the business on the commodity side," Schmitt said on the company's second-quarter earnings call. "We also expect that the refund claims for tariffs paid last year will help partially offset commodity pressure, allowing us to continue taking proactive measures."

Deeper Dive

According to a recent joint report by Duke University's Fuqua School of Business and the Federal Reserve Banks of Richmond and Atlanta, U.S. CFO optimism about the economy declined in the second quarter, with energy price shocks makinginflation the top concern among finance executives again。

PepsiCo executives said rising gasoline prices have already impacted consumer behavior, leading to reduced discretionary spending, particularly evident in the convenience store channel.

"I think clearly the Iran war and its impact on oil prices is significant, not just in the U.S. but globally," CEO Ramon Laguarta said on Thursday's earnings call.

The company is making affordability central to its growth strategy in the U.S. This means ensuring its brands "show up in consumers' lives in portions and at price points that consumers can afford today," Laguarta said.

Schmitt said PepsiCo expects "gradual improvement in North America" as the company uses tariff refunds to help offset commodity inflation. "That's how we're thinking about it," he said.

As of the time of writing, the company did not immediately respond to requests for further details on its refund claims.