| Here’s your daily business briefing. - 🥤 PepsiCo beats earnings amid U.S. sales struggle
- 🕹️ Deep Dive: Mobile game spending slows after decades of growth
- 🚗 GM raises 2024 outlook on Q1 beat
Thanks for reading! Shriram
p/Shriram | |
| 1 | | PepsiCo reported quarterly earnings and revenue that beat analysts' expectations, with adjusted earnings per share reaching $1.61, surpassing the expected $1.52, while revenue reached $18.25B, exceeding the anticipated $18.07B. In the quarter, organic revenue, excluding acquisitions, divestitures, and foreign exchange, increased by 2.7%. More: - The American multinational company's food division saw a 0.5% decrease in volume, while its beverage segment reported flat volume.
- The demand from lower-income Americans declined, as seen by a 5% decline in Pepsi's beverage unit volume throughout the quarter.
- However, demand was higher outside of the U.S., as seen by the 12% volume gain in snacks reported by Pepsi's Asia-Pacific, Australia, New Zealand, and China regions.
- North American revenue from Quaker Foods, the oats brand, fell 24% after the company expanded a recall to include more cereals, bars, and snacks due to a salmonella risk.
- Compared to the previous year, Pepsi gained a savory-snack market share in China, India, Brazil, Australia, and Pakistan and increased its beverage market share in Brazil, Turkey, South Korea, Thailand, Vietnam, and Pakistan.
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What the numbers say: The $200B video game industry is facing its most significant slowdown in 30 years, with consumer spending on mobile gaming dropping by 2% to $107.3B last year. Sony has reduced its PlayStation 5 sales forecast due to slowing hardware sales, and Microsoft, after acquiring Activision Blizzard for $75B, is considering selling its own games on rival consoles, as the industry's growth rate last year was less than 1%, indicating slower growth compared to other entertainment categories. Relevance: The gaming industry's sharp slowdown contrasts with the peak growth experienced during the COVID-19 pandemic, revealing concerns about growth, profitability, job cuts, and the lack of new gaming devices sold to expand the market. Rising development costs, dependence on blockbuster franchises, and increased competition from entertainment giants like Disney and Netflix contribute to the challenges faced by the gaming industry. More data: Disney's $1.5B investment in Epic Games and Netflix's expansion into gaming indicate renewed interest in the gaming sector from entertainment companies. The industry focuses on finding new sources of growth among players who cannot afford expensive consoles or packaged games, underscoring the importance of accessibility and innovation in future strategies. | | | |
| 3 | | General Motors raised its 2024 guidance after surpassing Wall Street's expectations in the first quarter. The company reported adjusted earnings per share of $2.62, exceeding the expected $2.15, and revenue of $43.01B, higher than the anticipated $41.92B, with the company's net income rising by about 26% to $2.95B during the quarter. More: - The automotive manufacturing firm has raised its adjusted earnings forecast to $12.5B to $14.5B, or $9 to $10 per share, and adjusted automotive free cash flow to a range of $8.5B to $10.5B.
- The first-quarter beat and guidance increase were mainly due to GM's North American businesses, propelled by robust truck sales.
- The division's adjusted earnings rose to $3.84B, up 7.4% YoY, offsetting losses of $106M in China and $10M in other international markets during the year's first three months.
- The Detroit-based business is still bullish about the spring and summer selling seasons, even though U.S. car inventories are growing.
- GM's financing arm reported first-quarter adjusted earnings of $737M, reflecting a 4.4% decrease from the previous year.
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| 4 | | Philip Morris International Inc. increased its full-year outlook following robust sales of heated tobacco and nicotine pouch products, now expecting adjusted earnings per share of up to $6.67 in 2024 on a currency-neutral basis, compared to the previous guidance of up to $6.55 per share. PMI is also conducting trials of its IQOS heated tobacco product in the U.S., intending to reduce reliance on traditional cigarettes. More: - PMI's alternative products, such as IQOS heated tobacco sticks and Zyn nicotine pouches, represented 39% of net revenue in the first quarter.
- During the quarter, Zyn nicotine pouch shipments to the U.S. increased by over 80% to 131.6 million cans.
- In 2022, PMI expanded its U.S. distribution network by acquiring Zyn-maker Swedish Match in a $16B buyout deal.
- According to analyst Owen Bennett of Jefferies, PMI's success with Zyn pouches in the U.S. surpassed marketplace estimates.
- The American multinational tobacco company's net cigarette revenue increased 3.5% to $5.4B, matching analyst estimates.
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| 5 | | JD Sports Fashion Plc has agreed to acquire Hibbett Inc. for approximately $1.1B, offering $87.50 per share compared to the previous day's closing price of $72.49. The acquisition is intended to accelerate JD Sports' U.S. expansion, particularly in the southeastern region, aiming to boost North America's share of sales from 32% to 40%. More: - Based in Birmingham, Alabama, Hibbett operates 1,169 stores throughout the U.S., including the City Gear chain, retailing leading brands such as Nike and Adidas.
- As part of its growth strategy, JD Sports aims to establish itself as a leading force in sporting goods retail, especially in the U.S. market.
- After the acquisition, Hibbett CEO Mike Longo will remain in his position, with funding consisting of $300M in cash and a $1B extension to existing bank facilities.
- Following the announcement, JD Sports shares increased by 1.6% in early London trading.
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| 6 | | JetBlue Airways reduced its annual revenue forecast after reporting lukewarm first-quarter revenue attributed to oversupply in Latin America. The company revised its revenue estimate for the fiscal year 2024, which was previously expected to be stable, to a fall in the low-single-digit percentage range. More: - The Long Island City-based business aims to return to profitability by cutting unprofitable routes and reallocating resources to better-performing regions, such as reducing service to Bogota, Colombia, and Lima, Peru.
- In 2023, the Caribbean and Latin America comprised over 33% of JetBlue's total capacity.
- Analysts expected full-year revenue to dip slightly to $9.61B, while JetBlue forecasts second-quarter revenue to decline between 6.5% and 10.5%, contrasting with estimates of a nearly 4% drop.
- American low-cost airline's cost-cutting efforts showed progress, with an adjusted per-share loss of $0.43 in the first quarter, smaller than the estimated $0.52 loss, while total operating revenue fell 5.1% to $2.21B, in line with estimates.
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| 7 | | Quick Hits: - Facing declining sales and growing competition, Tesla, the world's largest electric vehicle maker, has announced aggressive price cuts in China, Germany, and the U.S.
- The U.S. Federal Trade Commission is suing to block Tapestry, the parent company of Coach, from acquiring Capri, owner of Michael Kors, for $8.5B, citing concerns about competition elimination.
- AWS aims to be the go-to platform for hosting and refining custom generative AI models, introducing Custom Model Import in Bedrock, allowing organizations to access their in-house models as fully managed APIs.
- The global hedge fund industry ended the first quarter with a record $4.3T in assets, adding $190B, marking the sixth consecutive quarter of growth, according to data provider HFR.
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 | Freelance Writer | | Shriram is pursuing Master’s in Business with Marketing at Warwick Business School. He worked as a Senior Consultant in Tech and Political Consultancies before his Masters. He is passionate about Tech, Marketing, Strategy, Anthropology and Politics. He is also the Postgraduate Ambassador for Warwick Business School. | | This newsletter was edited by Shriram Jeevakumar | |
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