Key Points:

  • PepsiCo Chief Financial Officer Steve Schmitt said on Thursday's earnings call that the company's appliedtariff refundsare expected to contribute approximately 1 percentage point to this year's earnings per share growth. This factor will provide necessary support for the company amid rising costs and changing 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 were $2.20, up 4% year over year. Despite reaffirming its 2026 outlook, profitability and demand trends remain mixed: 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 at the commodity level," Schmitt said on the company's second-quarter earnings call. "At the same time, we expect that the refund applications for tariffs paid last year will help partially offset commodity price pressure, allowing us to continue taking proactive measures."

Deeper Analysis:

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

PepsiCo executives said rising gasoline prices have affected 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 are 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 "appear in consumers' lives at portion sizes and price points they can currently afford," Laguarta said.

Schmitt said PepsiCo expects "gradual improvement in the North American market" and will use 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 further inquiries regarding details of its refund applications.