Pepsi to cut 3,300 jobs as weak economy hits soft drink sales

NEW YORK: PepsiCo reported a quarterly profit Tuesday that missed Wall Street forecasts and cut its full-year outlook. The soft drink company has been hurt by an economic slowdown that has flattened demand, as well as by a relatively stronger U.S. dollar.

PepsiCo also said it would cut 3,300 jobs, or 1.8 percent of its work force, as part of a plan to save more than $1.2 billion over three years.

The company's shares fell more than 4 percent in premarket trading.

PepsiCo, the maker of Pepsi-Cola drinks, Frito-Lay snacks and Quaker foods, did not give a forecast for 2009, which also weighed on its shares, said a Morgan Stanley analyst, William Pecoriello.

Amid a nationwide housing slump, a credit crunch and job losses consumers have been eating less at restaurants, cutting back on trips to gasoline stations and convenience stores and buying fewer items like bottled water.

The changing habits have taken a toll on beverage sales, which is viewed as a discretionary purchase by many.

"The beverage business was clearly the soft spot," PepsiCo's chief financial officer, Richard Goodman, said in an interview. "The whole category has continued to be soft this year."

Pepsi said that 40 percent of the jobs it would cut would come from closing as many as six plants and other actions to be announced by the end of the year.

Most of the job cuts will occur in the fourth quarter. Pepsi expects to incur a related charge of $550 million to $600 million.

Net income fell to $1.58 billion, or 99 cents per share, in the third quarter, which ended Sept. 6, from $1.74 billion, or $1.06 per share, a year earlier.

Excluding losses on commodity hedges, earnings were $1.06 per share. Analysts on average were expecting $1.08, according to Reuters Estimates.

Yet quarterly revenue rose to $11.24 billion from $10.17 billion, driven by strength at Frito-Lay.

Goodman said Pepsi's global sales for September had been consistent with year-to-date numbers and therefore had not been directly affected by a widening crisis in financial markets.

Citing a recent strengthening in the value of the U.S. dollar, the company lowered its 2008 earnings outlook to a range of $3.67 to $3.68 per share, from a forecast of at least $3.72 per share.

Pepsi shares were at $55.97 in afternoon trading, down $5.80, or 9.4 percent.