Coca-Cola CEO James Quincey emphasized the company’s resilience today as it reported first-quarter earnings amid the COVID-19 pandemic. Here are initial takeaways from today’s earnings release and company-hosted calls with Wall Street analysts and media:
Results. Coca-Cola beat Wall Street expectations, reporting first-quarter comparable per-share earnings of 51 cents. Analysts has predicted about 44 cents on average. Organic revenue was little changed on price/mix that was also flat and unit case volume that fell -1.0%. In the US and Canada, unit case volume grew +3.0% following heavy stock-up buying in March.
Forecast. Executives provided no earnings forecast after previously retracting the company’s full-year guidance. In a statement, the company said it expects a “material” negative impact in the second quarter, with the outcome to be determined by the intensity of ongoing shelter-in-place demands and the “substance and pace of the macroeconomic recovery.” In its release, Coke anticipated improvement later this year: “The company believes the pressure on the business is temporary and remains optimistic on seeing sequential improvement in the back half of 2020.”
Built for Crisis. Despite immense uncertainty, Quincey emphasized during an earnings call with analysts that Coke’s top executives globally have cut their teeth on crises in various markets over the past several decades. That means the leaders understand how to adjust revenue management programs, expenses and portfolios to compensate. That includes a pivot to affordability where needed, using relevant brands and packages. “Responding in a crisis is certainly a big part of the DNA of the Coke system,” Quincey said. “The revenue growth management approach was born in crisis and we have developed that capability around the world.”
Pandemic Devastates Away-From-Home Consumption. Coca-Cola said unit case volume outside of China was tracking growth of +3.0% for the quarter through the end of February. By the end of March, global volume (including China) had fallen to -1.0% for the quarter as much of the globe took shelter at home to avoid the virus. April then brought a precipitous volume decline once at-home stocking up of groceries subsided. Through today, global volume for April is down -25%, Coke reported. This was due almost entirely to the loss of away-from-home consumption, which makes up about half of Coke’s global revenue, the company stated. In the US, sales from drive-throughs and takeout blunted the away-from-home decline to some degree, Quincey said.
China Offers Clues to Recovery. Quincey said all plants in the country are open and employees are back at Coke offices in Shanghai. “We’re seeing encouraging signs of increased consumption at outlets re-opened, resulting in sequential improvement,” he said. “However, consumption is still lower than prior year and we expect a full recovery to take time, especially as there are still limits to crowd sizes.” Quincey went on to warn of second phases of the crisis that were seen in markets such as Tokyo, Japan. “We may be at the end of the big global lockdown, but we are still some way from the new normal,” he added.
E-Commerce. Quincey noted a significant increase in e-commerce sales, including in the US. The channel doubled in some markets, he noted.
UK Furloughs. Coca-Cola has furloughed about 16,000 Costa Coffee café workers in the UK with full pay, which includes some government compensation. Another 5,000 Costa employees remain on the job, Quincey said during a media call.
Atlanta HQ. As the state of Georgia plans to ease stay-at-home restrictions later this week, Quincey said he doesn’t expect Atlanta headquarters workers to be brought back into the office right away. Some technical staff, such as lab workers who need facilities to do their jobs, may return to headquarters sooner.
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