UK Markets close in 5 hrs 2 mins

PepsiCo to lay off hundreds of U.S. corporate workers

Yahoo Finance Live anchors discuss reports that PepsiCo will lay off hundreds of corporate workers in an effort to cut costs.

Video transcript

- We'll catch up with you once we know the results of that.

- For sure.

- All right, and thing number three this morning, PepsiCo is reportedly cutting hundreds of corporate jobs in its US offices. That's according to "The Wall Street Journal." This move indicating that cost-cutting measures are extending beyond big tech. We've already heard some examples of that, but this is one of the bigger ones of that, right?

And it's also interesting because "The Journal" is saying these cuts are happening more on the beverage side because there's already been some reorganizations on the snack and food side. But still, for a company of this size, for there to be reports of this nature, which it has not confirmed, by the way, but nonetheless, it's just again another temperature read on where we are right now.

- Yeah, PepsiCo declined to comment to Yahoo Finance on those potential cuts. But look, I've been covering PepsiCo for a very long time. And one thing that has always stood out, this is a company maniacal on managing costs, especially towards the end of the year. Also, let's keep in mind this is also a company this year that said that it will no longer sponsor the Super Bowl Halftime Show, another likely cost-cutting measure under CEO Ramon Laguarta, who has really proven that he wants to cut expenses at this company.

Now, we asked longtime CFO Hugh Johnston about their efforts to cut expenses when they reported earnings in October. Take a listen.

HUGH JOHNSTON: We did. Beginning of the fourth quarter, we took some more pricing. Again, all of that is based on commodity input costs, which continue to be higher. For the year, we'll be in the high teens in terms of our commodity input costs.

So our pricing has been a little bit less than what we've experienced in inflation. But, frankly, we focused on all the other aspects of our cost structure as well. So while gross margins were down a bit, operating margins were up, as we've managed the balance of the cost structure very tightly.

- And Pepsi, PepsiCo is very cognizant of their stock price. It has outperformed this year. And one of the reasons why is they get a lot of credit for cutting expenses. And if they want to keep that stock price going, they're going to probably have to get a little bit leaner going into next year.

- Yeah, within that pricing, they had even said at the outset of the earnings that came forward last quarter that some of their brands are being stretched to higher price points, to the point that he was making a moment ago, as well as yours, and the consumers are following us. Now, that kind of dovetails into what we're hearing this morning out of even CEO Brian Moynihan of Bank of America, saying that consumers are resilient. And for consumers who are actually looking across some of the brands that are making it into their homes still and across the necessities prices that are elevated for them, it is a question of for a company in Pepsi, of those brands that you continue to manufacture, how are you continuing to find favorability, even at higher price points? And how are those price points also offsetting some of the expenses that you're seeing on the wage front that are also elevated for them and many other companies that have cited that as part of their headcount reduction?

- I mean, effectively, the period we're in right now is the tide is going out, right? And you see who is vulnerable in this. I don't know what the metaphor is. But you know what I'm saying.

- Warren Buffett's favorite saying.

- Right, yeah. You see that there are vulner-- even if consumer spending is strong, if there are inefficiencies in your business, now is the time that you're going to be trying to eliminate those inefficiencies.