PALO ALTO, Calif. -
At least Pepsi Bottling Group didn't blame the as-yet-unstarted war for its embarrassing first-quarter earnings miss earlier this week. And it didn't suggest that the dog ate its homework or that its little sister smeared finger paint all over its spreadsheets.
Having said that, the lameness of the excuses the bottler did give go a long way toward explaining why its stock received an 18 percent haircut on Wednesday. That's $1.1 billion in real money, for those who favor the details over abstractions.
Pepsi Bottling (PBG: Research, Estimates) is PepsiCo's main bottler. Based in Somers, N.Y., about 38 percent of its shares are owned by the soft-drink giant, which through separate classes of shares has about a 43 percent voting interest in Pepsi Bottling.
The point is, Pepsi Bottling's fortunes go hand in glove with PepsiCo's.
In one earnings miss, Pepsi Bottling managed to blame it troubles on some of the silliest explanations around for poor execution, bad forecasting and excessive guidance-giving. More, its news release detailing its "challenges" is a model of corporatese and a good example of why investors are fed up with the stock market.
In the release on Tuesday night, and again in a conference call Wednesday morning, Pepsi Bottling "updated" its first-quarter and full-year (more on this conjunction emphasis soon) financial guidance "to reflect the impact of several circumstances on its operations." (emphasis added)
The first circumstance is "a significant innovation overlap" from 2002's first quarter. Translation: Pepsi came out with lots of new products last year, making this year's first quarter what lazy Wall Streeters like to call a "tough compare."
Never mind that Wall Street already knew this year wouldn't be like last year. After all, Pepsi Bottling just released fourth-quarter earnings in late January and had an opportunity to chat about the business going forward. Investors were hardly ignorant.
Similarly, Pepsi Bottling noted that the Easter holiday (well known for its ritual sugar-water ingesting, I suppose) this year comes well into the second quarter. Because Easter was in the first quarter last year, this somehow puts 2003's first quarter at a disadvantage.
Last, Pepsi Bottling, leaning on a popular crutch these days, says the East Coast blizzard last month stalled many of its trucks, hurting first-quarter volumes. Okay, this one makes sense, but who cares?
| Recently by Adam Lashinsky
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Is Pepsi Bottling's supply chain so tight that a few days of outages left the shelves of its customers bare? Won't folks have satisfied their Pepsi fix after the storm cleared? Jokes aside, earnings do not fall 4 percent for the year -- and a company doesn't lose nearly 20 percent of its value -- because of a few snow days in February.
If only companies said instead, "We haven't done that well so far this quarter, and we should have done a better job of flagging obvious problems before now."
Imagine what Pepsi Bottling will have to say when -- dare I say, if? -- the war begins.
Adam Lashinsky is a senior writer for Fortune magazine. Send e-mail to Adam at lashinskysbottomline@yahoo.com.
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