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Coca Cola reports 1% Q1 decline, predicts fallout from coronavirus pandemic

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April 21, 2020

Net revenues for the Coca-Cola Company declined 1% to $8.6 billion in the first quarter, according to a company press release on first quarter performance as well as the impact to date from the coronavirus pandemic. Since the beginning of April, the company has experienced a volume decline globally of approximately 25%, with nearly all of that decline coming in away-from-home channels.

Organic revenues were even for the first quarter. Revenue performance included even concentrate sales and even price/mix. The quarter included one less day, which resulted in an approximate 1-point headwind to revenue growth.

Operating margin, which included items impacting comparability, was 27.7% versus 28.0% in the prior year, while comparable operating margin (non-GAAP) was 30.7% versus 28.2% in the prior year. Solid underlying operating margin (non-GAAP) expansion was partially offset by currency headwinds.

Earnings per share grew 65% to $0.64, and comparable EPS (non-GAAP) grew 8% to $0.51.

The company entered 2020 with solid momentum, coming off strong results in 2019. Through the end of February, the company was growing volume 3%, excluding China, and was on track to achieve its previously provided full year 2020 targets.

In March, as the coronavirus pandemic spread globally, countries increased social distancing and shelter-in-place mandates. In markets around the world, the company subsequently saw significant changes in consumer purchase patterns, notably substantial declines in away-from-home channels. In at-home channels, the company witnessed early pantry loading in certain markets, followed by more normalized demand levels, along with a sharp increase in e-commerce.

Given that away-from-home channels represent approximately half of the company's revenues, the company expects the net effect of these consumer purchase patterns to have a significant impact on second quarter results. For context, since the beginning of April, the company has experienced a volume decline globally of approximately 25%, with nearly all of that decline coming in away-from-home channels.

The ultimate impact on the second quarter and full year 2020 is unknown at this time, as it will depend heavily on the duration of social distancing and shelter-in-place mandates, as well as the substance and pace of macroeconomic recovery. However, the impact to the second quarter will be material.

The company believes the pressure on the business is temporary and remains optimistic on seeing sequential improvement in the back half of 2020. The company, along with its bottling partners, is continuing to adapt quickly to the current environment, with a focus on mitigating the near-term impact while positioning for success coming out of the crisis.

For an update on how the coronavirus is affecting the convenience services industry, click here.