On Monday (August 7), Tyson Foods fell short of the revenue and profit projections set by Wall Street for the third quarter. This was primarily due to declining prices of chicken and pork, along with a decrease in demand for their beef products, which negatively impacted their financial performance.
In its latest effort to cut expenses, the company has announced the closure of an additional four chicken plants across the United States. This decision has caused the company’s shares to drop by nearly 6% in premarket trading.
Facing diminished profits and a decrease in consumer demand resulting from inflation and elevated interest rates, Tyson has already taken measures such as eliminating corporate positions and closing various chicken facilities earlier this year.
In an attempt to counter the escalating expenses related to feed and labor, the company raised its prices in the previous year. However, in 2023, it has encountered challenges due to reduced prices in essential protein categories like pork. Additionally, the company has faced difficulties in projecting sales and previously acknowledged that decreased demand for beef has posed obstacles in transferring increased costs to consumers.
“Chicken, beef and pork all face different types of macro and market challenges,” Chief Financial Officer John R. Tyson said in an interview. “That’s persisted for a little while.”
Quarterly net sales declined by 3% to reach $13.14 billion, which fell short of the projected $13.59 billion as per Refinitiv data. The company witnessed a 16.4% decrease in average sales prices for pork, a 5.5% decline for chicken, and a 5.2% increase for beef.
“Domestic consumers continue to look for lower-cost protein alternatives, trading down from higher-cost proteins like pork or reducing overall protein consumption,” agricultural lender Rabobank said in July.
Tyson anticipates the cessation of operations at the chicken plants to occur within the initial two quarters of its fiscal year 2024. The company projects incurring charges ranging between $300 million and $400 million as a result of these closures.
Tyson wrongly predicted last year that demand for chicken would be strong at supermarkets in November and December, Chief Executive Donnie King said in February. In January, the company replaced the president of its poultry business.
In the beef business, Tyson faces reduced profit margins as a diminishing U.S. cattle herd forces packers to pay more for livestock. Lingering drought conditions limit the amount of pasture available for grazing.
Net losses attributable to Tyson were $417 million, or $1.18 per share, in the reported quarter, compared with a net income of $750 million, or $2.07 per share, a year earlier. On an adjusted basis, the company earned 15 cents per share in the quarter ended July 1.
