Tyson Foods (NYSE:TSN) experienced a disappointing third-quarter performance, failing to meet Wall Street’s revenue and profit expectations. The company’s financial results were adversely impacted by declining chicken and pork prices, as well as a slowdown in demand for its beef products.
As a consequence of the challenging market conditions, Tyson Foods (NYSE:TSN) is taking drastic measures to curb costs. The company has decided to shut down four additional chicken plants in the United States, following previous closures, as part of its ongoing efforts to streamline operations and optimize efficiency.
CEO Donnie King acknowledged the company’s comprehensive approach to tackling the challenges, stating, “We are looking at everything in terms of how it works across the board.”
This year, Tyson has already made several cutbacks in the form of corporate job reductions and the shuttering of other chicken plants. The company has been grappling with declining profits due to reduced consumer demand stemming from inflation and higher interest rates.
To offset rising feed and labor expenses, Tyson had increased prices in the past. However, in 2023, the company faced lower prices in core protein segments, making it difficult to pass on the increased costs to consumers. The unpredictability of demand has added to the complexity of the situation, with reduced demand for beef being particularly challenging for the company.
Chief Financial Officer John R. Tyson acknowledged the diverse macro and market challenges faced by Tyson, saying, “Chicken, beef, and pork all face different types of macro and market challenges.”
The company’s net quarterly sales dropped by 3% to $13.14 billion for the quarter that ended on July 1, falling short of analysts’ projections of $13.59 billion, as reported by Refinitiv data. Tyson’s average sales prices for pork and chicken declined by 16.4% and 5.5%, respectively, while beef prices saw a 5.2% increase.
Industry experts observed that domestic consumers have been seeking lower-cost protein alternatives, leading them to shift away from higher-priced proteins like pork or reduce their overall protein consumption.
Tyson anticipates that the recently announced chicken plant closures will be effective during the first two quarters of fiscal 2024, incurring charges ranging from $300 million to $400 million.
In light of the challenges faced by Tyson in accurately predicting demand, the company is closely monitoring market dynamics. Last year, Tyson’s projections for strong chicken demand during November and December at supermarkets turned out to be inaccurate, leading to a change in the leadership of its poultry business in January.
Despite the difficulties in the beef business and reduced profit margins due to increasing livestock costs, CEO Donnie King remains optimistic about the future, stating, “If you look at the chicken business today versus where we were just a quarter ago, there are more tailwinds than headwinds in the chicken business in the near to long term.”
Tyson Foods (NYSE:TSN) reported net losses of $417 million, or $1.18 per share, in contrast to the net income of $750 million, or $2.07 per share, recorded a year earlier. On an adjusted basis, the company’s earnings stood at 15 cents per share, falling short of analysts’ expectations for a profit of 26 cents per share, according to Refinitiv data.
Featured Image: Unsplash @ tysonbrand
Author Faith Yakubu 
