- Tyson Foods misses Q3 revenue and earnings expectations set by analysts.
- The lower chicken, pork prices and weaker beef demand contribute to the decline.
- Tyson responds with the plan to close four additional US chicken plants to reduce costs.
Tyson Foods (TSN.N) fell short of the financial expectations set by analysts for its third-quarter revenue and earnings. The decline was attributed to lower prices for chicken and pork, along with weakened demand for its beef offerings.
In response, the company has announced the closure of four additional chicken plants in the United States as part of its ongoing effort to cut costs. This decision caused the company’s shares to drop by almost 6% before the market opened.
Throughout the year, Tyson has already taken measures such as eliminating corporate positions and shutting down other chicken processing facilities. These actions were taken in response to challenges posed by diminishing profits and a reduced desire for its products due to the financial pressures faced by consumers due to inflation and increased interest rates.
In an attempt to counteract rising costs related to feed and labor, the company increased its prices last year. However, in 2023, Tyson will face difficulties due to reduced prices in key protein segments, particularly pork.
Additionally, the company has encountered challenges in accurately predicting its sales, and it had previously noted that decreased demand for beef made it hard to pass on the added expenses to its customers.
According to Chief Financial Officer John R. Tyson in an interview, “Chicken, beef, and pork all face different types of macro and market challenges. That’s persisted for a little while.”
In the recent quarter, Tyson Foods experienced a 3% decrease in net sales, totaling $13.14 billion, which was lower than the anticipated $13.59 billion projected by analysts based on Refinitiv data. The company saw a significant drop in average sales prices, with pork prices declining by 16.4%, chicken prices by 5.5%, and beef prices increasing by 5.2%.
“Domestic consumers continue to look for lower-cost protein alternatives, trading down from higher-cost proteins like pork or reducing overall protein consumption,” according to a July statement from agricultural lender Rabobank.
Tyson Foods is set to close several chicken plants during the first half of fiscal 2024, aiming to save costs. The company estimates expenses of $300 million to $400 million due to these closures.
Last year, Tyson’s prediction about strong chicken demand during the holiday season turned out to be incorrect, leading to management changes. In its beef division, lower profit margins are a challenge as a shrinking US cattle population raises livestock costs.
Drought conditions are also limiting grazing pastures. The reported quarter showed a net loss of $417 million, contrasting with a $750 million profit the previous year. Adjusted figures reveal earnings of 15 cents per share for the quarter ending on July 1.