Tyson Foods Faces Revenue Challenges and Announces Closure of Four U.S. Chicken Plants

Tyson Foods, a leading multinational meat producer, reported disappointing third-quarter revenue and profit on Monday, attributing the decline to falling chicken and pork prices and slowing demand for beef products. The company revealed its decision to shut down four additional U.S. chicken plants as part of a cost-cutting strategy, leading to a premarket drop of nearly 6% in its shares.

 

With rising inflation and higher interest rates putting pressure on household budgets, some consumers have become more cautious, resulting in reduced meat purchases. This trend has adversely affected sales for Tyson Foods, as well as other major meat producers like Hormel Foods.

 

The company has faced challenges in predicting sales and struggled to pass on higher costs to consumers due to decreased demand for beef. In the third quarter, net sales declined by 3% to $13.14 billion, falling short of analysts’ expectations of $13.59 billion. The average sales prices for pork and chicken decreased by 16.4% and 5.5%, respectively, while beef prices rose by 5.2%.

 

In an effort to mitigate costs, Tyson Foods has already eliminated U.S. jobs and closed two chicken processing plants. The additional four plants are scheduled to be closed next year.

 

Tyson Foods also faces reduced profit margins for beef processing, as a shrinking U.S. cattle herd has led packers to pay higher prices for livestock. Furthermore, lingering drought conditions have limited the availability of pasture for grazing, compounding the challenges in the beef sector.

 

According to Rabobank, domestic consumers are seeking lower-cost protein alternatives and scaling back on protein consumption in general, contributing to the company’s revenue struggles.

 

In the reported quarter, Tyson Foods incurred a net loss of $417 million, or $1.18 per share, compared to a net income of $750 million, or $2.07 per share, during the same period the previous year. On an adjusted basis, the company earned 15 cents per share in the quarter ended July 1.

 

The closure of additional chicken plants and the ongoing challenges in the beef sector highlight the complexities Tyson Foods faces in navigating the current economic landscape and meeting changing consumer demands.

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