Tyson Foods Inc (TSN.N) took a “hit in the mouth” as greater-than-expected beef and pork supplies softened demand for its chicken, executives said on Monday as the meatpacker fell behind Wall Street estimates for quarterly profit.
The company’s key markets – beef, pork, and chicken – moved in the opposite direction from what executives had expected and they were left astonished by how much meat was available in the United States. Shares of Tyson, the biggest U.S. meat company by sales, fell 4.8% at $60.97 on Monday afternoon.
The results reveal Tyson’s struggle to predict demand for meat in a high-inflation environment and as the availability of beef changes quickly while drought in the western United States prompts ranchers to decrease cattle herds by sending more animals to slaughter.
Tyson also struggled with greater-than-expected supplies of chicken as the worst-ever U.S. outbreak of bird flu led to export restrictions, causing more poultry available domestically, the company said.
“We got hit in the mouth in Q1 because of all the protein on the market,” Chief Executive Officer Donnie King told analysts on a call.
Tyson started planning in August to satisfy robust demand for chicken at supermarkets in November and December, King said. Meatpacking executives thought chicken would need to bridge an expected gap in overall meat supplies created by low beef and pork production, he said.
Their forecasts were inaccurate, though. Beef production was unexpectedly high, leaving Tyson to resell excess chicken at a discount and spend money transporting it, King said.
Last month, Tyson said Wes Morris would succeed David Bray as president of its poultry business.
The company can do a better job ensuring it has the right number of chickens in the right place at the right time, Morris said on the call. Tyson can also increase its understanding of changing consumer demand, he said.Buy Bitcoin Now
The second quarter will likely be worse than the first, which ended on Dec. 31, Chief Financial Officer John R. Tyson said. Tyson reduced its outlooks for operating margins in 2023. Consumers are displaying “unusual, erratic” behavior switching between proteins, King said.
The impact of excess meat is a turnabout after Tyson said it struggled to get meat on store shelves during the COVID-19 pandemic and ensuing supply-chain problems.
Tyson’s sales jumped 2.5% to $13.26 billion in the first quarter, falling short of analysts’ average estimate of $13.52 billion, according to Refinitiv IBES data. Adjusted earnings of 85 cents per share were way less than estimates of $1.34 per share.
“This is the first time I’ve seen all markets work against us, all at the same time,” King said.
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