Tyson Foods Inc (TSN.N) will shut down two U.S. chicken plants with nearly 1,700 employees on May 12, the company said on Tuesday.
The closures indicate the largest U.S. meat company by sales is still trying to figure out how to boost its chicken business that has struggled for years. Tyson Foods will close a plant in Van Buren, Arkansas, with 969 workers and a plant in Glen Allen, Virginia, with 692 workers, according to a statement.
Chicken demand will move to other plants as part of a strategy to utilize the full capacity at each of its plants, the company said.
“The current scale and inability to economically improve operations have led to the difficult decision to close the facilities,” Tyson said.
Arkansas-based Tyson said in 2022 it could not reach all its orders for chicken owing to limited supplies and labor, and planned to ramp up production. The company previously purchased chicken from other producers to satisfy demand.
Tyson incorrectly predicted in 2022 that demand for chicken would be robust at supermarkets in November and December, Chief Executive Donnie King said on a quarterly earnings call in February. In January, the firm replaced the president of its poultry business.
Closing plants is difficult but warranted as Tyson seeks to enhance performance, said Arun Sundaram, senior equity analyst at CFRA Research. He said he was not astonished by the decision and expects Tyson may carry out further restructuring.
“There’s been a lot of investor pressure on management about improving the chicken margins,” Sundaram said.
Tyson shares were marginally lower in afternoon trading.
Overall sales fell short of analyst estimates for the quarter ending Dec. 31, when total operating margins fell to 3.5% from 11.3% the prior year. The company at the time said the current quarter would be slower than the end of last year.
“They’re desperate,” said Magaly Licolli, director of Venceremos, an organization that lobbies for poultry workers in Arkansas. “They’re trying to save money and cutting workers and making other workers do more.”
Tyson had around 124,000 U.S. workers as of Oct. 1, including 118,000 workers at non-corporate sites like meat plants, according to regulatory filings. In October, the company said it would move all corporate employees to its headquarters in Springdale, Arkansas.
Buy Crypto NowThe United Food and Commercial Workers Local 400 union, which represents workers at Tyson’s plant in Virginia, criticized the decision to shut down the facility.
“These men and women risked their lives and the safety of their families to keep this plant operational during the pandemic, and this is the thanks they get?” said Mark Federici, UFCW Local 400 president.
Tyson said employees losing employment could apply for jobs at other company facilities.
