Diving overview:
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Tyson Foods improved its operating profit to $312 million in the second quarter despite sluggish sales from last year, thanks to efforts to recover its chicken business as consumers turned away from food. Spending.
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Sales remained unchanged from the previous year at $13 billion. Meanwhile, chicken operating profit soared to $158 million due to improved processing efficiency following the closure of six plants. These tailwinds offset headwinds from beef and pork, supported by solid revenues from Jimmy Dean, Hillshire Farms and other prepared foods.
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Despite improvements in some parts of the company, John R. Tyson, executive vice president and chief financial officer, Cautious third quarter outlook for investors; There are uncertainties associated with consumer behavior, cow cycles, product costs, etc.
Dive Insight:
Melanie Bolden, Tyson’s group president and chief growth officer of prepared foods, said while inflation is prompting some consumers to reconsider their purchases, shoppers are not buying snacks or other discretionary purchases. The trend could benefit Tyson, he said, as he focuses more on staple foods.
“The effects of inflation, combined with historically low savings rates, are creating more cautious and price-sensitive consumers,” Bolden said. “Prudent consumers are also likely to prioritize necessities over discretionary categories. You can see it,” he said.
Because of Tyson’s huge size and product diversity, John R. Tyson said, “We are in a pretty good position to win no matter where consumers shop.”
“We see the rest of the year as being fairly balanced, but there are a lot of different factors all at play, especially with the seasonality of pork, so adjustments could be made,” Tyson said. Told.
After three years of cumulative inflation, consumers have grown tired of rising food and daily living costs and have become more selective about where and how they spend their money.
This has disrupted some retail and food service sectors as consumers increasingly choose private labels over premium brands and enjoy meals at home rather than eating out. The company is expanding its selection of seasoned and marinated meats to give shoppers “convenient restaurant-quality meal options at home,” CEO Donnie King said on an earnings call. He said he is focusing on.
Although second-quarter sales were sluggish compared to the same period last year, recovery efforts at Tyson’s chicken division helped improve operating income to $312 million.
King said the company continues to struggle with high chicken mortality and genetic issues, but operations are running smoothly and more efficiently due to lower global grain costs.
Tyson recently closed the last of six chicken processing plants it announced last year and two case-capable beef facilities to cut costs and reallocate resources. The company is also in the process of closing one of its pork plants in Iowa.
“Together, we were able to finish the first half strong. We still have work to do and believe we have a strategy in place to continue making progress and delivering long-term shareholder value.” ,” King said during the earnings call.
Still, the company expects its third-quarter results may be lower than the fourth.
“Third quarters have historically performed better than fourth quarters, but we expect commodity costs to rise in the third quarter.” Bolden said.
Tyson shares closed at $58.50 on the New York Stock Exchange on Monday, down 6% from Friday, following the release of second-quarter results. Shares fell more than 9% in morning trading.