Tyson Foods took a “hit in the mouth” as larger-than-expected US beef supplies reduced demand for its chicken, company executives said on Monday, as the meatpacker missed Wall Street estimates for quarterly profits.
Shares were down 4.7% as Tyson also cut its outlooks for operating margins this year.
Tyson Foods was caught wrong footed by expectations for chicken demand to increase at supermarkets in the face of tightening supplies of beef and pork. Instead, meat supplies were ample and Tyson was forced to sell chicken at lower prices when demand fell short, executives said.
The results show Tyson’s struggle to forecast meat supplies as a drought in the western United States continues to drive ranchers to reduce their herds, temporarily increasing beef production.
Tyson also grappled with excess domestic supplies of chicken as the worst-ever U.S. outbreak of bird flu triggered export restrictions, 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’s sales rose 2.5% to $13.26 billion in the three months ending on Dec. 31, its first quarter, missing analysts’ average estimate of $13.52 billion, according to Refinitiv IBES data. Adjusted earnings of 85 cents per share were much lower than expectations of $1.34 per share.
The second quarter will likely be weaker, Chief Financial Officer John R. Tyson said.
“This is the first time I’ve seen all markets work against us, all at the same time,” King said.
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