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Tyson Foods Faces Challenges Amidst Rising Inflation
May 6, 2024
Tyson Foods Inc. recently saw a significant drop in its shares due to ongoing inflation impacting consumer demand. The company’s profits, mainly driven by branded and ready-to-eat products, have been affected by consumers prioritizing essential items over discretionary spending.
Melanie Boulden, overseeing Tyson’s Prepared Foods business, highlighted that high inflation rates and low savings have made consumers more cautious about spending, especially lower-income households. This cautious approach has led to reduced profits, with expectations of weaker performance in the second half of the fiscal year compared to the first.
Tyson’s beef business, its largest sector, has faced challenges, while its prepared foods unit has been a major source of operating profits. Despite these challenges, Tyson raised its profit outlook for fiscal 2024, mainly due to improvements in margins in its chicken and pork businesses.
However, uncertainties remain regarding consumer behavior, U.S. cattle supplies, and commodity costs. The company anticipates potential weakness in the third quarter, considering these variables along with the seasonal nature of pork and prepared food businesses.
Tyson reported adjusted net income of 62 cents per share for the quarter ending March 30, a significant improvement compared to the previous year. The increase was primarily driven by the chicken business, benefiting from lower costs, including feed. Additionally, streamlining operations, such as the closure of six poultry facilities last year, contributed to restoring profitability.
Earlier this year, Tyson also faced boycotts after allegations surfaced about plans to hire migrants at its factories. The uproar stemmed from a debunked report suggesting recruitment of asylum seekers in New York City. Tyson swiftly refuted the claims, emphasizing its commitment to legal employment practices through programs like E-Verify and IMAGE. Despite job creation history, Tyson faced backlash over a plant closure in Iowa, although unrelated to refugee hiring plans. Conservative outrage fueled the boycott, highlighting immigration tensions ahead of the presidential election amidst a surge in asylum seekers at the U.S.-Mexico border.
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