Tyson Foods, Inc. 2QFY24: Outlook Update on Consumers, Chicken, Beef & Pork

May 15, 2024 | Corporate Insights, No Bull Economics

Tyson Foods reported that the consumer is under pressure, especially lower-income households who are struggling with 20% cumulative retail inflation over the last 3 years & a historically low savings rate. Price-sensitive consumers are prioritizing essential staples over discretionary categories and management reported shifts from fine dining into QSR & QSR slippage into meals consumed at home. Tyson is closely monitoring the cattle cycle & key commodity costs.

Strategy & 2QFY24 Financial Results

  • Tyson is expanding its offerings of seasoned & marinated meats across its Beef, Pork & Chicken portfolio.
  • The goal is to offer convenient restaurant-quality food options at home.
  • Tyson’s dollar share in bacon was at a record high level during the quarter & management expects its new bacon facility will drive additional share gains.
  • The company’s enterprise-adjusted operating income increased $341MM to $406MM during the quarter, driven primarily by a significant improvement in Chicken profitability.

Chicken Outlook

Tyson Foods Chicken Highlights

  • Despite the Chicken Segment’s 2QFY24 revenue decline, its adjusted operating income increased +$325MM y/y, reflecting: lower grain costs; and improved yield, labor efficiencies & plant utilization rates.
  • Management questions the USDA’s forecast for a +1% y/y increase in chicken supply during 2024. This opinion reflects that broiler mortality continues to be elevated while hatchability continues to be 3% to 5% below historical rates.
  • Chicken genetic selection over the last several years has skewed towards broader characteristics like yield & feed conversion and it is notable that efforts to eliminate antibiotics across the supply chain have driven the increase in broiler mortality.

Beef Outlook

Tyson Foods Beef Highlights

  • Limited cattle supplies led to spread compression, driving a 2QFY24 decline in its Beef Segment AOI. Tyson’s goal is to offset some of the challenges of a tight cattle supply environment by improving labor utilization while managing mix to meet customer & consumer demand.
  • A shift from an El Nino weather pattern to a dryer La Nina pattern pressures pasture conditions which are extremely important to heifer retention. However, heifer retention benefits from a double-digit decline in the number of cattle going to slaughter during 2022 & 2023.

Pork Outlook

Tyson Foods Pork Highlights

  • Better spreads & ongoing operational execution drove an increase in the Pork Segment’s 2QFY24 AOI. A decision to close one of its pork facilities reflects efforts to optimize its footprint by reallocating resources to more efficient plants.
  • Tyson reported genetic improvement across the entire industry, leading to additional pigs per liter (the best herd health over the last 10 years). Management expects ample supply going forward.

Tyson Foods 2Q24 Financials

Marketing Consumer Research Weekly Banner

Nobull consumer research weekly

No Bull Economics

Get Corporate & Market Insights in your inbox