Tyson Foods Closing Chicken Plants in Bid to Cut Costs — Should Investors Be Worried?
Key takeaways
- Tyson Foods is shuttering four chicken plants as it looks to save on costs
- The company’s earnings report missed earnings and revenue estimates
- Tyson Foods shares plunged as low as 10% before closing down 4%
Meatpacking giant Tyson Foods has had a rough ride of late. After struggling to navigate life after the pandemic boom and a slowdown in demand for its products, the company has been forced to cut costs. The latest casualties are four chicken plants, with thousands of jobs left in limbo at the move. Keep reading to find out how Wall Street reacted to the news.
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What’s happening with Tyson Foods?
Meat manufacturing company Tyson Foods is shutting down four more chicken plants as it looks to cut further costs. Based in Arkansas, Indiana and Missouri, the closures could affect up to 3,000 factory jobs.
It’s not the first time Tyson Foods has had to make some difficult calls as it adjusts to a shifting landscape after the highs of the pandemic. The business closed down two other chicken plants in Arkansas and Virginia earlier this year, slashing 1,700 jobs simultaneously and laying off corporate employees.
The four plants, set to shut down by early 2024 at the latest, account for roughly 10% of Tyson’s chicken production capacity. The company confirmed the work would move to existing facilities closer to its customers and help relocate workers into new positions.
What was the market reaction?
With plant closures comes a predicted cost — $300 million to $400 million, to be precise. Tyson Foods shares slumped at the news, falling as much as 10% before making a comeback. The shares finished Monday trading 4% down.
The Q2 earnings report highlighted why Tyson Foods continues cutting costs. The meatpacker missed Wall Street’s forecasts on revenue and profit: net sales fell 3% to $13.14 billion when analysts had expected $13.59 billion, while adjusted earnings per share arrived at 15 cents compared to the anticipated 26 cents.
The reason? Meat is expensive, and American households feel the pinch from every angle. Apparently, chicken and pork prices have fallen, while consumer demand for beef has slowed. In short, it’s a pretty unlucky set of circumstances for Tyson Foods.
The bottom line
Tyson Foods is trying as best as it can to right the ship, and unfortunately, that now means closing down some of its older plants that communities have sprung up around. The company can only hope the cost of living crisis abates enough for demand to pick up once more.
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