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(Reuters) -Tyson Foods Inc posted a surprise second-quarter loss and cut its full-year revenue forecast on Monday as prices for its beef and pork have declined, sending the U.S. meatpacker’s shares tumbling 12%.
The weaker-than-expected results indicate cash-strapped consumers are cutting back on meat spending in a high-inflation environment while a shrinking cattle herd forces Tyson to pay more for livestock, eroding margins.
CEO Donnie King, who is seeking to cut costs, said meat markets are challenging and Tyson is focused on improving profit margins. The company lowered its forecast for fiscal year 2023 sales to $53 billion to $54 billion from $55 billion to $57 billion.
“This quarter was definitely a tough one,” King told analysts on a conference call. “The current macro backdrop is clearly tough.”
Average sales prices of beef and pork fell 5.4% and 10.3%, respectively, in the quarter ending April 1. Sales volumes in Tyson’s beef segment also fell 3%, leaving the unit’s overall sales down 8.3% at $4.62 billion.
Meatpackers increased prices of their products last year to offset spiraling costs of animal feed, labor, freight and commodity prices, aggravated by a lingering U.S. drought and supply chain issues.
The drought and cost of livestock feed have driven cattle producers to send animals to slaughter instead of keeping them for breeding.
Tyson said it costs to buy live cattle increased by $305 million in the quarter and reported an adjusted operating margin of 0.2% for the beef business, down from 12.7% a year earlier. The company pegged beef margins at negative 1% to positive 1% for fiscal year 2023, compared to its previous forecast of 2% to 4%.
The Springdale, Arkansas-based meat packer’s net sales were $13.13 billion in the quarter ended April 1, compared with analysts’ average estimate of $13.62 billion, according to Refinitiv data.
Tyson posted an adjusted loss of 4 cents per share, compared with analysts’ expectations of a profit of 80 cents per share.
