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Tyson stays positive as retail business rises by more than 20%

Challenges to continue with COVID-19 timeline unknown, but long-term outlook remains strong

Krissa Welshans, Feedstuffs Editor

May 6, 2020

3 Min Read
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During the early third quarter, Tyson saw retail sales move to approximately two-thirds of our total company sales — from a historic average of 45% of sales.Tyson Foods

Despite impacts from COVID-19, Tyson Foods said its outlook remains positive, with its core business and financial strength expected to position it well for the long term. The company reported net income of $364 million for the second quarter of 2020, down from $426 million in the second quarter of 2019. Adjusted earnings per share were $2.43, down 13% from the prior year. Net income for the first six months was $921 million, down from $977 million in 2019.

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“While we cannot anticipate how long the challenges presented by COVID-19 will persist, we remain focused on driving long-term growth,” Tyson chief executive officer Noel White (left) said. “Our solid balance sheet, ample liquidity, scale and diversity continue to give us confidence in our long-term outlook.”

White said the health and well-being of team members remains the company’s top priority, even as it works to ensure a secure food supply amid operational challenges, including absenteeism, reduced production speeds and selected idling of plants.

“The COVID-19 pandemic in the United States has had a significant impact on our channel mix, with increased retail and plummeting foodservice demand. From a supply chain perspective, where possible, our facilities have adapted to new product mixes, which has enabled us to ship millions of pounds per week between channels and has set us apart from many of our competitors,” said White.

Related:Grocery chains limit meat purchases to prevent hoarding

The company does expect current conditions to continue during its third quarter, with a gradual recovery expected to begin in the fourth quarter, but White said this all depends on the extent to which businesses and schools are able to reopen.

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While Tyson has been successful in shifting some of its production from foodservice to retail, not all of its facilities are able to do so.

Despite the uncertainty, White said global population and income growth will continue to drive an increased need for protein. The company’s size, diversity of portfolio and broad geographic presence will give Tyson an advantage, he said. Further, he noted that changes due to the pandemic will undoubtedly remain after the crisis, including continued higher levels of e-commerce for both grocery and foodservice channels.

Retail up more than 20%

Tyson president Dean Banks reported that the company’s retail business posted gains of more than 20% during the last 13 weeks, outpacing total food and beverage as well as the top 10 food manufacturers. While panic buying has subsided from extreme levels, he said the company continues to see 15-40% volume increases versus last year, depending on the category.

“Historically, approximately 45% of our total company sales were retail, 40% foodservice and 15% international. During the early third quarter, we saw our retail sales move to approximately two-thirds of our total company sales,” Banks said.

Related:Trump’s order addresses patchwork handling of meat plant closures

Also, while Tyson has been successful in shifting some of its production from foodservice to retail, not all of its facilities are able to do so, Banks said. The volume increases in retail were not sufficient to offset the losses in foodservice. As a result, the company expects negative year-over-year volumes in the second half of fiscal 2020.

Regarding ecommerce, Tyson experienced a more than 140% month-to-month growth rate in product lines sold to a major e-commerce customer.

“We expect this trend to continue. Going forward, we expect sustained retail sales growth and a slow recovery in our foodservice channel,” White said.

Tyson also announced yesterday it will resume limited production at its Waterloo, Iowa, facility on Thursday, May 7. Team members have been invited to tour the facility Wednesday to view the enhanced safety precautions and protective social distancing measures installed throughout the plant. The pork processing facility temporarily suspended harvest operations on April 22 to test its team members for COVID-19 and a deep cleaning of the facility. 

For our most up-to-date coverage, visit the coronavirus homepage.

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This article originally appeared on Feedstuffs, a Supermarket News sister website.

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