Tyson Foods Inc (TSN.N) will close two U.S. chicken plants with almost 1,700 employees on May 12, the company said on Tuesday.
The closures show the biggest U.S. meat company by sales is still trying to figure out how to improve its chicken business that has struggled for years.
Tyson will shut a plant in Glen Allen, Virginia, with 692 employees and a plant in Van Buren, Arkansas, with 969 employees, according to a statement.
Chicken demand will shift to other plants as part of a strategy to utilize the full capacity at each of its facilities, the company said.
“The current scale and inability to economically improve operations has led to the difficult decision to close the facilities,” Tyson said.
Arkansas-based Tyson said last year it could not fulfill all its orders for chicken due to limited supplies and labor, and planned to boost production. The company previously bought chicken from other producers to meet demand.
Tyson wrongly predicted last year that demand for chicken would be strong at supermarkets in November and December, Chief Executive Donnie King said on a quarterly earnings call last month. In January, the company replaced the president of its poultry business.
Shuttering plants is difficult but justified as Tyson seeks to improve performance, said Arun Sundaram, senior equity analyst at CFRA Research. He said he was not surprised by the decision and expects Tyson may implement further restructuring.
“There’s been a lot of investor pressure to management about improving the chicken margins,” Sundaram said.
Tyson shares were slightly lower in afternoon trading.
Overall sales missed analyst estimates for the quarter ending Dec. 31, when total operating margins dropped to 3.5% from 11.3% a year earlier. The company at the time said the current quarter would be weaker than the end of 2022.
“They’re desperate,” said Magaly Licolli, director of Venceremos, an organization that advocates for poultry workers in Arkansas. “They’re trying to save money and cutting workers and making other workers do more.”
Tyson had about 124,000 U.S. employees as of Oct. 1, including 118,000 workers at non-corporate sites like meat plants, regulatory filings show. In October, the company said it would relocate all corporate employees to its headquarters in Springdale, Arkansas.
The United Food and Commercial Workers Local 400 union, which represents employees at Tyson’s plant in Virginia, slammed the decision to close the facility.
“These men and women risked their lives and the safety of their families to keep this plant operational during the pandemic, and this is the thanks they get?” said Mark Federici, UFCW Local 400 president.
Tyson said workers losing their jobs could apply for positions at other company facilities.