(Bloomberg) -- Tyson Foods Inc. shares plunged the most since August after the company said persistent inflation has eroded consumers’ appetite for the branded and ready-to-eat offerings accounting for most of the company’s profits.

High inflation and low saving rates have prompted consumers to prioritize essential staples over discretionary categories, Melanie Boulden, who oversees Tyson’s Prepared Foods business, said in a conference call with analysts. The executive said the business that produces sausages and snacks under brands such as Wright and Jimmy Dean is likely to deliver less profits in the second half of the current fiscal year than in the first. 

“The consumer is under pressure, especially the lower-income households,” Boulden said. A 20% cumulative inflation over the past three years has contributed to create a “more cautious, price-sensitive consumer” in retail, she added.  

Tyson shares plunged as much as 9.4% in New York, to the lowest level since March. 

Consumer woes add to concerns about Tyson’s ability to more quickly restore profitability after last year’s plunge. The prepared foods unit has generated more than half of the producers’ operating profits this year as the Springdale, Arkansas-based company grapples with a major downturn in its beef business, the company’s largest, due to a shortage of cattle in the US. While its chicken and pork businesses have improved, mostly driven by lower costs, margins are still relatively compressed. 

The company also said poultry production growth in the US has been constrained by issues including poor egg fertility and elevated chicken mortality rates, echoing concerns raised last week by rival Pilgrim’s Pride Corp. What’s more, prices for the grains used as feed for birds and hogs are rebounding, threatening to erode margins over the next quarters.

“There are still some uncertainties out there,” Chief Financial Officer John Tyson said during the same call, citing concerns about consumer behavior, cattle supplies and key commodity costs. The executive added that the fiscal third quarter, which is typically the company’s strongest, may be weaker than the fourth quarter this year. 

The somewhat gloomier outlook outlined by executives eclipsed Tyson’s better-than-forecast second-quarter results. Adjusted net income in the three months ended March 30 was 62 cents a share, reversing a loss of 4 cents a share a year earlier, Tyson said in a statement Monday. That exceeded even the highest of analyst estimates compiled by Bloomberg. The company also raised its adjusted operating profit outlook, citing the improved performance of its chicken business. 

The earnings rebound was mostly driven by the chicken business. Tyson said measures to streamline its operations, including the shutdown of six poultry facilities last year, played a key role in restoring profitability. Meanwhile, operating income at the prepared foods unit shrank 7.5% from a year earlier in the quarter. The beef unit posted a loss of $34 million as higher cattle costs more than offset improved volumes and prices.

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