So, I think with that over the long run, we project to be competing and performing as a best-in-class chicken company from a margin standpoint, and that’s how we realize that. I think the other big move that we made, we’ve seen it in our live performance results this year is the switch from NAE to NAIHM and that provides us for a lot more consistency in order to meet customer demand and expectations from a live standpoint.
Michael Lavery: Okay. That’s helpful. Great. And just a follow-up on Prepared Foods. I understand it’s obviously always competitive, and you touched on some of those dynamics. But can you give a sense on promotional levels? Would you say they’re normalized again? Do you see increasing activity there? You called out some of the mix headwinds was priced otherwise flat? Or I guess maybe could you dissect the price and mix pieces of that, and just a sense of how the environment looks from a promotional perspective? Is it getting more intense, or does it seem to have stabilized? What’s your sense of how that looks?
Melanie Boulden: Yeah. So, this is Melanie. I would say that promotional activity is continuing — we are continuing to see intense promotional activity. In terms of how we are operating, we have our highest-performing our highest-ROI merchandising initiatives in place to drive our feature and display and choice at shelf, and we are seeing it working. But to your point, competitive activity in this area is strong and we’re just focused on controlling our controllables. And in addition to our promotional activity, we’re focused on, as I said before, increasing our MAP investment to engage consumers. Again, we’ve got strong innovation in place, and we’re enhancing — when you asked about price, we’re making sure that we enhance our price pack architecture structure to address competitive pricing as well.
Michael Lavery: Okay, great. Thanks so much.
Donnie King: Thank you.
Operator: The next question comes from Alexia Howard with Bernstein. Please go ahead.
Alexia Howard: Good morning, everyone.
Donnie King: Good morning.
John R. Tyson: Good morning, Alexia.
Alexia Howard: Okay. So two ones. Firstly, on the financial side. Your leverage has obviously come down, but it sounds as though weather — there’ll be more sequential improvement in operating income next quarter in CBD given the weather issues. Do you expect leverage to continue to come down from here, or could next week — next quarter be the high point?
John R. Tyson: Yeah. Thanks, Alexia. So, I think two questions in there. The first off is just independent of weather — I want to make sure we’re tracking. Independent of weather, we expect our Q2 to typically be one of the softer quarters from an operating income standpoint. And so then that’s exacerbated by weather a little bit. In the long run, we are projecting for leverage to continue to come down. That’s driven by a couple of things. One, we’re getting more efficient with working capital. We’ve talked about some inventory clearing in our — around our segments. Exactly kind of where things happen in the first half of the year, we can say that we would expect to end our fiscal 2024 in a better net leverage position from a ratio standpoint than last year.
That’s evident also in our pull down on CapEx and what we projected, which is to be a better year from an operating income and EBITDA standpoint than ’23. So that’s — we’re trending in the right direction, aggressively pursuing that at or around 2 times net leverage ratio. And we would project that we’ll get to do that, continue to invest in our business and also support our dividend from a capital allocation standpoint.
Alexia Howard: Thank you. And then just as a follow-up, sticking with Prepared Foods, it sounds as though this mix shift into foodservice is obviously a good thing overall, but it is pushing the pricing down and potentially there might be a negative mix shift with margins. Are you able to clarify whether that price pressure will continue in future quarters? And are you able to talk about the margin differential between branded retail and foodservice and private label, which I assume is lower?
Donnie King: Okay. Alexia, this is Don. There are a lot of questions in there. Here’s what I can tell you relative to foodservice. And keep this in mind, we’ve talked about it today because you have seen some volume improvement relative to foodservice. I would remind you that we had given up some business in the middle of pandemic, and the nature of those contracts can be quite lengthy. And we’re starting to get back in when those open up and get some volume. We have maintained in Prepared Foods the capacity which produces those products. So, if you think about it from that perspective, this overhead in these assets have been a drag on our business to some degree. We’ve gotten new volume to put into those assets. So that’s one piece of it.
We’re probably not going to talk about the differential in the margin structure between foodservice and retail. But it’s important that we regain that volume in foodservice. But our retail — our iconic brands in retail continuing to support those and grow those and innovate and do merchandising like Melanie has talked about before, those are all still critical — mission critical for us.
Melanie Boulden: Yeah. And the only thing, Alexia, I would like to add, because I think Donnie did a nice job of highlighting more of the top-line, but also as we think about our business and our performance, one of the reasons that we were able to deliver a solid quarter and what we plan on continuing to do is focus on our controllables, the things we can control, especially from an operational efficiency standpoint. So, we’re really focused on improving our service levels, maximizing our asset utilization by driving down our overhead and increasing our yield and labor efficiencies. And importantly, we’re driving automation to improve our supply chain execution. So, from a top-line perspective, yes, your question was about mix, but I just wanted to reiterate that we’re also working all levers of the P&L to ensure that we drive strong bottom-line as well.
Alexia Howard: Great. Thank you very much. I’ll pass it on.
Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Donnie King for any closing remarks.
John R. Tyson: Before Donnie wraps us up, I just want to make sure we land one final point related to our outlook for 2024. And we’ve had a lot of great discussion this morning about our various segments. We obviously moved the range on Chicken and on Pork. But I just want to highlight our reaffirmation of the total company guidance from $1 billion to $1.5 billion based on a lot of various macro factors and the interplay between all of our segments. I think we have reasons to believe while we could achieve a range of outcomes in that window, the midpoint plus or minus, we designed it that way for a reason, and it feels like a way to think about the total look. And then obviously, as we move through Q2 and through the balance of the year, we’ll give any revisions as necessary.
But cautiously optimistic, promising start to the year, but still a lot of factors at play around total protein availability, consumer sentiment and the other unpredictable factors that would get us to where we are. So, Donnie, I think with that, I hand it over to you.
Donnie King: Okay. I want to say — once again, say thank you to all 139,000 of our team members. We’re here today and have a good story to tell because of those 139,000 team members who contribute to us each and every day. Their efforts are what makes and what drives this business forward. Our strategy is working. We have the right leadership team in place to deliver, and we’re poised to drive long-term opportunity and shareholder value. We’ve taken some steps in the right direction, but we have a lot of work to do. Thanks for your continued interest in Tyson Foods, and we look forward to speaking with you again soon.
Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
