The international meat giant revealed the move on 21 November, as it continued to battle a class action law suit, revealed lower than expected profits in company results and faced a pricing debate.
In an earnings call, Kenneth Zaslow, an analyst at BMO Capital Markets, said: “I would just say your timing of your retirement may not be perceived as optimal.
“Tyson is in the middle of a class action suit, earnings fell short of expectation on the perception that you have kind of reached peak earnings. And you are in a debate over your Georgia Dock pricing. Why not hand the reins over once the dust settles a little bit?”
'Surprise'
Later in the call, Jeremy Scott, a financial advisor at CLSA, said: “I also echo some of the surprise, maybe at the timing.”
Tyson Foods, alongside Pilgrim’s Pride Corp and Sanderson Farms Inc, faces a class action law suit, filed last month, which alleges price collusion in the broiler chicken market.
Responding to Zaslow’s comments, Smith, who became CEO in November 2009, said: “Ken, I think this is an excellent time for us to be making this transition. Company is off to a phenomenal start for quarter, we are on a very solid foundation.
“As we have said before, we dispute the claims, we are looking forward to our opportunity to defending ourselves in court on the litigation. So that has nothing to do with the transition. So, yes, there is not a better time, we have got a great team, Tom is a very capable leader. So in terms of all of that there couldn’t be a better time to be making this transition.”
'Thrilled'
Hayes, a former executive director of The Hillshire Brands Company, which merged with Tyson Foods in August 2014, responded to Zaslow’s comments: “What I’ll say is the timing, I think from everybody’s perspective actually couldn’t be better given the great shape that Donnie has brought the Company to, and we are all just thrilled about the opportunities ahead of us.
“As it relates to the Q4 [fourth financial quarter] to Q1 [first quarter of the new financial year], yes there is a shortfall in Q1, and I think largely you will see it show up in the strong Q4 show up in Q1… But I think we are in great shape particularly in beef and pork ...”
Analysts also highlighted question marks recently raised by US media over the Georgia Dock pricing index for chicken prices, which Tyson Foods uses, amid claims the system has overly-inflated chicken prices.
However, Hayes played down the relevance of the claims, saying only 3.5% to 4% of total chicken sales used the Georgia Dock index.
In a press release referencing Smith’s replacement by Hayes, Tyson Foods said Smith would continue to be available to Tyson on a consultancy basis for a three-year period.
John Tyson, chairman of the board of directors, said: “The board’s decision to name Tom CEO at this time was based on both his track record and how his skills align with the company’s strategic direction and continuing evolution.
'Utmost confidence'
“The board has the utmost confidence in Tom’s ability to build on the platform Donnie has created, to expand further into developing markets, new product categories and proprietary food experiences, and to continue investing in our core nine categories.”
Hayes is a 29-year veteran of the consumer products industry. Before he became president, he was chief commercial officer at Tyson Foods, overseeing all North American sales, plus the foodservice prepared foods business. He also previously served as president of foodservice.
Previously, Hayes served as chief supply chain officer for The Hillshire Brands Company, responsible for operations including procurement, manufacturing, food safety and quality, engineering, and logistics.
Before that, Hayes was senior vice president and chief supply chain officer for Sara Lee North America, responsible for supply chain activities for the company’s North American Retail and Foodservice businesses. Prior to this role, Hayes was president of Sara Lee Foodservice.
Tyson Foods said in the 12 months ended 1 October 2016, total sales fell from $41.4bn to $36.9bn. However, operating income increased from $2.2bn to $2.8bn. Sales fell across the board in all categories in which the company was active, chicken, beef, pork, prepared foods and other.