Core Insights - Jana Partners is advocating for significant changes at Lamb Weston, including a board overhaul or a potential sale of the company [1] - The activist investor has gained support from former executives, including Jeffery DeLapp, who holds 458 voting shares [1] - Lamb Weston has faced challenges, reporting an unexpected loss and cutting its guidance due to declining demand for frozen potatoes [1] Company Developments - Lamb Weston recently replaced its CEO, with COO Michael J. Smith set to take over on January 3 [1] - The company has seen its shares decline by more than a third this year, despite a recent 4% increase following Jana's actions [1] - Jana Partners holds over a 5% stake in Lamb Weston and has aligned with six food-industry executives to challenge the board [1] Financial Performance - Lamb Weston reported a loss in its second-quarter 2025 financial results, which prompted criticism from Jana Partners [1] - The company cited softening demand for frozen potatoes, which is expected to continue into 2026 [1] - Jana described the financial results as "disastrous" and criticized the board for failing to act in the best interests of shareholders [1]

Core Viewpoint - Lamb Weston Holdings, Inc. is facing significant challenges in the frozen potato industry, leading to a weaker-than-expected performance in its second-quarter fiscal 2025 and a lowered financial outlook for the remainder of the fiscal year [1][10]. Group 1: Market Challenges - The company is experiencing a decline in global restaurant traffic, increased competition, overcapacity in the market, and rising manufacturing costs [3][10]. - Lamb Weston reported a 6% decline in quarterly volume due to weak global restaurant traffic and customer share losses, with North America segment volume falling by 5% and International segment volume dropping by 6% [7]. - The company's price/mix decreased by 2% due to competitive pressures and unfavorable channel and product mix [4]. Group 2: Financial Performance - In the second quarter of fiscal 2025, Lamb Weston’s adjusted gross profit decreased by $134.9 million to $343.5 million, attributed to increased manufacturing costs, unfavorable price/mix, and reduced sales volumes [8]. - The company has revised its annual net sales target range to $6.35-$6.45 billion, down from $6.6 billion to $6.8 billion, reflecting heightened competitive pressures and challenges in both International and North America segments [11]. - Adjusted net income guidance has been lowered to $440-$460 million, with adjusted earnings per share revised to $3.05 to $3.20, down from previous estimates of $600 million to $615 million and $4.15 to $4.35, respectively [11]. Group 3: Future Outlook - Lamb Weston anticipates that challenging conditions will persist through fiscal 2025 and into fiscal 2026, driven by continued softening in global frozen potato demand and accelerated capacity additions [10]. - The company is implementing a restructuring plan to improve operating efficiency and profitability, but faces an uncertain future due to weak demand and rising costs [15].

Core Insights - The performance of Lamb Weston (LW) in international markets is crucial for assessing its financial resilience and growth prospects [2][3] - The company's total revenue for the quarter was $1.6 billion, a decrease of 7.6% from the previous year [4] Revenue Breakdown - North America contributed 66.97% of total revenue, amounting to $1.07 billion, which was a surprise decrease of 3.25% compared to analyst expectations [5] - International revenue was $528.8 million, accounting for 33.03% of total revenue, also below expectations by 6.49% [6] Future Projections - Analysts expect total revenue for the current fiscal quarter to be $1.55 billion, reflecting a 6.1% increase from the previous year, with North America and International expected to contribute 66.8% and 36.9% respectively [7] - For the full year, total revenue is projected at $6.49 billion, a slight increase of 0.3% from the prior year, with North America and International expected to account for 68.2% and 34.4% respectively [8] Conclusion - Lamb Weston's reliance on international markets presents both opportunities and risks, making it essential to monitor international revenue trends for future forecasts [9][10]

Group 1 - The fundamental outlook for Lamb Weston Holdings (NYSE: LW) is considered poor, with no immediate catalysts to improve stock sentiment [1] - The investment approach emphasizes value investing principles and a focus on long-term growth, aiming to buy quality companies at a discount to their intrinsic value [1]

Group 1 - The investing group Ian's Insider Corner offers features such as a Weekend Digest, trade alerts, and direct access to Ian [1] - Ian Bezek, a former hedge fund analyst, specializes in high-quality compounders and growth stocks at reasonable prices, focusing on markets in Latin America and developed markets [4] Group 2 - Membership in Ian's Insider Corner includes access to initiation reports for new stocks, an active chat room, and weekly updates [3]

Financial Performance - For the thirteen weeks ended November 24, 2024, the net income was a loss of $36.1 million, compared to a net income of $215.0 million for the same period in the previous year[47]. - Adjusted EBITDA for the thirteen weeks ended November 24, 2024, was $281.9 million, down from $376.9 million in the prior year[47]. - Restructuring plan expenses amounted to $159.1 million for the thirteen weeks ended November 24, 2024[47]. - Interest expense for the thirteen weeks ended November 24, 2024, was $43.3 million, compared to $29.1 million for the same period in the previous year[47]. - The company recorded approximately $39 million related to a voluntary product withdrawal during the twenty-six weeks ended November 24, 2024[49]. - The company reported unrealized derivative losses of $3.0 million for the thirteen weeks ended November 24, 2024[47]. - Foreign currency exchange losses were $9.6 million for the thirteen weeks ended November 24, 2024[47]. Debt and Financing - The company entered into a new $500 million term loan facility, using $225 million to repay the Term A-1 loan and $275 million for the revolving credit facility[42]. - At November 24, 2024, the company had $2,990.9 million of fixed-rate and $1,106.8 million of variable-rate debt outstanding[61]. - A one percent increase in interest rates related to variable-rate debt would have resulted in an increase in interest expense of $11.2 million annually ($8.6 million after-tax) at November 24, 2024[61]. - At May 26, 2024, the company had $2,495.0 million of fixed-rate and $1,341.7 million of variable-rate debt outstanding[61]. - A one percent increase in interest rates related to variable-rate debt would have resulted in an increase in interest expense of $13.6 million annually ($10.6 million after-tax) at May 26, 2024[61]. Market Sensitivity - A hypothetical 10 percent decline in market prices would have resulted in a charge to "Cost of sales" of $8.8 million ($6.6 million after-tax) as of November 24, 2024[58]. - A hypothetical 10 percent adverse change in exchange rates versus the U.S. dollar would result in losses of $73.9 million ($56.2 million after-tax) as of November 24, 2024[60]. - A hypothetical 10 percent decline in market prices would have resulted in a charge to "Cost of sales" of $9.2 million ($6.9 million after-tax) as of May 26, 2024[58]. - A hypothetical 10 percent adverse change in exchange rates would result in losses of $63.3 million ($48.1 million after-tax) as of May 26, 2024[60]. Accounting and Reporting - The company has not reported any material changes to off-balance sheet arrangements[54]. - There were no material changes to critical accounting policies and estimates during the second quarter of fiscal 2025[55].

Lamb Weston Holdings, Inc. (LW) posted dismal results for the second quarter of fiscal 2025, with the top and the bottom lines declining year over year. Quarterly net sales and earnings missed the Zacks Consensus Estimate. LW’s shares tumbled 21.7% in the premarket trading session today.Find the latest EPS estimates and surprises on Zacks Earnings Calendar.LW’s bottom line came in at 66 cents, missing the Zacks Consensus Estimate of $1.02. The metric declined 54% due to reduced adjusted income from operatio ...

U.S. stocks traded higher midway through trading, with the S&P 500 gaining around 0.4% on Thursday.The Dow traded up 0.39% to 42,493.51 while the NASDAQ rose 0.39% to 19,468.70. The S&P 500 also rose, gaining, 0.38% to 5,894.42.Check This Out: Top 3 Consumer Stocks You May Want To Dump This QuarterLeading and Lagging SectorsUtilities shares rose by 1.1% on Thursday.In trading on Thursday, health care shares fell by 0.9%.Top HeadlineThe U.S. economy grew by an annualized rate of 3.1% in the third quarter com ...

Shares of Lamb Weston (LW -21.70%) -- North America's largest potato producer -- were sliding again after it delivered third-quarter results before the start of Thursday trading that missed estimates, offered weak guidance, and said it was replacing its CEO.As of 11:37 a.m. ET, the stock was down 21.2% on the news. Lamb Weston's problems are multiplyingLamb Weston's revenue in the quarter fell by 8% year over year to $1.6 billion, which missed the consensus estimate of $1.67 billion. The underperformance ca ...

Financial Data and Key Metrics - Net sales declined by 8% compared to the prior year quarter, with volume declining 6% and price-mix declining 2% [12][13] - Adjusted EBITDA fell by $95 million to $282 million, primarily due to a $135 million decline in adjusted gross profit [19] - North America segment sales declined by 8%, with volume down 5% and price-mix down 3% [15][17] - International segment sales declined by 6%, with volume down 6% and price-mix flat [17][18] - The company ended the quarter with $80 million in cash and $1.2 billion available under its revolving credit facility, with net debt at $4 billion and a leverage ratio of 3.4x [23][24] Business Line Performance - North America segment faced volume declines due to reduced restaurant traffic and customer share losses, particularly in food-away-from-home channels [15] - International segment experienced volume declines due to softening restaurant traffic in key markets like Germany, France, and Spain, as well as competitive pressures in the Middle East and Asia Pacific [17][18] - The company exited lower-priced and lower-margin business in EMEA, which contributed to volume declines but will no longer be a headwind moving forward [18] Market Performance - U S restaurant traffic declined by about 2% year-over-year, with QSR traffic declining by 1 5% [15] - In Europe, restaurant traffic was flat in the UK but declined in Germany, France, and Spain, while Japan saw QSR traffic growth decelerate [17][18] - China's restaurant traffic growth remained soft, and the Middle East and Asia Pacific faced intense competition, leading to customer share losses [18] Strategic Direction and Industry Competition - The company is evaluating opportunities to reduce manufacturing and supply chain costs, improve sales execution, and expand its total addressable market by leveraging proprietary technologies [10] - Competitors have announced plans to add over 3 5 billion pounds of capacity between 2024 and 2027, primarily in Europe, China, and Brazil, which could lead to industry capacity utilization dropping to the mid-to-high 80s [30][31][33] - The company has implemented a restructuring plan to address the supply-demand imbalance, targeting $55 million in cost savings for fiscal 2025 and $85 million in annualized savings by fiscal 2026 [34] Management Commentary on Operating Environment and Outlook - The company expects the challenging operating environment to persist due to weak restaurant traffic trends and increased industry capacity [10] - Management revised its fiscal 2025 net sales target to $6 35 billion to $6 45 billion, down from the previous range of $6 6 billion to $6 8 billion, and adjusted EBITDA target to $1 17 billion to $1 21 billion, down from $1 38 billion [38][39] - The company anticipates higher volume growth in the second half of the year, driven by international and North America segments, but expects price-mix to decline due to competitive pressures [44][45] Other Important Information - The company announced a $250 million increase to its share repurchase authorization, bringing the total available under the program to $560 million [53] - A quarterly dividend increase of $0 01 per share was declared, bringing the dividend to $0 37 per share [54] - The company expects capital expenditures to decline significantly in the second half of fiscal 2025, targeting total annual capital expenditures of $750 million [49] Q&A Summary Question: Structural EBITDA Margin in Light of Industry Capacity - The company expects normalized EBITDA margins to be in the range of 19% to 20% in the short to medium term, assuming all announced capacity expansions come online [63][64] Question: Competitor Actions on Capacity - Management believes competitors are also evaluating the industry dynamics but has not yet seen similar actions to curtail production or close facilities [67][68] Question: International Business Pressures - In Europe, pricing pressure is driven by a better-than-expected potato crop, while in Asia, competitive dynamics and ERP-related challenges have impacted customer share [74][75] Question: Gross Margin Deleverage - Production inefficiencies and unplanned downtime contributed to lower gross margins, but improvements are expected as the new Chief Supply Chain Officer implements cost-saving initiatives [79][80] Question: Customer Losses and Pricing - Customer losses were primarily due to competitive pricing, with no significant service-related issues [84] Question: Share Repurchase Aggressiveness - The company plans to opportunistically repurchase shares as free cash flow increases in the second half of the year [86] Question: Activist Investor Concerns - Management declined to comment on potential board changes or the possibility of a sale, focusing instead on the earnings outlook and leadership transition [91] Question: Demand Trends and GLP-1 Impact - Weak consumer demand is attributed to inflation and reduced restaurant traffic, with no significant impact observed from GLP-1 weight loss drugs [117][118] Question: New TAM Opportunities - The company is exploring opportunities with non-traditional customers, such as those not previously offering fries or tater tots, but did not provide specific volume potential [122] Question: Capacity Utilization and Industry Slack - The company's utilization rate is in line with industry standards in the low 90s, with improvements expected as production inefficiencies are addressed [126][127] Question: Inventory Levels - Inventory levels are typically elevated in Q2 and Q3 due to potato harvests, with reductions expected as the year progresses [149] Question: Leverage Target - The company maintains its leverage target of 3 5x, with no changes despite increased buybacks and dividends [153]