Lamb Weston (LW) Counters Cost Challenges With Pricing Strategy

Group 1: Company Performance - Lamb Weston Holdings, Inc. is implementing pricing strategies to counter inflationary pressures and is expanding production capacity for long-term growth despite concerns over subdued restaurant traffic [1] - The company experienced a 4% increase in price/mix during the third quarter of fiscal 2024, attributed to ongoing pricing actions initiated in fiscal 2023, with anticipated net sales between $1.69 billion and $1.75 billion for the fourth quarter [2] - Lamb Weston has a robust balance sheet and strong cash generation, positioning it well to enhance production capacity and meet growing demand for snacks and fries [3] Group 2: Capital Expenditures - In the first three quarters of fiscal 2024, capital expenditures totaled $828.3 million, mainly for the new China factory and capacity expansion projects in Idaho, the Netherlands, and Argentina, with total anticipated capital expenditures for fiscal 2024 reaching $950 million [4] Group 3: Cost Challenges - The company has seen increased SG&A expenses, with a rise of $30.4 million to $164.4 million in the third quarter of fiscal 2024, primarily due to consolidation costs and ERP system transition expenses [6] - Despite a year-over-year increase in adjusted gross profit, Lamb Weston faces challenges from elevated costs per pound due to mid-single-digit inflation in key inputs like raw potatoes, labor, and energy [7] Group 4: Volume Concerns - Lamb Weston registered a 16% decline in quarterly volumes in the fiscal third quarter, attributed to unfilled customer orders during the ERP system transition and subdued restaurant traffic patterns [8] - The decline in volumes is also linked to the company's strategic decision to discontinue certain lower-priced and lower-margin business lines [8] Group 5: Stock Performance - The stock of Lamb Weston has declined by 15% over the past three months, contrasting with the industry's growth of 1.9% [9]