Lamb Weston Earnings: FY25 Miss, FY26 Reset, “Focus to Win” Plan Unveiled
- Hardik Shah
- Jul 24
- 3 min read
TLDR
FY25 profit fell sharply despite volume gains, driven by competitive pricing and cost headwinds.
FY26 reset underway with a new “Focus to Win” plan targeting $250M+ in cost savings and $120M in working capital improvements by FY27.
Consumer demand for fries remains resilient, but soft global restaurant traffic continues to pressure margins.
Business Overview
Lamb Weston Holdings, Inc. (NYSE: LW) is a leading global supplier of frozen potato products, primarily serving restaurants and foodservice distributors. With operations spanning North America, Europe, and other international markets, the company focuses on value-added offerings including premium fries and innovative formats tailored for both quick-serve and retail customers.
Lamb Weston Earnings
FY25 Results (Year Ended May 25, 2025):
Net Sales: $6.45B (flat YoY)
Adjusted EBITDA: $1.22B (–14% YoY)
Net Income: $357M (–51% YoY)
Adjusted EPS: $3.35 (–34% YoY)
Q4 FY25:
Net Sales: $1.68B (+4% YoY), driven by 8% volume growth
Adjusted EBITDA: $284.9M (+1% YoY)
Adjusted EPS: $0.87 (+12% YoY)
“Lamb Weston ended the year with momentum in customer wins and retention, delivering results ahead of our updated expectations.” – Mike Smith, CEO
The year-over-year profit decline stemmed from inflationary cost pressures, higher fixed factory costs due to production curtailments, and strategic pricing investments to retain and win customers.
Forward Guidance FY26
Net Sales: $6.35B–$6.55B (–2% to +2%)
Adjusted EBITDA: $1.00B–$1.20B
CapEx: ~$500M (includes $100M for wastewater treatment)
Guidance assumes flat global restaurant traffic and sustained consumer pressure from macroeconomic and geopolitical headwinds. Most sales and margin recovery is expected in H2 due to pricing resets and a 53rd week.
Operational Performance
Key operational takeaways:
FY25 gross profit fell due to temporary production curtailments and elevated costs in warehousing and transportation.
FY26 will see increased fixed costs due to start-up of new capacity in Argentina and normalization of incentive compensation.
Inventory days were reduced by 8 days, and working capital initiatives are expected to yield $120M in improvements by FY27.
“We’re operating in some of the lowest cost potato-growing regions and are investing in capabilities aligned to our growth opportunities.” – Mike Smith, CEO
Market Insights
While global demand for fries remains high, market dynamics are shifting:
QSR traffic is down 1–3% YoY in key markets (U.S. and U.K.).
Growth is being driven by food delivery, air fryers, and QSR innovation.
Industry capacity expansions are slowing, and some projects have been postponed or canceled.
“We believe much of the new capacity in developing markets does not have the capability to produce higher-margin premium items.” – Mike Smith, CEO
Consumer Behavior & Sentiment
Despite weak traffic, demand for fries remains sticky:
Fry attachment rates in the U.S. are still ~2 points above pre-pandemic levels.
French fry servings grew 1% YoY in Q4.
QSR hamburger chains remain under pressure with high-single-digit traffic declines over a 2-year stack.
“Our category remains attractive. Fries are one of the most profitable items on restaurant menus across generations.” – Mike Smith, CEO
Lamb Weston is responding with pricing support, innovation like fast-cooking fries for non-traditional outlets, and geographic focus on regions where QSR formats are growing.
Strategic Initiatives
The newly announced “Focus to Win” plan includes:
$250M+ cost savings by FY28 ($100M in FY26)
$120M working capital improvement by FY27
Zero-based budgeting, simplification of global operations, and portfolio review of non-core assets
Innovation investment, including new global innovation hubs and next-gen products like “Fast Fries”
Capital Allocation
Dividends: $207M paid in FY25, with a Q4 dividend of $0.37/share
Share Buybacks: $282M in repurchases; $358M remains authorized
CapEx Discipline: $651M in FY25 (below target); FY26 CapEx set at $500M
The Bottom Line
Lamb Weston is realigning for long-term growth amid macro uncertainty and soft traffic. FY25 was a transition year, weighed down by pricing actions and higher costs. FY26 will be defined by operational rigor and strategic discipline, led by the “Focus to Win” playbook. Key watch items for investors: margin recovery, working capital execution, and signs of a restaurant traffic rebound.
—
Comments