Consumer Staples
Packaged Foods
$8.99B
11K
Lamb Weston Holdings, Inc. engages in the production, distribution, and marketing of frozen potato products in the United States, Canada, Mexico, and internationally. It offers frozen potatoes, commercial ingredients, and appetizers under the Lamb Weston brand, as well as under various customer labels. The company also provides its products under its owned or licensed brands, such as Grown in Idaho and Alexia, and other licensed brands, as well as under retailers’ own brands. It sells its products through a network of internal sales personnel and independent brokers, agents, and distributors to quick service and full-service restaurants and chains, wholesale, grocery, mass merchants, club retailers, and specialty retailers, as well as foodservice distributors and institutions, including businesses, educational institutions, independent restaurants, regional chain restaurants, and convenience stores. The company was incorporated in 1950 and is headquartered in Eagle, Idaho.
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Net income decreased by $368.3 million to $357.2 million in fiscal 2025 from $725.5 million in fiscal 2024. Diluted EPS also fell substantially by $2.48 to $2.50. This decline is primarily attributed to higher manufacturing costs, increased interest expense, and a $100.0 million restructuring expense.
Gross profit declined by $368.1 million to $1,398.6 million in fiscal 2025, with Adjusted Gross Profit down $298.2 million to $1,460.5 million. This was primarily due to increased manufacturing costs per pound, including higher factory burden absorption from temporarily curtailed production, and low-single-digit increases in key input costs like potato, labor, and packaging, despite a 2% increase in overall sales volume.
Cash provided by operating activities increased by $70.1 million to $868.3 million in fiscal 2025 from $798.2 million in fiscal 2024. This improvement was largely driven by $349.1 million of favorable changes in working capital, primarily from reduced inventories (inventory days on hand declined 8 days) and favorable changes in accrued liabilities.
The company announced a new strategic plan, "Focus to Win," on July 23, 2025, centered on four pillars: prioritizing markets/channels, strengthening customer partnerships, achieving executional excellence, and setting the pace for industry-leading innovation. This plan includes a new Cost Savings Program.
As part of its new strategic plan, Lamb Weston initiated a Cost Savings Program expected to deliver at least $250 million of annualized run rate savings by the end of fiscal year 2028, with approximately $200 million by the end of fiscal year 2027. The program also targets $120 million in working capital improvements by the end of fiscal 2027.
The International segment's net sales increased by $81.7 million, or 4%, to $2,186.1 million in fiscal 2025, driven by a 5% increase in volume from new and existing customer wins. This growth is supported by strategic capacity expansions, with projects in China and the U.S. completed in fiscal 2024, the Netherlands in H1 fiscal 2025, and a new facility in Argentina expected to begin production in August 2025.
On October 1, 2024, management announced the FY25 Restructuring Plan, which included the permanent closure of a manufacturing facility in Connell, Washington, temporary curtailment of production lines, and headcount reductions (approximately 4% of the global workforce). This resulted in $185.8 million of pre-tax charges in fiscal 2025, with $137.1 million being cash charges.
The transition to a new ERP system in North America during fiscal 2024's third quarter led to temporary reduced visibility into finished goods inventories, affecting customer order fulfillment. This disruption contributed to declines in sales volume and margins, and the next phase of ERP implementation for production facilities was paused in fiscal 2025.
Management is undertaking working capital initiatives to decrease inventories, with inventory days on hand declining by 8 days in fiscal 2025 compared to fiscal 2024. The new Cost Savings Program, part of the 'Focus to Win' strategy, further demonstrates management's commitment to improving operational efficiency and cost structure.
In fiscal 2025, the company continued to face elevated commodity and supply chain costs, including low-single-digit increases for potatoes, edible oils, packaging, grains, starches, and energy inputs, as well as low double-digit increases in transportation and warehousing costs. Management noted that attempts to offset these pressures through price increases may not be successful or sustainable, potentially reducing sales volume.
The labor market remains tight and competitive, leading to challenges in labor availability, increased turnover, and higher labor costs, including increased overtime and wage rates. The company also faces risks from expiring collective bargaining agreements, with 65% of union hourly employees under contracts currently in negotiations or scheduled to expire within the next twelve months.
The company is highly dependent on information technology systems, which are increasingly vulnerable to sophisticated cyberattacks, exacerbated by geopolitical tensions and the use of AI. Furthermore, the ongoing ERP system implementation has caused past disruptions, and future phases could lead to further operational challenges, data loss, or financial reporting difficulties.
The value-added frozen potato products industry remains highly competitive, with the company facing large global, local, and regional competitors. In fiscal 2025, Lamb Weston increased its investments in price and trade support to compete in this environment, which contributed to a 2% decline in overall price/mix and a 3% decline in North America price/mix.
Global restaurant traffic continued to soften in fiscal 2025, impacting demand for frozen potato products. This, combined with additional industry capacity coming online and an oversupply of potatoes in fiscal 2025 (which led to a write-off of excess raw potatoes), created increased pricing pressure and could restrict the company's ability to maintain prices or lead to market share loss.
Lamb Weston benefits from long-tenured relationships with leading quick service and fast casual restaurant chains, global foodservice distributors, and large grocery retailers. The company offers a broad product portfolio to a diverse channel and customer base in over 100 countries, helping to maintain its position as the number one supplier in North America and a leading international supplier.
Manufacturing costs per pound increased in fiscal 2025, primarily due to higher factory burden absorption resulting from temporary production curtailment aimed at reducing inventory levels. Additionally, key input costs (potatoes, labor, packaging) increased by low-single-digits, and transportation and warehousing costs rose by low double-digits.
The FY25 Restructuring Plan, which included facility closure and production line curtailment, was substantially completed by the end of fiscal 2025, incurring $185.8 million in pre-tax charges. This is complemented by a new Cost Savings Program, aiming for at least $250 million in annualized savings by fiscal 2028, demonstrating a clear focus on improving operational efficiency.
The company successfully reduced inventory levels in fiscal 2025, with inventory days on hand declining by 8 days compared to fiscal 2024. This is a result of ongoing working capital initiatives aimed at bringing inventories in line with historical levels, which had exceeded typical levels in the prior two fiscal years due to lower sales volume.
The company leverages its R&D resources to drive growth through innovation, including creating new products and enhancing existing ones. R&D activities also focus on sustainability impacts of manufacturing processes, driving processing innovations aimed at reducing waste and water usage, and improving food safety and quality.
While the company transitioned central systems to a new ERP in fiscal 2024, it experienced temporary reduced visibility into finished goods inventory and paused the next phase for production facilities in fiscal 2025. This indicates ongoing challenges and significant resource investment in digital transformation efforts, with potential for further disruptions.
The company has appointed a new Chief Information Officer (May 2025) and Chief Information Security Officer (March 2025), both with extensive experience. They regularly update the Audit Committee on cybersecurity programs, policies, and emerging threats, indicating a proactive approach to managing increasing cyber risks, sophisticated attacks, and potential vulnerabilities from new technologies like AI.
The company repurchased 4,867,449 shares for $282.0 million in fiscal 2025, significantly more than the 2,294,654 shares for $225.3 million in fiscal 2024. The Board also increased the share repurchase authorization by $250 million to $750 million in December 2024. Additionally, cash dividends paid increased to $206.9 million in fiscal 2025 from $174.0 million in fiscal 2024.
Investing activities used $648.0 million in fiscal 2025, a decrease from $984.1 million in fiscal 2024, as strategic capacity expansion projects in China, the U.S., and the Netherlands were completed. The company expects to use approximately $500 million for investing activities in fiscal 2026, primarily for maintenance, facility modernization, and environmental projects, including $100 million for wastewater treatment.
Total debt and financing obligations increased to $4,148.2 million as of May 25, 2025, from $3,842.4 million in fiscal 2024, driven by increased borrowings under a new term loan agreement. This contributed to a 33% increase in net interest expense, which rose to $180.0 million in fiscal 2025 from $135.8 million in fiscal 2024.
The company expects to spend approximately $100 million in fiscal 2026 on environmental projects, primarily focused on wastewater treatment at production facilities. Furthermore, it anticipates spending about $500 million in aggregate over the next six years to comply with government environmental regulations and permit limitations, demonstrating a strong commitment to environmental stewardship.
Lamb Weston prioritizes employee health, safety, and well-being, striving for a "zero-incident culture" through comprehensive management systems and training. The company also focuses on attracting, developing, and retaining talent through competitive compensation, benefits, and development programs, including a comprehensive employee survey in fiscal 2025 to enhance workplace culture and engagement.
The Board has ultimate oversight of cybersecurity risk as part of its ERM program, with the Audit Committee regularly reviewing the cybersecurity program. The company has also adopted a code of conduct for all employees and a code of ethics for senior financial officers, and implemented an ESG oversight committee, demonstrating a commitment to responsible governance.
In fiscal 2025, the company experienced declines in sales volume due to a slowdown in restaurant traffic in North America and other key international markets. This was exacerbated by consumers responding to the cumulative effect of inflation on food consumed away from home, indicating a challenging macroeconomic environment impacting demand for value-added frozen potato products.
The company continues to face price volatility in primary raw materials (potatoes, edible oils, energy) due to factors like weather, commodity market fluctuations, and geopolitical conflicts such as the war in Ukraine and conflicts in the Middle East. These factors can adversely impact the availability and prices of inputs, increasing operational costs.
The company is exposed to risks from changes in trade, monetary, and fiscal policies, including new or increased tariffs (e.g., U.S. tariffs in April 2025) and retaliatory measures by foreign governments. Additionally, increasing regulation around food safety (e.g., acrylamide formation) and environmental standards (e.g., climate change) could lead to higher compliance costs and operational restrictions.