By Mackenzie Tatananni
Lamb Weston is scrambling to turn its business around in the face of activist investor pressure and sluggish market conditions. Its latest earnings show the challenges continue.
The maker of french fries posted adjusted earnings of 72 cents a share for its fiscal third quarter, outstripping analysts' calls for 61 cents. Net sales ticked up 3% to $1.56 billion and topped the $1.49 billion Wall Street had anticipated.
However, the company saw mixed performance across its customer segments. Net sales to customers in Lamb Weston's North America segment, which includes the U.S., Canada, and Mexico, increased 5% in the quarter. The same metric declined 1% for customers outside North America.
On the heels of its latest results, Lamb Weston raised the midpoint of its fiscal-year sales guidance. The company now expects sales of $6.45 billion to $6.55 billion, compared with a prior range of $6.35 billion to $6.55 billion. Analysts polled by FactSet were looking for $6.53 billion.
Shares inched up 0.3% in premarket trading Wednesday. Futures tracking the benchmark S&P 500 rose 0.6%.
The company came under activist pressure last month, less than a year after a different investor, Jana Partners, reached a settlement with the company. Activist investor Starboard Value delivered a letter to CEO Michael Smith and Lamb Weston's board in March.
The firm asserted that Lamb Weston had made "meaningful progress" following Smith's appointment in late 2024, but had room to expand its cost reduction program and conduct a strategic review of operations in the Asia Pacific region.
"The return of volume growth and more rational capacity behavior are important milestones, but stabilization alone will not be sufficient to unlock Lamb Weston's full earnings potential," Starboard wrote in the letter, viewed by Barron's.
The supplier of frozen potato products, which counts McDonald's as its largest customer, has grappled with a drop in restaurant traffic globally. Softer demand for its core product -- french fries -- has weighed on its top line.
Lamb Weston has responded by lowering prices in a bid to attract and retain customers alongside a sweeping restructuring plan. The company cautioned at the time of its last earnings report in December that discounts and rising manufacturing costs would continue to pressure profits.
Gross profit declined $90.9 million to $331.6 million in Lamb Weston's latest quarter. Excluding certain items, the metric fell $92.9 million to $327.5 million, partly reflecting a $32.5 million pretax charge related to the write-off of excess raw potatoes in the International segment. Lamb Weston chalked this up to "lower-than-planned sales volumes resulting from softer market demand."
Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com
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April 01, 2026 08:57 ET (12:57 GMT)
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