Lamb Weston, a prominent player in the frozen potato industry, has reported a decline in expected earnings for fiscal year 2025, as detailed during a recent financial disclosure. Following an unexpected decrease in revenue and earnings for the latest fiscal fourth quarter, the company is bracing for further challenges in the upcoming year. For fiscal 2025, Lamb Weston has projected earnings per share (EPS) between $4.35 and $4.85, indicating a downturn from the unadjusted EPS of $4.98 recorded for fiscal 2024, which reflects a dramatic year-over-year decrease of 28%.
Expectations among two analysts surveyed by Capital IQ were predicting a GAAP EPS of $5.99 for the current year. This forecast prompted a significant reaction in the market, with Lamb Weston’s shares plummeting by 27% during midday trading. The anticipated difficulties in fiscal 2025 are attributed to several market dynamics.
Chief Executive Tom Werner remarked on how menu price inflation is leading to a contraction in restaurant traffic, which in turn is negatively impacting volume sales. The company is estimating a revenue range of $6.6 billion to $6.8 billion for the fiscal year, an increase compared to the $6.47 billion reported for fiscal 2024; however, this figure falls short of the average analyst estimate, which stands at $6.81 billion based on the assessments of eight financial analysts. "The operating environment has changed rapidly over the past twelve months as global restaurant traffic and frozen potato demand softened due to menu price inflation continuing to negatively affect global restaurant traffic," Werner commented in his statement, emphasizing the shift in market conditions. In light of the projected supply-demand imbalance that is expected to persist throughout most of fiscal 2025, Lamb Weston is implementing several strategic operational adjustments.
These include targeted investments aimed at price stabilization to stimulate volume growth, cost reduction measures, and enhancements to supply chain productivity, as indicated by Werner. In the financial results for the fourth quarter, Lamb Weston reported revenues of $1.61 billion, down from $1.69 billion the previous year, and also fell short of market analysts' expectations, which averaged $1.71 billion according to Capital IQ.
The North American market, a key segment for the company, saw a 4% drop in sales to $1.11 billion, while international sales decreased by 7%, totaling $498.7 million, a reflection of the overall decline in volume. Additionally, the adjusted EPS for the three months that ended on May 26 was reported at $0.78, a decline from $1.29 in the same quarter last year, and was beneath the market consensus of $1.26. Werner expressed disappointment regarding the performance in the fourth quarter, noting that, "Our price/mix results were below our expectations, while market share losses and a slowdown in restaurant traffic in the US and many of our key international markets were greater than we expected." With price fluctuations showing a notable decrease of 27.63%, and shares trading at $56.90, investors remain concerned about the company's trajectory moving forward..