Lamb Weston reported a significant decline in its share price during intraday trading on Thursday, plummeting 21% after the company disclosed disappointing fiscal second-quarter results alongside a lowered full-year guidance. The supplier of frozen potato products noted that revenue decreased 8% year over year, totaling $1.6 billion for the three months concluded on November 24, which fell short of the average analyst estimate of $1.67 billion on FactSet. Adjusted earnings per share also fell sharply, dropping from $1.45 to $0.66, and failing to meet analysts' expectations of $1.01.
In light of this downturn, CEO Tom Werner acknowledged, "Our financial results in the second quarter were below our expectations. Higher-than-expected manufacturing costs and softer volumes accounted for the shortfall." Effective January 3, the Chief Operating Officer, Michael Smith, will take over Werner’s role, who will continue to provide advisory support until August 31 to facilitate a smooth transition.
In the North American market, Lamb Weston experienced an 8% decline in sales, amounting to $1.07 billion, while international sales dipped by 6%. The overall volume saw a 6% decline, attributed to diminishing restaurant traffic trends globally, loss of customer share, and the company's strategic choice to exit certain businesses in Europe in the previous year. Management has revised its fiscal 2025 sales guidance, now projecting between $6.35 billion and $6.45 billion, down from earlier expectations of $6.6 billion to $6.8 billion, citing increased competition internationally and ongoing pressures on volume in North America.
The current consensus on FactSet anticipates sales of $6.66 billion for the fiscal year. Furthermore, the adjusted EPS target has been lowered to a range of $3.05 to $3.20, down from $4.15 to $4.35. Analysts are forecasting a non-GAAP EPS of $4.17 for this fiscal year. Werner remarked on the challenging outlook: "We expect challenging conditions to persist through the remainder of fiscal 2025 and into fiscal 2026, driven primarily by an accelerating rate of capacity additions and continued near-term softening of global frozen potato demand below historical rates, particularly outside North America, until demand trends improve and capacity expansion normalizes." In addition to a restructuring plan announced in October, Lamb Weston is actively exploring further avenues to cut expenses, focusing on manufacturing and supply chain costs..