Lamb Weston (LW) expects its challenges to persist into fiscal year 2025

Shares of Lamb Weston Holdings, Inc. (NYSE: LW) plummeted on Wednesday after the company delivered disappointing results for the fourth quarter of 2024 and issued a bleak outlook for fiscal year 2025. The stock was down 27% in afternoon trade. The French fry maker’s quarterly performance was impacted by a dip in restaurant traffic across its key markets. It expects these challenges to persist in the upcoming fiscal year as well.

Unimpressive Q4

Lamb Weston’s revenue and earnings for the fourth quarter of 2024 declined on a year-over-year basis and fell short of estimates. Net sales decreased 5% to $1.61 billion, missing expectations of $1.70 billion. Adjusted EPS fell 40% to $0.78, missing projections of $1.26.

Business performance

In the fourth quarter, Lamb Weston saw volumes decrease 8%, due to market share losses and the company’s decision to exit some of its lower-priced and low-margin businesses in Europe. Volumes were also impacted by a slowdown in restaurant traffic in North America and many key international markets, as well as a voluntary product withdrawal.

Price/mix increased 3% in the quarter, helped by inflation-driven pricing actions. Adjusted gross profit decreased 16% to $363 million, due to the impact from the voluntary product withdrawal, and lower sales volumes.

Lamb Weston saw sales and volumes decline across both its segments in Q4. Sales in the North America segment decreased 4% to $1.11 billion while sales in the International segment fell 7% to $498.7 million. Volume in North America fell 7% while International volume dropped 9%, due to market share losses, soft restaurant traffic trends in the US and international markets, and the voluntary product withdrawal.

Outlook  

Lamb Weston anticipates the challenges seen in fiscal year 2024 to continue into fiscal year 2025. Menu price inflation has led to softness in frozen potato demand and a slowdown in global restaurant traffic. This in turn has led to an increase in available capacity in North America and Europe. LW believes this supply-demand imbalance will continue through the most part of FY2025.

Lamb Weston expects net sales for FY2025 to range between $6.6-6.8 billion, representing a growth of around 2-5% on a constant currency basis. The company expects volume to decline in the low-to-mid-single digits during the first half of the year due to market share losses and soft restaurant traffic trends. Volume growth is expected to be favorable in the latter half of the year. LW expects net income of $630-705 million and EPS of $4.35-4.85 for the year.