Lamb Weston Slumps on Q4 Earnings Miss And Weak FY25 Guidance; Expects Volume Decline Amid Market Challenges

Lamb Weston Holdings, Inc. LW shares are trading lower after the company reported worse-than-expected fourth-quarter financial results and issued its FY25 earnings per share guidance below estimates.

Quarterly sales of $1.61 billion, missing the street view of $1.70 billion. The company reported adjusted earnings per share of 78 cents (down 40%), missing the analyst consensus of $1.26.

“We expect fiscal 2025 to be another challenging year. 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,” said Tom Werner, President and CEO. 

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Volume declined 8%, with more than one-half of the decline reflecting the impact of market share losses and the company’s decision to exit certain lower-priced and lower-margin businesses in Europe earlier in the year. 

Adjusted gross profit declined by $72.2 million versus the prior year quarter to $363.0 million due to an approximately $40 million impact associated with the voluntary product withdrawal, as well as lower sales volumes. 

Outlook: Lamb Weston sees FY25 revenue of $6.6 billion—$6.8 billion versus the $6.8 billion estimate.

In the first half of fiscal 2025, the company expects volume may decline low-to-mid single digits as compared to the prior year period, reflecting the carryover impact of market share losses incurred in the prior year as well as soft restaurant traffic in the U.S. and key international markets. 

The company sees earnings per share of $4.35 – $4.85 versus $6.10 estimate.

As compared to the prior year, the company expects net income and EPS to decline, in part by an increase in depreciation and amortization expense of approximately $75 million associated with the depreciation of the capacity expansions in China and Idaho, and the amortization of the new ERP system.

The company also expects an increase in interest expense as compared to the prior year to reflect higher debt levels and reduced capitalized interest.

Price Action: LW shares are trading lower by 25.8% to $58.31 at last check Wednesday.

Image via Shutterstock

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