Lamb Weston Shares Slide As Q1 Earnings Disappoint; Flags Inflation, Supply Chain Threats

Lamb Weston Holdings Inc LW reported first-quarter FY22 sales growth of 13% year-on-year, to $984.2 million, missing the analyst consensus of $993.09 million.
Net sales from the Global segment rose 12% Y/Y, Foodservice increased 36%, and the Retail segment declined 14%.
Gross profit decreased 29.2% Y/Y to $151.3 million, and the gross margin contracted 910 basis points to 15.4%.
The operating margin was 6.1%, and operating income for the quarter fell 56% to $60.2 million.
Lamb Weston held $789.7 million in cash and equivalents as of August 29, 2021. Net cash from operating activities totaled $161.8 million.
Adjusted EBITDA decreased 39% Y/Y to $123 million. EPS of $0.20 missed the analyst consensus of $0.39.
"The impact of extreme summer heat that negatively affected potato crops in the Pacific Northwest, combined with industrywide operational challenges, including highly inflationary input and transportation costs, labor availability, and upstream and downstream supply chain disruptions, will result in higher costs as the year progresses, and significantly pressure our earnings," said CEO Tom Werner.
Outlook: Lamb Weston sees FY22 sales growth to be above its long-term target of low-to-mid single digits. Lamb Weston expects its gross profit margins to remain below pre-pandemic levels through FY22.
Price action: LW shares are trading lower by 6.00% at $58.6 on the last check Thursday.

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