Lamb Weston Stock Plunged as Price Discounts Pressured Profits

Lamb Weston’s top seller is french fries. (Dreamstime)

Key Points

• Lamb Weston shares fell nearly 26% to $44.15 after the company warned of continued profit pressure due to price reductions.
• Quarterly sales reached $1.62 billion, exceeding expectations, while adjusted earnings per share rose to 69 cents from 66 cents.
• Sales volume increased 8%, but average product prices declined 8%, impacting margins amid higher manufacturing costs.

Shares of Lamb Weston plunged nearly 26% to trade at $44.15 as of Friday afternoon, after the frozen-potato maker warned investors that profits will remain under pressure as it lowered prices to lure customers back.

Lamb Weston stock is on track for its lowest close since March 18, 2020, when it closed at $45.01. The stock is down about 33% year to date. The decline came even as the company’s latest quarterly sales, at $1.62 billion, beat Wall Street expectations of $1.59 billion.

For the quarter ended November, Lamb Weston reported 44 cents in earnings per share, a sharp jump compared with the 25-cents loss a year earlier thanks to hefty costs associated with its cost-saving and restructuring plan.

Excluding impact from those efforts, Lamb Weston’s adjusted earnings came at 69 cents a share, up from 66 cents a year ago and topping Wall Street estimates of 64 cents, according to FactSet.

Management said it’s on track to deliver $100 million in cost savings this fiscal year, and at least $250 million in annual savings by the end of fiscal 2028. Lamb Weston also raised its quarterly dividend by 3% to 38 cents a share.

Still, investors were spooked as management warned that profitability could drop—as the company lowered product prices despite higher manufacturing costs overseas.

Lamb Weston is in the midst of a turnaround after a string of soft results. Weaker restaurant traffic has hit demand for its core product—french fries. The company has leaned on discounting to stabilize volumes and revive growth.

In the latest quarter, Lamb Weston’s sales value rose 1% from a year ago, with North American revenue essentially flat and international sales up 4%. Sales volume climbed 8%, but the average prices of products sold declined 8% from the year-ago period.

The lower prices could hurt margins, especially amid higher labor, energy, and other input costs. The company said adjusted gross margins are likely to be flat to down in the second half of fiscal 2026 compared with the first half.

For fiscal 2026, management expects adjusted earnings before interest, taxes, depreciation, and amortization to land around the midpoint of the company’s $1 billion to $1.2 billion target range. That’s much lower than the $1.22 billion in fiscal 2025.

Write to Evie Liu at evie.liu@barrons.com