Lamb Weston Holdings, Inc.

Lamb Weston Holdings, Inc. is a leading global producer, distributor, and marketer of value-added frozen potato products, headquartered in Eagle, Idaho. The company is the number one supplier of value-added frozen potato products in North America and a leading supplier internationally, with a strong presence in high-growth emerging markets, offering a broad product portfolio to a diverse channel and customer base in over 100 countries, with french fries representing most of the product portfolio. The industry is highly competitive, with competitors including large North American and European frozen potato product companies that compete globally, as well as local and regional companies, and the international markets are highly fragmented with increased production capacity added by local and regional companies in emerging markets like Saudi Arabia, China, and India.

Significant competitors named include Agristo N.V., Aviko B.V., Cavendish Farms Corporation, Farm Frites International B.V., J.R. Simplot Company, The Kraft Heinz Company, and McCain Foods Limited. The company competes on the basis of customer service and support, value, product innovation, product quality, brand recognition and loyalty, price, and the ability to identify and satisfy customer and consumer preferences. The ten largest customers accounted for approximately 50% ¹ of consolidated net sales in fiscal 2026, and the largest customer, McDonald's Corporation, accounted for approximately 15% ², 15% ³, and 14% ⁴ of consolidated net sales in fiscal 2026, 2025, and 2024, respectively.

The company generates revenue through the sale of value-added frozen potato products, including frozen potatoes, commercial ingredients, and appetizers, sold under the Lamb Weston brand, as well as owned or licensed brands including Grown in Idaho and Alexia, other licensed brands comprised of brand names of major North American restaurant chains, customer labels, and retailers' own brands. Products are sold through a network of internal sales personnel and independent brokers, agents, and distributors to chain restaurants, wholesale, grocery, mass merchants, club retailers, specialty retailers, and foodservice distributors and institutions, including businesses, educational institutions, independent restaurants, regional chain restaurants, and convenience stores.

The company operates two reportable segments: North America and International. The North America segment primarily includes frozen potato products sold in the United States, Canada, and Mexico to quick service and full-service restaurants and chains, foodservice distributors, non-commercial channels, and retailers, with a product portfolio including frozen potatoes, commercial ingredients, and appetizers sold under the Lamb Weston brand, as well as frozen potatoes sold under the Company's owned or licensed brands, including Grown in Idaho and Alexia, other licensed brands comprised of brand names of major North American restaurant chains, customer labels, and retailers' own brands. The International segment primarily includes frozen potato products sold outside of North America to quick service and full-service restaurant chains, foodservice distributors, non-commercial channels, and retailers, with a product portfolio including frozen potatoes, commercial ingredients, and appetizers sold under the Lamb Weston brand, as well as many customer labels.

The company holds a 50% ⁵ ownership interest in Lamb-Weston/RDO Frozen, a joint venture with RDO Frozen Co., that operates a single potato processing facility in the U.S., and owns a 75% ⁶ interest in a joint venture in Austria whose financial results are consolidated. In fiscal 2026, the company began implementing a cost savings program (the Cost Savings Program) to drive operational and cost efficiencies, and the Cost Savings Program exceeded its first year milestone of $100 million ⁷ in savings. The company completed its capital growth initiatives, opening a new facility in Argentina to serve the growing Latin America market, and returned a total of $320.7 million ⁸ to shareholders through $207.5 million ⁹ in cash dividends and $113.2 million ¹⁰ in repurchases of common stock. On January 8, 2026, the company announced the closure of its Munro, Argentina production facility and consolidation of production in Latin America to its new facility in Mar del Plata, Argentina, and in February 2026, permanently curtailed its Hallam South production facility in Australia, consolidating production for the region in its Hallam North production facility.

Net sales for fiscal 2026 increased $161.0 million ¹¹, or 2% ¹², to $6,612.3 million ¹³ compared to the prior year, benefiting from a favorable foreign currency impact of $123.1 million ¹⁴ or 1% ¹⁵. Sales volume increased 7% ¹⁶ driven by volume increases in North America, APAC, and Latin America, while price/mix declined 6% ¹⁷ driven by continued price and trade support. Net income declined $67.2 million ¹⁸ from fiscal 2025 to $290.0 million ¹⁹, and Adjusted EBITDA declined $112.8 million ²⁰ versus fiscal 2025 to $1,147.2 million ²¹. Cash provided by operating activities was $942.9 million ²², and capital expenditures were $410.1 million ²³, a reduction of $240.6 million ²⁴ from the prior year.

For fiscal 2027, management expects low single-digit sales volume growth and a low single-digit decline in price/mix for the full year, with net sales expected to be flat to up slightly on a comparable weeks basis. Fiscal 2027 is a 52-week period versus a 53-week period in fiscal 2026. As a result of cost savings, improved efficiencies and lapping one-time items, earnings growth is expected to outpace sales growth.

The company's growth strategy includes a Focus to Win strategy, which has driven strong volume and share growth in North America through customer retention and contract wins. Internationally, volume grew in Asia Pacific and Latin America, which more than offset volume losses in EMEA, and the company is actively managing challenges in the EMEA region including increased competition, softer demand, and disruption of shipments in the Middle East due to the conflict in Iran. The company has completed its capital growth initiatives, opening a new facility in Argentina to serve the growing Latin America market, and is pursuing additional opportunities to improve its cost structure and capital efficiency based on the success of the Cost Savings Program.

The Cost Savings Program exceeded its first year milestone of $100 million ²⁵ in savings, and the company will continue to pursue additional opportunities to improve its cost structure and capital efficiency. The company advanced its executing with excellence strategic pillar through supply chain and manufacturing operating improvements, with significant productivity gains lowering cost per pound and generating cost savings to offset inflation and unexpected costs.

Cash used for capital expenditures, excluding acquisitions if any, is expected to be approximately $380 million to $410 million ²⁶ for fiscal 2027, and cash from operations is expected in the range of $750 million to $800 million ²⁷. The company has reduced structural capital intensity, lowering capital expenditures by $240.6 million ²⁸ from the prior year to $410.1 million ²⁹ in fiscal 2026.

The company's outlook assumes global restaurant traffic will be flat for fiscal 2027. The company continues to face headwinds including increased competition, softer demand in Europe, and disruption of shipments in the Middle East due to the conflict in Iran, which resulted in a challenging year for the EMEA region. The company also faced an oversupply of potatoes in fiscal 2026, largely attributable to continued soft restaurant traffic trends in Europe, as well as significant surplus in the European potato market due to expanded potato acreage and a robust crop of potatoes during the last growing season, which resulted in the write-off of excess raw potatoes that adversely affected financial results.

The company faces material risks from commodity price volatility for inputs such as raw potatoes, edible oils, grains, starches, and energy, which are subject to factors including weather, tariffs, and geopolitical conflicts, and the company may not be able to offset cost increases through pricing or productivity initiatives, as higher product prices may result in reductions in sales volume given the highly competitive market and soft restaurant traffic. The company's largest customer, McDonald's Corporation, accounted for approximately 15% ³⁰ of consolidated net sales in fiscal 2026, and the ten largest customers accounted for approximately 50% ³¹ of net sales, creating concentration risk. The company had approximately $3.9 billion ³² of debt as of May 31, 2026, which could limit cash flow available for operations and investments, and the credit agreements contain covenants that restrict the company's ability to incur additional debt, pay dividends, and make investments. The company's international operations, which accounted for approximately 35% ³³ of net sales in fiscal 2026, are exposed to foreign exchange rates, trade barriers, tariffs, and political instability, including the conflicts in the Middle East which have disrupted shipping routes and increased volatility in commodity and transportation markets since late February 2026. The company's business is affected by potato crop harvest quality and performance, and in fiscal 2026, an oversupply of potatoes due to soft restaurant traffic in Europe and a significant surplus in the European potato market resulted in a $33.1 million ³⁴ pre-tax charge for write-offs of excess raw potatoes.

Management's message emphasizes a solid year in fiscal 2026 led by strong volume and share growth in North America, meaningful progress in executing the Focus to Win strategy, and the Cost Savings Program exceeding its first year milestone of $100 million ³⁵ in savings. The key strategic priorities emphasized for the period ahead include continuing to pursue additional opportunities to improve cost structure and capital efficiency, focusing resources on generating sustainable long-term value for shareholders, and expecting earnings growth to outpace sales growth in fiscal 2027 as a result of cost savings, improved efficiencies, and lapping one-time items. Management's outlook for fiscal 2027 includes expectations for low single-digit sales volume growth, a low single-digit decline in price/mix, net sales flat to up slightly on a comparable weeks basis, capital expenditures of approximately $380 million to $410 million ³⁶, and cash from operations in the range of $750 million to $800 million ³⁷.