Lamb Weston Reports Third Quarter Fiscal 2025 Results; Reaffirms Fiscal Year 2025 Outlook

Lamb Weston Holdings, Inc. (NYSE: LW) has announced its results for the third quarter of fiscal 2025 and reaffirmed its full year financial targets for fiscal 2025.

Mike Smith, President and CEO of Lamb Weston:

"As a result of the actions we took in early fiscal 2025 to drive operational and cost efficiencies, we closed the quarter with sequentially improved volume trends and profitability metrics that were in line with our previously updated fiscal 2025 outlook."

"Thanks to our team’s fiscal discipline and focused execution, we continue to deliver the cost savings identified in the Restructuring Plan announced in October 2024. That said, we expect headwinds from soft restaurant traffic to persist, and we continue to see opportunities to further streamline costs while investing strategically to support customers."

"We remain on track to achieve our goal of reducing capital spending by USD 250 million this year compared with the prior fiscal year. In addition, we expect to deliver a further USD 200 million in capital spending reductions in fiscal 2026 as we complete our growth-related investments, leading to USD 450 million in total reductions compared to fiscal 2024. Lamb Weston remains a leader in innovation, product quality, customer relationships and operations, and we will continue to build on this strong foundation to better serve global markets as we focus on delivering enhanced shareholder value."

Engagement of AlixPartners

Lamb Weston has engaged AlixPartners, a leading global business advisory firm, to assist the Company in evaluating opportunities for near- and long-term value creation and cost savings. The Company is working with urgency and plans to provide updates on this initiative as its work with AlixPartners progresses.

Summary of Third Quarter FY 2025 Results

Q3 2025 Commentary

Q3 Results of Operations

Net sales increased USD 62.2 million, to USD 1,520.5 million, up 4 percent versus the prior year quarter. Volume increased 9 percent compared to the prior year quarter as the Company fully replaced the combined regional, small, and retail customer volume lost in the prior year during its transition to a new ERP system(2).

The Company also had recent customer contract wins across each of its channels and geographic regions, net of volume losses, which were partially offset by soft global restaurant traffic trends. Price/mix declined 5 percent, reflecting the impact of planned investments in price to compete in the increasingly competitive environment in both the North America and International segments.

Gross profit increased USD 18.8 million versus the prior year quarter to USD 422.5 million, and included USD 2.8 million (USD 2.2 million after-tax, or USD 0.02 per share) of unrealized gains related to mark-to-market adjustments associated with commodity hedging contracts and USD 0.7 million of charges (USD 0.5 million after-tax, or zero per share) related to the Company’s Restructuring Plan(2) . The prior year quarter included USD 23.3 million (USD 17.3 million after-tax, or USD 0.12 per share) of unrealized losses related to mark-to-market adjustments associated with commodity hedging contracts.

Adjusted Gross Profit(1) declined USD 6.6 million versus the prior year quarter to USD 420.4 million due primarily to unfavorable price/mix, higher transportation and warehousing costs primarily driven by higher warehouse inventories, and USD 16.2 million of higher depreciation expense largely associated with the Company’s recent capacity expansions in the Netherlands and the U.S.

The decline in Adjusted Gross Profit(1) was partially offset by higher sales volumes and lower manufacturing costs per pound, which included lapping USD 53.5 million of pre-tax charges in the prior year, including an estimated USD 33 million of costs associated with the ERP transition(2) and USD 20.5 million for the write-off of excess raw potatoes(2), and a current year reduction in North America raw potato prices.

Selling, general and administrative expenses ("SG&A") declined USD 15.6 million versus the prior year quarter to USD 164.2 million, and included USD 3.1 million (USD 2.4 million after-tax, or USD 0.02 per share) of unrealized gains related to mark-to-market adjustments associated with currency hedging contracts, USD 7.0 million (USD 5.0 million after-tax, or USD 0.04 per share) of foreign currency exchange losses, a gain of USD 0.6 million (USD 0.4 million after-tax, or zero per share) related to blue chip swap transactions in Argentina(2), and USD 3.7 million (USD 2.9 million after-tax, USD 0.02 per share) of expenses related to ongoing shareholder activism matters.

The prior year quarter included USD 4.0 million (USD 3.0 million after-tax, or USD 0.02 per share) of unrealized losses related to mark-to-market adjustments associated with currency hedging contracts, USD 16.4 million (USD 12.4 million after-tax, or USD 0.08 per share) of foreign currency exchange losses, a gain of USD 7.4 million (USD 5.6 million after-tax, or USD 0.04 per share) related to blue chip swap transactions in Argentina(2), and USD 2.4 million (USD 1.8 million after-tax, or USD 0.01 per share) of integration and acquisition-related expenses associated with the completion of the Company’s acquisition of the remaining interest in Lamb-Weston/Meijer v.o.f. (“LW EMEA”), its former joint venture in Europe.

Adjusted SG&A(1) declined USD 7.2 million versus the prior year quarter to USD 157.2 million, primarily related to lapping higher expenses associated with the ERP transition(2) in the prior year quarter and cost savings associated with the Restructuring Plan(2) and other management initiatives to reduce costs, partially offset by the timing of compensation and benefit accruals. 

Net income declined USD 0.1 million from the prior year quarter to USD 146.0 million. Net income included a total net loss of USD 10.6 million (USD 14.5 million before tax, or USD 0.07 per share) and USD 28.9 million (USD 38.7 million before tax, or USD 0.19 per share) in the third quarter of fiscal 2025 and 2024, respectively, resulting from unrealized mark-to-market derivative gains and losses, foreign currency exchange losses, gains on blue chip swap transactions in Argentina(2), and items impacting comparability. 

Adjusted Net Income(1) declined USD 18.4 million versus the prior year quarter to USD 156.6 million, and Adjusted Diluted EPS(1) declined USD 0.10 from the prior year quarter to USD 1.10. The declines in Adjusted Net Income(1) and Adjusted Diluted EPS(1) largely reflect lower Adjusted Gross Profit(1) due to the factors described above, a higher effective tax rate and increased interest expense primarily due to higher total debt, partially offset by lower Adjusted SG&A(1). Adjusted Net Income(1) for the third quarter of fiscal 2024 included an approximately USD 72 million negative impact from the ERP transition(2).



Adjusted EBITDA(1) increased USD 20.2 million from the prior year quarter to USD 363.8 million, primarily due to higher net sales and lower Adjusted SG&A(1), which were partially offset by lower Adjusted Gross Profit(1). Adjusted EBITDA(1) in the prior year quarter included an approximately USD 95 million negative impact from the ERP transition(2) and a USD 25.0 million charge(2) for the write-off of excess raw potatoes, of which USD 4.5 million was recorded in equity method investment earnings. 

The Company’s effective tax rate(3) in the third quarter of 2025 was 28.3 percent, versus 22.8 percent in the third quarter of fiscal 2024, with the increase largely attributable to foreign losses without tax benefits and a higher proportion of overall earnings in the Company’s International segment.

International Summary

Net sales for the International segment, which includes all sales to customers outside of North America, increased USD 23.4 million to USD 534.2 million, up 5 percent versus the prior year quarter. Despite soft restaurant traffic, volume increased 12 percent, led primarily by chain customer contract wins in key international markets and, to a lesser extent, lapping unfilled orders due to the prior year ERP transition(2).

These volume increases were partially offset by the carryover effect of the Company’s decision in the prior year to exit certain lower-priced and lower-margin business in Europe to strategically manage customer and product mix. Price/mix declined 7 percent related to pricing actions in key international markets in response to the competitive environment along with unfavorable changes in foreign currency. 

International Segment Adjusted EBITDA declined USD 8.5 million to USD 93.2 million, including approximately USD 5 million of losses in the prior year related to lower order fulfillment rates associated with the ERP transition(2) and a USD 2.3 million allocated charge(2) for the write-off of excess raw potatoes. Unfavorable price/mix was partially offset by increased sales volume and lower manufacturing costs per pound. 

Equity Method Investment Earnings

Equity method investment earnings from unconsolidated joint ventures were USD 2.1 million and USD 1.0 million for the third quarter of fiscal 2025 and 2024, respectively. Equity method investment earnings in the prior year quarter included a USD 4.5 million charge(2) for the write-off of excess raw potatoes. The results for the current and prior year quarters reflect earnings associated with the Company's 50 percent interest in Lamb Weston/RDO Frozen, an unconsolidated potato processing joint venture in Minnesota.

Cash Flows, Capital Expenditures and Liquidity

While net income for the first three quarters of fiscal 2025 decreased USD 358.5 million compared with the prior year, net cash provided by operating activities increased USD 3.8 million to USD 485.3 million primarily due to favorable changes in working capital, mostly attributable to a greater build of inventory in the third quarter of fiscal 2024 related to the ERP transition(2). 

Capital expenditures, net of proceeds from blue chip swap transactions, during the first three quarters of fiscal 2025 were USD 563.1 million, down USD 250.7 million versus the prior year period, as the Company nears completion of its growth-related investments. The projects in China and the U.S. were completed during the second and fourth quarters of fiscal 2024, respectively.

The project in the Netherlands was completed during the second quarter of fiscal 2025, while the project in Argentina is on track to be completed by mid-calendar year 2025. As of February 23, 2025, the Company had USD 67.5 million of cash and cash equivalents, with USD 1,052.5 million of available liquidity under its revolving credit facility.

Capital Returned to Shareholders In the third quarter of fiscal 2025, the Company returned USD 151.4 million to shareholders through cash dividends and share repurchases. This includes USD 51.4 million to shareholders through cash dividends. In addition, the Company repurchased USD 100.0 million of its common stock under the Company’s share repurchase program during the quarter, with 1,559,369 shares repurchased at an average price of USD 64.13 per share. In the first three quarters of fiscal 2025, the Company returned a total of USD 336.7 million to shareholders. This includes USD 154.7 million to shareholders through cash dividends and USD 182.0 million through repurchases of common stock, with an aggregate of 2,972,221 shares repurchased at an average price of USD 61.23 per share.

During the third quarter of fiscal 2025, the Company’s Board of Directors increased the authorization under the Company’s share repurchase program by USD 250 million to an aggregate amount of USD 750 million. The program has no expiration date. The Company has approximately USD 458 million remaining that is authorized and available for repurchase under the share repurchase program. 

In addition, the Board of Directors declared a quarterly dividend of USD 0.37 per share of Lamb Weston common stock. The dividend is payable on May 30, 2025 to stockholders of record as of the close of business on May 2, 2025.

Fiscal 2025 Outlook

The Company reaffirms its financial targets for fiscal 2025 as follows:

• Net sales target range of USD 6.35 billion to USD 6.45 billion.
• Adjusted EBITDA(1) target range of USD 1.17 billion to USD 1.21 billion.
• Adjusted Net Income(1) target range of USD 440 million to USD 460 million and Adjusted Diluted EPS(1) of USD 3.05 to USD 3.20.

The Company now expects Adjusted SG&A(1) to be in the range of USD 665 million to USD 675 million, down from USD 680 million to USD 690 million.

The Company’s other financial targets are as follows:

• Depreciation and amortization expense of approximately USD 375 million;
• An effective tax rate(3) (full year) estimate of approximately 28 percent, excluding the impact of comparability items; and
• Cash used for capital expenditures, excluding acquisitions, if any, of approximately USD 750 million. Depending on the timing of cash paid, the Company’s cash investments for the Argentina expansion may result in 2025 spending below USD 750 million and push into fiscal 2026.

Given the uncertainty in the political economic environment, the Company’s guidance does not reflect any impact from potential import tariffs by the U.S. government and potential retaliatory actions taken by other countries.

End Notes

(1)Adjusted Gross Profit, Adjusted SG&A, Adjusted Income from Operations, Adjusted Net Income, Adjusted Diluted EPS, and Adjusted EBITDA are non-GAAP financial measures. Please see the discussion of non-GAAP financial measures, including a discussion of guidance provided on a non-GAAP basis, and the associated reconciliations at the end of this press release for more information. 

(2)See footnotes (1) - (5) to the Consolidated Statements of Earnings for further discussion. 

(3)The effective tax rate is calculated as the ratio of income tax expense to pre-tax income, inclusive of equity method investment earnings.