Lamb Weston (LW) Q1 2025 earnings summary

Executive summary

• First quarter results were generally in line with expectations, with net sales down 1% year-over-year to $1,654 million and net income down 46% to $127 million, amid ongoing soft restaurant traffic and frozen potato demand.

• Announced a restructuring plan including permanent closure of the Connell, Washington facility, temporary production curtailments, a 4% global headcount reduction, and a $100 million reduction in FY25 capital expenditures, aiming for $55 million in pre-tax savings in FY25 and $85 million annualized.

• Restructuring expected to result in $200–$250 million pre-tax charges, mostly in Q2 FY25, with 20% non-cash and 80% cash components.

• Potato crops in North America are slightly above average, while European crops are expected to be in line with historical averages.

Financial highlights

• Net sales for Q1 FY25 declined 1% year-over-year to $1,654.1 million; North America sales down 3% to $1,103.7 million, International up 4% to $550.4 million.

• Adjusted gross profit dropped $143.5 million to $356 million, mainly due to a $39 million voluntary product withdrawal, higher depreciation, and increased manufacturing costs.

• Adjusted EBITDA was $290 million, down $123 million from the prior year, primarily due to higher costs and the product withdrawal.

• Net income dropped $107.4 million to $127.4 million; diluted EPS was $0.88, down from $1.60 year-over-year.

• Gross margin was 21.5%, about 100-150 basis points below target and down from 30% year-over-year, mainly due to the product withdrawal.

Outlook and guidance

• Fiscal 2025 net sales targeted at $6.6–$6.8 billion (2–5% growth), with volume as the main driver.

• Adjusted EBITDA expected at the low end of $1.38–$1.48 billion due to higher manufacturing costs and less favorable mix.

• Adjusted diluted EPS target reduced to $4.15–$4.35; GAAP diluted EPS target lowered to $2.70–$3.15.

• Adjusted SG&A target lowered to $680–$690 million; interest expense and tax rate estimates increased.

• Capital expenditures for FY25 reduced by $100 million to $750 million.