Lamb Weston (LW 0.93%), a major producer of frozen potato products serving restaurants and retailers worldwide, reported its fiscal 2025 fourth-quarter earnings on July 23, 2025. The company reported results above expectations, posting adjusted EPS of $0.87 compared to analyst estimates of $0.78. Revenue reached $1.68 billion, outpacing consensus forecasts of $1.65 billion. Despite these positive headline numbers, pressures on profitability remain due to competitive pricing, higher fixed costs, and muted growth in restaurant demand. Management introduced a significant cost reduction plan, reflecting the urgency to address these ongoing challenges.
| Metric | Q4 FY25 | Q4 FY25 Estimate | Q4 FY24 | Y/Y Change |
|---|---|---|---|---|
| Adjusted EPS | $0.87 | $0.78 | $0.78 | 11.5% |
| Revenue | $1.68 billion | $1.65 billion | $1.61 billion | 4% |
| Income from operations | $185.8 million | $212.5 million | (12.6%) | |
| Adj. EBITDA | $284.9 million | $283.4 million | 0.5% | |
| Net income | $119.9 million | $129.6 million | (7.5%) |
Source: Lamb Weston. Note: Analysts' consensus estimates provided by FactSet.
Business Overview and Recent Focus
Lamb Weston operates as a leading supplier of value-added frozen potato products, such as French fries, hash browns, onion rings, and potato appetizers. Its products serve a wide customer base, including major quick service restaurants (fast-food chains), traditional restaurants, grocery retailers, and foodservice distributors in both North America and global markets.
The company's growth depends on maintaining its market leadership in North America, successful joint ventures for manufacturing and distribution, a diverse customer base, and ongoing innovation in its core product lines. Key recent business focuses include strengthening relationships with major restaurant chains, increasing the variety of potato and non-potato snacks, and implementing operational improvements to control costs and drive efficiencies amid changing consumer demand.
Quarter in Review: Results, Drivers, and Segment Dynamics
For the period, Lamb Weston returned to growth, with revenue (GAAP) up 4%. This performance was mostly driven by an 9% increase in sales volume, following contract wins and a full recovery from last year’s sales disruptions related to its new enterprise resource planning (ERP) system. However, price and product mix fell 4%, as the company reported heavy promotional activity and competitive pricing in its key North American and international markets.
Adjusted diluted EPS outperformed expectations and rose 12% year over year. Affected by margin compression, higher fixed costs, and ongoing elevated prices for ingredients other than potatoes. Adjusted EBITDA, a widely used measure of core profitability, increased 0.5% year over year.
Segment results showed contrasting trends. In North America, segment revenue slipped 1%, even as volume rose by 4%. Lower prices and a shift away from higher-margin quick service restaurant (QSR) customers weighed on results. The segment’s adjusted EBITDA dropped 7%, reflecting increased transportation and warehouse costs. Meanwhile, International segment revenue (GAAP) grew 15%, and volume increased 16% year over year in the fourth quarter, aided by numerous new customer contracts in overseas markets. International adjusted EBITDA surged 55%, largely due to sales growth and efficiency improvements.
Operating margin contracted. This decline was mostly due to unfavorable changes in pricing and product mix, only partly offset by lower manufacturing costs per pound and the absence of last year’s extraordinary product withdrawal expenses.
Product Development and Supply Chain Initiatives
The company underscored continued innovation in its frozen potato category, launching fridge-friendly fries -- potatoes suitable for extended refrigeration -- and expanding its retail product line with new items such as onion rings and cheesy bites. Internationally, it introduced new varieties of French fry products, such as "Three-Sided Frenzy Fries," aimed at boosting consumer appeal and serving new channels in key regions. While these innovations help reinforce customer relationships, they have not yet driven a significant improvement in margins or overall sales mix.
Lamb Weston continued to emphasize effective supply chain management. Inventory days on hand at the end of fiscal 2025 declined by eight days compared with fiscal 2024, reflecting faster product movement and an effort to adjust output to softer restaurant traffic. Costs related to warehousing and logistics, however, rose by low double digits. The “Focus to Win” initiative, announced this quarter, targets at least $250 million in annualized cost savings by FY2028, including working capital improvements and tighter expense management. This plan features a 4% cut in headcount, a focus on working capital, and new management incentives tied to free cash flow and return on invested capital.
Lamb Weston's joint ventures, including its investments in Lamb Weston/RDO Frozen and various international facilities, experienced lower equity method investment earnings on a GAAP basis in FY2025, mainly due to reduced restaurant traffic and underutilized production capacity. These ventures remain strategically important but have not provided incremental growth in the current market cycle.
On capital returns, the company distributed $488.9 million to shareholders in FY2025. This return included $282.0 million in share repurchases and $206.9 million in dividends, reflecting continued commitment to shareholder distributions even as the competitive and cost landscape shifts.
Looking Ahead: Management Outlook and Key Watchpoints
For fiscal 2026, Lamb Weston projects net sales between $6.35 billion and $6.55 billion in FY2026, suggesting little to modest growth from the prior year. Adjusted EBITDA is forecasted at $1.0 billion to $1.2 billion in FY2026, marking a possible decrease against 2025 results. The company expects continued headwinds from price and mix declines in the first half of FY2026, with some stabilization possible later in the year. Management anticipates pressure on gross profit in FY2026 due to ongoing price investments, fixed cost absorption resulting from earlier production curtailments, and input cost inflation for ingredients other than potatoes.
The company’s execution of its large-scale cost savings program will be crucial, as competitive dynamics in both North American and international markets remain intense. Investors are likely to track customer demand trends for major quick-service restaurant chains and ongoing market share developments. The company’s focus remains on operational discipline, product lineup extension, and careful management of working capital and capital expenditures.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
