Frozen French fry maker Lamb Weston names new CEO, moves to loss in Q2 and cuts outlook

By MICHELLE CHAPMAN The Associated Press

Lamb Weston is naming a new CEO as the company moved to a loss in its second quarter and trimmed its fiscal 2025 forecast amid weakening demand for frozen potato products in North America.

Shares of the Eagle, Idaho-based company, whose customers include McDonald’s, tumbled more than 21% in morning trading on Thursday, putting shares down 42% in the year to date.

Lamb Weston said that Michael Smith, who currently serves as its chief operating officer, will become its CEO and join its board on Jan. 3, 2025. Smith takes over the CEO post from Thomas Werner, who will serve as an adviser through Aug. 31, 2025 to help with the transition process.

“Mike’s appointment represents the culmination of a thoughtful, years-long succession planning process by our board, and we are confident he is the right leader to guide Lamb Weston forward,” Chairman W.G. Jurgensen said in a statement.

Smith joined Lamb Weston in in 2007. He’s served as the company’s COO since May 2023. Smith previously served as Lamb Weston’s senior vice president and general manager of foodservice, retail, marketing and innovation and senior vice president, growth and strategy.

The announcement of the CEO change comes just days after activist investor Jana Partners said that Lamb Weston needed significant board and leadership changes in order to improve its performance.

Jana, which along with its strategic and operating partners has a more than 5% stake in Lamb Weston, said Monday that if the company didn’t make personnel changes it should consider a formal review of its strategic options, including a potential sale.

Lamb Weston supplies frozen potato, sweet potato, appetizer and vegetable products to restaurants and retailers globally, according to its website.

Lamb Weston has been working on business improvements, stating in a regulatory filing in October that it was closing a plant and temporarily reducing some production lines and manufacturing-related schedules as it looked to reduce costs and bring its supply more in line with demand in North America. The company also said at that time that it would be making some job cuts and would be eliminating some unfilled positions as another way to lower expenses. It has more than 10,000 employees worldwide.

In its fiscal second quarter, Lamb Weston lost $36.1 million, or 25 cents per share. It earned $215 million, or $1.48 per share, a year earlier.

Stripping out restructuring costs and one-time costs, earnings were 66 cents per share.

But that was well below the $1.02 per share that analysts surveyed by Zacks Investment Research were looking for.

During its earnings conference call, Lamb Weston said that traffic at quick service restaurant chains specializing in hamburgers fell about 1.5% in the quarter when compared with the prior-year period.

The company noted that promotional meal deals saw consumers trading down from medium fries to small fries. So even though traffic trends are improving, consumers trading down their meals is a headwind to volumes, it added.

Lamb Weston now anticipates fiscal 2025 adjusted earnings between $3.05 and $3.20 per share and revenue in a range of $6.35 billion to $6.45 billion. Its prior forecast was for adjusted earnings between $4.15 and $4.35 per share and revenue in a range of $6.6 billion to $6.8 billion.

Analysts polled by FactSet predict earnings of $4.21 per share on revenue of $6.66 billion.