Lamb Weston Holdings Inc (LW) Q1 2026 Earnings Call Highlights: Strong Volume Growth Amidst ...

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Net Sales: Flat at $1.1 billion, with a $24 million favorable impact from foreign currency translation. Volume Growth: Increased by 6%, driven by customer wins and retention, primarily in North America and Asia. Price Mix: Declined 7% at constant currency rates compared to the prior year. Adjusted EBITDA: Flat at $302 million. Adjusted Gross Profit: Declined due to unfavorable price mix, partially offset by higher sales volume and decreased manufacturing costs per pound. Free Cash Flow: Strong at $273 million. Capital Expenditures: Declined to $79 million, with a fiscal 2026 expectation of approximately $500 million. Liquidity: Approximately $1.4 billion, including $1.3 billion available under the revolving credit facility and $99 million in cash and cash equivalents. Net Debt: $3.9 billion with an adjusted EBITDA to net debt leverage ratio of 3.1 times. Fiscal 2026 Revenue Outlook: $6.35 billion to $6.55 billion, a 2% decline to 2% increase. Fiscal 2026 Adjusted EBITDA Guidance: $1 billion to $1.2 billion.

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Release Date: September 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Lamb Weston Holdings Inc (NYSE:LW) delivered first-quarter results that exceeded expectations, showcasing strong commercial momentum. The company reported strong volume growth across both segments, driven by customer wins and retention, particularly in North America and Asia. Lamb Weston Holdings Inc (NYSE:LW) is implementing a strategic plan, 'Focus to Win,' aiming for $250 million in annual run rate savings by fiscal year end 2028. The company is launching new innovative products this fall, including flavor-forward offerings and expanding its licensed brands. Lamb Weston Holdings Inc (NYSE:LW) is restarting a curtailed production line in response to sustained volume growth in North America, indicating strong demand.

Negative Points

Net sales were essentially flat, with a slight decline on a constant currency basis, indicating challenges in maintaining revenue growth. Price mix declined 7% in North America, primarily due to lower net selling prices and unfavorable channel product mix. The international segment faces competitive pressures, particularly in Europe and Latin America, affecting price mix and profitability. Adjusted gross profit declined due to unfavorable price mix, despite higher sales volume and cost savings initiatives. The company anticipates low-single-digit inflation in the second quarter, which may impact margins, along with additional startup expenses and factory burden absorption related to the new Argentina plant.

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Q & A Highlights

Q: Lamb Weston has restarted a previously curtailed production line in the US. How does this align with the current supply-demand imbalance in the industry? A: Michael Smith, President and CEO, explained that the restart was necessary to meet demand signals and maintain customer fill rates. He noted that the industry has been rational, with some capacity announcements being delayed or canceled, and no new announcements since July.

Q: Is the low-to mid-single-digit year-over-year decline in price mix for the first fiscal half of the year still expected? A: Bernadette Madarieta, CFO, stated that they expect a mid-to high-single-digit decrease in price mix in the first half, moderating to low to mid in the second half, with foreign currencies having a larger impact.

Q: Can you clarify the gross margin commentary about being more flat quarter over quarter? A: Bernadette Madarieta noted that in North America, the change is more seasonal, with some input cost inflation expected in 2Q. However, the international segment will see more impact due to rising potato costs and plant startup costs.

Q: What is the tariff exposure, and how has it been included in the guidance? A: Bernadette Madarieta mentioned that the tariff exposure, primarily related to palm oil imports, is expected to be about $25 million annually. The guidance now includes the full amount for these tariffs.

Q: How is the expansion of the broker network in North America being received internally? A: Michael Smith clarified that the direct sales force is being maintained and augmented with brokers in under-penetrated channels. The sales team supports this change as it allows them to focus on successful areas while exploring new opportunities.

Q: Can you discuss the impact of restarting the curtailed line in the second quarter? A: Michael Smith explained that restarting the line is easier than starting a new facility and is expected to continue running based on demand signals. Bernadette Madarieta added that the impact on fixed factory burden will moderate by the end of the second quarter.

Q: What has driven the recent business wins in QSR and other away-from-home categories? A: Michael Smith attributed the wins to improved customer engagement and joint business planning, focusing on service, quality, and consistency rather than just price.

Q: How should we think about the underlying run rate of SG&A going forward? A: Bernadette Madarieta indicated that about a third of the $100-million cost savings target will benefit SG&A, with additional costs from stock compensation and strategic investments expected in the latter half of the fiscal year.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

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