Bernadette Madarieta
Chief Financial Officer at Lamb Weston
Thanks, Tom, and good morning, everyone. I want to also thank the Lamb Weston team for finishing the year strong and setting us up well for fiscal 2024. Let's begin with our fourth quarter results. Sales were up more than $540 million versus the prior year quarter or 47% to a quarterly record of just under $1.7 billion. That's at the high-end of our targeted range for the quarter.
About $380 million of the increase was attributable to the consolidation of our EMEA and Argentina operations. The EMEA amount is above the high end of the targeted $300 million to $325 million range for the quarter, reflecting a strong benefit from pricing actions. Excluding incremental sales from these acquisitions, net sales grew 14%. Price-mix was up 24% as we continued to benefit from pricing actions taken in fiscal 2023 across each of our business segments to counter input and manufacturing cost inflation.
As expected, price-mix in the quarter decelerated sequentially from the 30% or more increase that we delivered in our second and third quarters as we largely lapped all the pricing actions taken in fiscal 2022. In addition, we received no year-over-year benefits from freight rates charged to customers as we reduced these rates further to match the decline in our transportation costs. While we expect lower customer freight rates will soon become a year-over-year headwinds for price-mix, our goal is to match these to our transportation costs so that their effect on our profits is neutral overtime.
Our overall sales volumes in the quarter declined 10% due to four factors. The first and primary driver was our continued effort to strategically improve our product and customer mix by exiting certain lower-priced and lower-margin business across our domestic and international portfolio.
Second, demand was tempered by softer casual dining and full-service restaurant traffic in the U.S. This had a more pronounced effect on our Foodservice segment and drove much of the decline in that segment's volume in the quarter. Third, certain customers in international markets began to right-size inventories after carrying unusually high levels of inventory to de-risk their supply chains during the pandemic.
And fourth, certain large retail customers temporarily lowered prices to right-size inventories of private-label products, delaying shipments of products that we produced on their behalf. In addition, we realized some acceptable levels of branded product volume elasticity in response to the inflation-driven pricing actions that we implemented over the past year.
Moving on from sales, our gross profit in the quarter, excluding comparability items, increased more than $170 million to nearly $425 million. About 40% of the increase was attributable to the incremental earnings from consolidating EMEA. The remainder was driven by the cumulative benefit of pricing actions, mix improvement and supply-chain productivity in our legacy Lamb Weston business, which more than offset higher input and manufacturing cost per pound and the impact of lower volumes.
Gross margin was up more than 300 basis points to 25.1%, despite absorbing the dilutive impact on margin of the EMEA acquisition. Input costs increased high-single-digits on a per pound basis, easing somewhat from the double-digit inflation rate earlier in the year. The increase in costs per pound were, again, largely driven by a 20% increase in the contracted price for potatoes in North America, significantly higher prices for open-market potatoes due to poor yields from the 2022 crop, and continued increases in the cost of labor, energy, edible oils and ingredients for batter coatings.
Our higher per pound costs also reflected reduced fixed-cost coverage due to lower throughput as we did take some extended downtime for planned maintenance in some of our production facilities, and increased write-downs of inventories, primarily consisting of bulk and obsolete finished goods.
Our SG&A expenses, excluding comparability items, increased $65 million to $183 million. About half of the increase was from incremental SG&A with the consolidation of EMEA, while the other half was primarily driven by three factors. First, higher compensation and benefit expenses due to improved operating performance; second an $8 million increase in advertising and promotion expenses as we restore support behind our branded products in our Retail segment to historical levels; and third, higher expenses related to improving our IT and ERP infrastructure.
Adjusted EBITDA including joint-ventures increased $117 million or 59% to $318 million, with higher sales and gross profit driving the growth.
Moving to our segments. Sales in our Global segment were up 85% in the quarter and included the $380 million of incremental sales from the EMEA and Argentina acquisitions. Net sales excluding the acquisitions grew 17%. Price-mix was up 28%, which is largely comparable to the increases in the previous two quarters. The increase in price-mix reflects the carryover benefit of the domestic and international pricing actions that took effect in our fiscal second and third quarters.
Volume declined 11%, primarily reflecting the impact of exiting certain lower-priced and lower-margin business in international and domestic markets and the inventory destocking by certain customers in international markets that I mentioned earlier. Global's product contribution margin, excluding comparability items, increased about $145 million. More than half of the increase was from the cumulative benefit of pricing actions, mix improvement and supply chain productivity, more than offsetting higher costs per pound and lower volumes. Incremental earnings from EMEA, which was above our target for the quarter drove the remainder of the increase.
Sales in our Foodservice segment grew 4%, a notable deceleration versus the 17% that we delivered through the first three quarters of the year. Price-mix was up a healthy 13%, but lower than the 26% that we posted through the first three quarters as we fully lapped our pricing actions taken in fiscal 2022 and realized no tailwind from transportation rates. As expected, the price increase that we began to implement in May only had a modest impact in the quarter. So, we'll see more benefit come through in early fiscal 2024.
Sales volumes were down 9%, which is consistent with the prior three quarters. We attribute most of the decline to the impact of softer casual dining and full-service restaurant traffic, although we also continue to realize the impact of exiting some lower-priced and lower-margin business. Foodservice's product contribution margin fell about $3 million. Lower volumes drove the decline as higher price-mix more than offset the impact of higher cost per pound.
Sales in our Retail segment increased 25%. Price-mix increased 35%, driven by pricing actions across our branded and private-label portfolios that we began to implement in February to counter input cost inflation. Trade support during the quarter remained below historical levels, given category demand. Volume fell 10%, largely reflecting the challenges that I described earlier for private-label products.
Retail's product contribution margin increased more than $40 million and its margin percentage expanded 140 basis points to nearly 38% as the cumulative benefit from pricing and mix improvement actions over the past couple of fiscal years more than offset higher cost per pound.
Moving to our liquidity position and cash flow, we continue to maintain a solid balance sheet with ample liquidity and a low leverage ratio. We ended the quarter with about $305 million of cash and no borrowings under our $1 billion U.S. revolver. Our net debt was nearly $3.2 billion at the end-of-the fourth quarter. Using EBITDA on a trailing 12-month basis, which only includes a single quarter of EMEA's earnings, our leverage ratio is 2.6 times.
We remain focused on creating value for our shareholders. Our capital allocation priorities remain the same and we continue to prioritize investing in our business to drive long-term growth as well as returning capital to our shareholders through dividends and share repurchases to offset management dilution.
In fiscal '23, we generated more than $760 million of cash from operations or $340 million above last year, largely due to higher earnings. Capital expenditures were about $735 million, which is up $430 million from the prior year. This increase is largely related to construction costs as we continue to expand processing capacity. For the year, we returned more than $190 million of cash to shareholders including $146 million in dividends and $45 million in share repurchases.
Now, let's turn to our fiscal 2024 outlook. We're taking a prudent approach to our financial targets for the year. Overall, we anticipate that the operating environment will continue to be challenging with inflation and other macro factors affecting our cost structure. Restaurant traffic and consumer demand. In addition, we expect our capacity to produce coated fries, specialty cuts and chopped and formed varieties such as puffs and hash browns, will remain constrained until our new production facilities in China and Idaho become available late in fiscal 2024.
For the year, we are targeting sales of $6.7 billion to $6.9 billion. This includes $1 billion to $1.1 billion of incremental sales attributable to the EMEA transaction during the first three quarters of the year, and net sales growth, excluding acquisitions, of 6.5% to 8.5%, which is above our long-term sales growth algorithm of low-to-mid single-digits. Note that since we began to consolidate EMEA sales beginning in the fourth quarter of fiscal 2023, those results are included in our last year's sales baseline when calculating our sales growth.
We expect sales growth excluding acquisitions to be largely driven by pricing actions, including both the carryover impact of actions taken in fiscal 2023 as well as any actions that we may take this year to counter input cost inflation. We also expect to deliver favorable customer and product mix as we continue to benefit from our revenue growth management initiatives.
As Tom noted, while we expect a solid contribution from price, we do not expect pricing actions to be at the same level as fiscal 2023. Outside of those customer contracts in our Global segment that have yet to be fully priced, we expect any future pricing actions will be largely in-line with the more modest rate of input cost inflation than what we've experienced in the past two fiscal years.
In addition, transportation rates that we charge the customers will likely serve as the price headwind as we continue to adjust rates to reflect lower freight costs. In fiscal 2024, we expect volume, excluding acquisitions, will continue to be pressured by our ongoing efforts to strategically manage product mix by exiting certain lower-price and lower-margin business. This strategy has proven to be beneficial to earnings and we continue to see opportunities across our domestic and international channels.
In addition, we're taking a cautious approach to consumer demand for two primary reasons. First, while QSR traffic has held up relatively well, casual dining and full-service restaurant traffic trends have softened in the U.S. over the past few months. Second, forecasting demand has become increasingly difficult due to conflicting data about the health of the consumer in the U.S., Europe and our key markets as a consequence of inflation, especially for food away-from-home; the expiration of temporary government assistance and other consumer support programs put in-place during the pandemic; employment trends and other macroeconomic headwinds.
Despite these near-term factors, we remain confident in the health and long-term growth prospects of the global category and we remain committed to investing in our people, production capacity and operations to support that growth. For earnings in fiscal 2024, we expect adjusted EBITDA, including unconsolidated joint-ventures of $1.45 billion to $1.525 billion, assuming potato crops in our primary growing regions are in-line with historical averages. Using the midpoint of this EBITDA range implies growth of more than 20% or about $260 million versus the prior year.
Looking at it another way, it's up $200 million more than our annualized second-half of fiscal 2023 run rate of $1.325 billion. In addition to incremental earnings from the Lamb Weston EMEA acquisition, we expect our earnings growth will be largely driven by higher sales and gross profit as we benefit from pricing actions, mix improvement, and supply-chain productivity. We're projecting that the increase in sales and gross profit will be partially offset by higher SG&A expenses. We're targeting total SG&A of $765 million to $775 million, which is up about $200 million.
In addition to inflation, the increase largely reflects incremental expenses attributable to the consolidation of our EMEA operations, increased investments to upgrade our information systems and ERP infrastructure, non-cash amortization of intangible assets associated with the EMEA acquisition as well as ERP investments we expect to place in-service during the year, and higher compensation and benefit costs due to increased headcount to support our growing business.
In addition to our operating targets, we expect equity earnings, which includes our Lamb Weston RDO joint venture in Minnesota to be $30 million to $35 million. We expect capital expenditures of $800 million to $900 million, as we continue construction of our previously-announced capacity expansion efforts as well as capital associated with our new ERP system and other IT upgrades.
So, to summarize our fiscal 2024 outlook. We're targeting sales of $6.7 billion to $6.9 billion, including $1 billion to $1.1 billion of incremental sales attributable to the consolidation of our EMEA operations. We expect our sales growth, excluding acquisitions, will be largely driven by price mix, with volume pressure due to our ongoing efforts to strategically manage customer and product mix and a cautious view of demand. And finally we're targeting adjusted EBITDA, including unconsolidated joint ventures of nearly $1.5 billion, using the midpoint of our guidance, which is an increase of 20%, and largely driven by sales and gross profit growth.
Lastly, as Tom mentioned, effective the beginning of fiscal 2024, we began managing our operations as two business segments, North America and International. In the coming weeks, we'll provide recast financial information for fiscal years 2021, 2022 and 2023 that is consistent with our new reporting segment structure, including quarterly results for the last two years.
And with that, let me now turn it back over to Tom for some closing comments.
