Lamb Weston NYSE: LW raised its fiscal 2027 outlook after reporting first-quarter results that exceeded its expectations, supported by continued volume growth in North America, cost-savings initiatives and improving pricing trends.
The company reported first-quarter net sales of $1.67 billion, up 1% from a year earlier. Adjusted diluted earnings per share rose 1% to $0.75, while adjusted EBITDA declined 5% to $286 million. Chief Financial Officer Jim Gray said EBITDA was ahead of the company’s expectations despite the year-over-year decline, which reflected carry-in costs from the prior year’s potato crop in Europe, the Middle East and Africa.
“The Lamb Weston team delivered a solid start to fiscal 2027 with net sales, adjusted EPS, and adjusted EBITDA results above our guidance,” President and CEO Mike Smith said on the company’s earnings call.
North America Drives Volume Growth
North America net sales increased 5%, driven by 7% sales-volume growth, marking the company’s seventh consecutive quarter of volume expansion in the region. North American adjusted EBITDA rose 11%, aided by higher volumes, cost savings, $5 million in tariff refunds and improved earnings from Lamb Weston’s joint venture with RDO.
Price mix in North America declined 1.7%, an improvement from the 2.4% decline in the prior quarter. Smith said the decline reflected roughly equal contributions from price and mix, including the carryforward effect of targeted pricing investments made in fiscal 2026 and shifts toward multinational chain and private-label business. Recent inflation-related pricing actions partly offset those factors.
Gray said the company outperformed broader restaurant-industry trends during the quarter. U.S. restaurant traffic was essentially flat, while quick-service restaurant traffic declined 1%, according to Circana CREST data cited by the company. Chicken-focused QSR traffic, however, rose 4%, a favorable trend for Lamb Weston because it over-indexes with chicken-focused chains.
Smith attributed the North American momentum to new customer wins, growth with existing customers, improved fill rates, joint business planning and product innovation. Lamb Weston has completed about 70% of its contracts scheduled for renewal this year, with a high retention rate and pricing that reflects inflation, according to management. Most remaining contract discussions are expected to conclude over the next two quarters.
International Results Remain Below Long-Term Aspirations
International net sales declined 8% in the first quarter, reflecting a 6% decline in sales volumes and a 2% decline in price mix. International adjusted EBITDA fell to $27 million, pressured primarily by lower European volumes and elevated carry-in costs from the previous year’s potato crop.
Management said it expects international margins to improve from first-quarter levels as it works through those prior-year potato costs. In Europe, Lamb Weston stopped production at its Broekhuizenvorst facility and transitioned customer fulfillment to other locations. Smith said the move is expected to lift regional capacity utilization above 90% and concentrate production in more cost-efficient plants.
The company also cited broader industry capacity rationalization, including announced plant closures and delayed or canceled expansion projects by other manufacturers. Smith said poor crop quality and lower yields following extensive heat and dry conditions are expected to constrain potato supply in Europe, with raw potatoes likely to limit industry capacity utilization.
Lamb Weston said it is positioned to meet anticipated customer demand because of its grower relationships and potato-contracting practices. The company implemented a price increase in Europe earlier in the month to address expected higher raw-material costs. Management said it is also working with customers to modify product specifications to help manage crop variability.
Outside Europe, the company said China delivered growth in net sales and adjusted EBITDA, supported by multinational chain demand and limited-time offers. Latin America continued to add business and ramp production at its Mar del Plata, Argentina, facility, including shipments to a new strategic global QSR customer.
Cost Programs and Organization Changes
Executive Chair Jan Craps said Lamb Weston has changed half of its executive leadership team, adjusted target-setting and compensation practices, and redesigned its organization to reduce management layers and improve accountability.
The company has also begun an enterprise-wide zero-based budgeting process and continues to pursue cost-savings programs. Smith said the initiatives are intended to permanently lower operating costs while allowing the company to selectively reinvest savings in customer-facing capabilities, innovation and commercial teams.
As part of its international reorganization, Lamb Weston will combine its China and Asia-Pacific regions into a unified APAC structure. Marc Schroeder, president of international, will leave the company at the end of the calendar year, and Lamb Weston has begun an external search for his successor.
Craps said the company’s market and channel prioritization work could ultimately lead to partnership or divestiture opportunities, though he said it was too early to provide details. Lamb Weston plans to discuss its strategy further at an Investor Day in early calendar 2027.
Raised Fiscal 2027 Outlook
For fiscal 2027, Lamb Weston now expects low-single-digit net sales growth, compared with its previous outlook of flat to 1% growth. The company raised its adjusted operating income target to $730 million to $810 million and increased its adjusted EBITDA forecast to $1.125 billion to $1.215 billion.
- Adjusted EPS is expected to be $3.05 to $3.35, compared with a fiscal 2026 52-week adjusted EPS base of $2.90.
- Cash provided by operations is forecast at $750 million to $800 million.
- Capital expenditures are expected to total approximately $380 million to $410 million on a cash basis.
- Second-quarter net sales are projected to rise low single digits, while adjusted EBITDA is expected to increase high single digits to low double digits.
Gray said the company expects input-cost inflation excluding potatoes to run about 100 basis points above its prior expectation, with freight, edible oils, packaging and ingredients among the major pressures. Lamb Weston plans to address those costs through savings programs and pricing actions where market conditions allow.
The company generated $144 million of free cash flow in the first quarter and returned $52 million to shareholders through its quarterly dividend. Lamb Weston declared its next quarterly dividend of $0.38 per share, payable Dec. 4.
About Lamb Weston (NYSE:LW)
Lamb Weston Holdings, Inc NYSE: LW is a global producer and marketer of frozen potato products. The company supplies French fries, potato wedges, hash browns, potato rounds, mashed potatoes and other specialty potato products to restaurants, foodservice distributors, retailers and food manufacturers.
Its product portfolio includes conventional and specialty frozen potato offerings, as well as sweet potato products and appetizer items. Lamb Weston sells products under its Lamb Weston and Grown in Idaho brands, while also providing private-label products for retail and foodservice customers.
The company's history dates to the 1950s, when it began producing frozen potato products in the Pacific Northwest.
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