Lamb Weston has posted fiscal fourth quarter and full year 2025 results in addition to providing its outlook for fiscal 2026. The Eagle, Idaho, USA-headquartered frozen potato processing and marketing company also unveiled “Focus to Win,” a comprehensive plan designed to improve performance and drive profitability.
Heralding a return to growth in the second half of this year, CEO Mike Smith reported that momentum in customer wins and retention has delivered financial results above updated expectations. He stated: “As part of our Focus to Win strategic plan, we are also announcing further steps to deliver at least $250 million of savings, including $200 million in annualized run rate savings and $120 million of favorable working capital improvements by year-end fiscal 2027. We expect that these cost savings and working capital improvements together with lower levels of capital expenditures will help drive improved profitability and cash flow.”
The chief executive officer added: “We enter fiscal 2026 with increased discipline around our customer relationships and our cost structure, along with a clear and executable plan of how to win with customers and succeed in a dynamic marketplace. The plan prioritizes markets and channels where we are well positioned to win for the long-term and doing what our team does better than anyone else – delivering the performance that has made Lamb Weston an industry leader through category leading innovation, exceptional products and customer-centric service.”
Q4 2025 Commentary
Net sales during Q4 of fiscal 2025 increased by $63.9 million, to $1,675.8 million, up 4 percent versus the prior year quarter. Volume rose 8 percent compared to the prior year quarter due to contract wins across each of Lamb Weston’s channels and geographic regions and, to a lesser extent, lapping an approximately $22 million negative impact to sales related to a previously announced voluntary product withdrawal in the prior year quarter.
The increase was partially offset by soft global restaurant traffic trends, which declined low single-digits in the United States and United Kingdom, the company’s largest global markets, compared with the prior year quarter. Price/mix declined 4 percent, reflecting efforts to partner with customers on price and trade to compete in the increasingly competitive environment in both the North America and International segments.
Gross profit declined $45.6 million versus the prior year quarter to $342.3 million. Adjusted Gross Profit fell $19.5 million versus the prior year quarter to $343.5 million, due to unfavorable price/mix, which was partially offset by lower manufacturing costs per pound related to lapping an approximately $40 million negative impact of the voluntary product withdrawal in the prior year and lower current year raw potato costs. These benefits were partially offset by higher fixed factory absorption costs from temporarily curtailed production, low-single-digit input cost inflation for other key inputs including: labor, ingredients, such as grains and starches used in product coatings, oil, packaging, and higher depreciation expense largely associated with the company’s recent capacity expansions in China, the USA and the Netherlands.
Net income declined $9.7 million from the prior year quarter to $119.9 million. Diluted EPS fell $0.04 from the prior year quarter to $0.85. Adjusted Net Income rose $9.1 million versus the prior year quarter to $122.8 million, and Adjusted Diluted EPS increased $0.09 from the prior year quarter to $0.87. The increase in Adjusted Net Income and Adjusted Diluted EPS largely reflects lower income tax expense related to lower Adjusted Gross Profit described above, partially offset by lower Adjusted Equity Method Investment Earnings described below.
Adjusted EBITDA increased $1.5 million from the prior year quarter to $284.9 million, primarily reflecting lower Adjusted SG&A, partially offset by lower Adjusted Gross Profit.
The company’s effective tax rate in the fourth quarter of 2025 was 15.1 percent, versus 28.2 percent in the fourth quarter of fiscal 2024, mainly due to discrete items and lower pre-tax income.
Fiscal Year 2025 Commentary
Net sales declined $16.3 million to $6,451.3 million versus fiscal 2024. The fall related to a 2 percent decrease in price/mix that reflected the impact of supporting customers with price and trade in a competitive environment globally. The decrease in price/mix was mostly offset by a 2 percent increase in volume, primarily in the International segment and included fully replacing the combined regional, small, and retail customer volume lost, primarily in North America, in the prior year during the company’s transition to a new ERP system in the second half of fiscal 2024. Volume increased despite a decrease in global restaurant traffic in fiscal 2025, compared to fiscal 2024.
Gross profit declined $368.1 million versus the prior fiscal year to $1,398.6 million. Adjusted Gross Profit fell $298.2 million versus the prior fiscal year to $1,460.5 million, driven by increased manufacturing costs per pound, including higher factory burden absorption. In response to softer restaurant traffic and to reduce inventory levels, production was temporarily curtailed in fiscal 2025. In addition, key input costs increased low-single-digits, including: potato, labor and packaging and the company recognized $57.6 million of incremental depreciation expense largely associated with its recent capacity expansions in China, the United States. and the Netherlands. Transportation and warehousing costs per pound increased in the low double digits, primarily related to higher warehouse inventories during the year. The increased costs were partially offset by lapping the losses related to the ERP transition, write-off of excess raw potatoes, and the incremental costs related to the voluntary product withdrawal in the prior year.
SG&A declined $67.9 million versus the prior fiscal year to $633.5 million. Adjusted SG&A fell $30.3 million to $643.9 million, mainly related to lapping higher expenses associated with the ERP transition in the prior year and a $13.9 million decrease in advertising and promotion expenses and cost savings associated with the FY25 Restructuring Plan announced in October 2024, partially offset by $14.6 million of incremental depreciation and amortization expense primarily related to the ERP transition in the prior year and higher compensation and benefit expenses.
Net income was $357.2 million, down $368.3 million versus the prior fiscal year, and Diluted EPS was $2.50, down $2.48 from the prior fiscal year. Adjusted Net Income was $478.6 million, down $261.3 million versus the prior fiscal year, and Adjusted Diluted EPS(1) was $3.35, down $1.73 versus the prior fiscal year. The decreases in Adjusted Net Income and Adjusted Diluted EPS largely reflect lower Adjusted Gross Profit due to the factors discussed above, and higher interest expense attributable to a $23.6 million reduction in capitalized interest in fiscal 2025, compared to the prior fiscal year, and higher borrowings during the year, which was partially offset by lower Adjusted SG&A and Adjusted Income Tax Expense.
Adjusted EBITDA declined $196.2 million from the prior fiscal year to $1,220.5 million, reflecting lower Adjusted Gross Profit, partially offset by lower Adjusted SG&A.
2026 Outlook
Meanwhile, looking ahead, Lamb Weston is anticipating net sales between $6.35 billion and $6.55 billion during fiscal 2026, as it focuses on driving free cash flow and returns on capital.
The 2026 forecast assumes continued pressure on consumers from macroeconomic and geopolitical factors. The company’s leadership believes customers and consumers will continue to prioritize french fries as a menu and at-home item, and its outlook assumes that global restaurant traffic will remain approximately even with fiscal 2025 levels. The outlook for next year does not include additional impacts of evolving trade policies, including additional changes in tariffs and retaliatory counter measures.
