Lamb Weston Holdings, Inc. (LW), a leading global supplier of frozen potato products, recently announced its fourth-quarter and full-year fiscal 2023 results, which fell short of analysts’ expectations. The company also withdrew its previous fiscal 2024 outlook and announced the appointment of a new Chief Executive Officer. These developments sent the company’s stock tumbling.
The company reported net sales of $1.27 billion for the fourth quarter, marking a 2% increase compared to the prior year’s quarter. However, this figure missed analysts’ consensus estimate of $1.31 billion. Price/mix increased 14%, reflecting favorable pricing actions to offset significant input cost inflation. Volume declined 12% due to supply chain constraints primarily related to potato supply.
Income from operations decreased to $133.7 million, compared to $180.4 million in the prior year’s quarter. Adjusted EBITDA, a key profitability metric, was $208.3 million, down from $266.5 million in the same period last year. The decrease in profitability was driven by higher raw material and manufacturing costs, partially offset by pricing actions and productivity improvements.
For the full fiscal year 2023, Lamb Weston generated net sales of $4.83 billion, a 15% increase compared to fiscal 2022. Price/mix increased 20%, while volume declined 5%. Adjusted EBITDA for the full year was $881.9 million, a decrease from $914.2 million in the prior fiscal year.
In light of the challenging operating environment and ongoing uncertainty related to potato supply, the company withdrew its previously issued fiscal 2024 outlook. Lamb Weston expects continued volatility in raw material, manufacturing, and transportation costs in fiscal 2024.
Concurrent with the earnings release, Lamb Weston announced that current President and CEO, Tom Werner, will retire on September 29, 2023. The Board of Directors has appointed Steven Carlisle, current Senior Vice President and Chief Commercial Officer, as the new President and CEO, effective September 30, 2023. Mr. Carlisle has been with the company for over 30 years and has held various leadership roles.
The disappointing financial results, coupled with the withdrawn outlook and CEO transition, led to a significant decline in Lamb Weston’s stock price. Investors are concerned about the company’s ability to navigate the current inflationary environment and the uncertainty surrounding potato supply. The incoming CEO, Steven Carlisle, will face the challenge of addressing these issues and guiding the company towards sustained profitability and growth.
The change in leadership and the uncertain market conditions create a dynamic situation for Lamb Weston. The company’s future performance will depend on its ability to effectively manage costs, secure a stable potato supply, and successfully implement its strategic initiatives under the new CEO. The market will be closely watching for signs of improvement in the coming quarters.
The appointment of Steven Carlisle signals a new chapter for Lamb Weston. His extensive experience within the company may provide a degree of continuity, but the challenges ahead are significant. Investors will be looking for his vision for the future of the company and his plans to address the current headwinds.
