News April 2019

Potato giant Lamb Weston boosts outlook as restaurants drive sales

America can’t get enough french fries. Sales to restaurants and food service distributors in North America carried potato giant Lamb Weston to a stronger quarter than expected, heating up shares of the $11bn company on Tuesday.

The group also raised its outlook for the full year, citing “favorable trends in global demand.” Idaho-based Lamb Weston, a purveyor of frozen food products such as french fries and mashed potatoes, increased its sales to food service customers and its smaller restaurant chain customers by 5 per cent year-over-year for the third quarter ending on February 24. Net sales surged 11 per cent in its global segment, which includes Lamb Weston’s top 100 North American restaurant chain customers and its international business.

The upbeat quarter spurred Lamb Weston to raise its sales forecast for fiscal 2019 for a second time this year. Lamb Weston expects sales to grow in the high-single digits, compared to a prior outlook for growth in the mid- to high-single digits. The company also sees adjusted earnings before interest, taxes, depreciation and amortisation of $895m to $905m, up from $870m to $880m.

Shares of Lamb Weston rallied more than 6 per cent on Tuesday morning before paring those gains to 2.5 per cent at $75.81 — still good enough to be the fifth-best performer in the S&P 500.

“Our base business in North America and Asia continued to drive solid sales and earnings growth in the third quarter, more than offsetting softer results in Europe that are being affected by a historically poor potato crop,” chief executive Tom Werner said in a statement.

Lamb Weston’s portfolio includes a wide range of potato products, from traditional potatoes to sweet potatoes, and crinkle cut fries to waffle fries. The company was spun off from ConAgra, the maker of Reddi-wip and Orville Redenbacher, in 2016.

Net sales across the company jumped 7 per cent to $927m in the quarter, topping analysts’ average forecast of $895m. Strength in the food service and global businesses offset a 1 per cent drop in sales to retail customers such as grocery stores.

Sources: Fincancial Times / Lamb Weston