Shares of Lamb Weston Holdings, Inc. (LW) have seen a notable decline of approximately 18% in pre-market trading on the NYSE. This downturn follows the company's recent announcement of a reduced fiscal outlook for 2025, coupled with the reporting of a net loss in its second-quarter results, accompanied by uninspiring net sales figures.
The company also disclosed a significant leadership transition. Michael Smith, currently the Chief Operating Officer, will ascend to the roles of President and Chief Executive Officer and join the Board of Directors, effective from January 3, 2025. This change comes as Thomas Werner steps down as CEO and Board member, although he will remain in an advisory capacity until August 31, 2025. Smith brings extensive experience to his new role, having been with Lamb Weston since 2007 and serving in various senior leadership positions over his 17-year tenure.
Additionally, the Board of Directors has approved a quarterly dividend increase, now set at $0.37 per share for Lamb Weston common stock, effective for disbursement on February 28 to shareholders recorded by the close of business on January 31.
Discussing the financial performance and outlook adjustment, Thomas Werner, the outgoing President and CEO, emphasized that the second-quarter results fell short of their expectations due to unforeseen manufacturing costs and reduced sales volumes. Despite meeting their targets for price/mix and operating expenses, the challenging broader operating conditions are anticipated to continue through the remainder of fiscal 2025 and into fiscal 2026.
For the fiscal year 2025, Lamb Weston now forecasts net income between $330 million and $350 million, with earnings per share projected at $2.30 to $2.45. This is a downward revision from earlier estimates of $395 million to $445 million in net income and earnings per share of $2.70 to $3.15. The company has also adjusted its target for adjusted net income to $440 million to $460 million, or $3.05 to $3.20 per share, down from the prior range of $600 million to $615 million, or $4.15 to $4.35 per share.
Market analysts, based on data from Thomson Reuters, had anticipated earnings of $4.20 per share, typically excluding any exceptional items.
Additionally, Lamb Weston has revised its adjusted EBITDA target to a range of $1.17 billion to $1.21 billion, lower than the previous target of around $1.38 billion. The company's annual net sales projection is now between $6.35 billion and $6.45 billion, reduced from the earlier estimate of $6.6 billion to $6.8 billion, while analysts had predicted sales of $6.65 billion for the year.
This revision in outlook is largely attributed to heightened competitive pressure affecting price/mix and volume in the International segment, additional volume challenges in North America, and underwhelming financial performance in the second quarter.
For the second quarter, Lamb Weston reported a net loss of $36.1 million, contrasting with the prior year's net earnings of $215.0 million. The loss per share for this quarter stood at $0.25, compared to earnings of $1.48 per share in the same period last year. Adjusted earnings for the quarter were reported at $94.5 million, or $0.66 per share, falling short of analysts' expectations of $1.01 per share. Net sales saw an 8% decline, amounting to $1.60 billion from $1.73 billion during the same timeframe last year, missing the anticipated $1.67 billion by analysts. Volume decreased by 6%, highlighting the impact of subdued global restaurant traffic trends.
At the close of trading on Wednesday, Lamb Weston's shares were valued at $78.22, experiencing a 4.98% decline. In pre-market activity, the shares have further decreased, trading at $64.00, reflecting an 18.2% drop.
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