Key Takeaways
- Shares of French fry company Lamb Weston plunged to multiyear lows today, hit by a downbeat quarter and year-ahead outlook.
- People are still buying fries at restaurants, the company said, but they’re eating out less.
- Lamb Weston hopes fast-food meal deals get restaurant traffic back up in the year ahead.
The oil’s gone cold for French fry maker Lamb Weston (LW). Shares of the company, known for its line of fries ranging from crinkle to waffle, fell like a dropped hot potato on Wednesday, with the shares falling 28% to multiyear lows. The reason: a downbeat full-year performance and a disappointing outlook for the year ahead.
“We expect fiscal 2025 to be another challenging year,” CEO Tom Werner said in a press release. The operating environment has changed rapidly over the past twelve months as global restaurant traffic and frozen potato demand softened due to menu price inflation.”
Inflation-Weary Consumers Not Eating Out as Much
Put another way, according to the company, people are still ordering fries—they’re just going to restaurants less often because of higher prices. Lamb Weston hopes the promotions that many fast-food chains have lately put in place to pull inflation-weary consumers back into their stores will help get sales volumes up again. One set of clues will land Monday, when McDonald’s (MCD) reports its latest quarterly results.
“Fry attachment rates in the U.S., Europe, Japan and China were largely steady,” Werner said on a conference call, a transcript of which was provided by AlphaSense. “We believe the pressure on restaurant traffic and demand is temporary and remain confident that the global fry category will return to its historical growth rate as consumers continue to adjust to higher menu prices.”
Still, it was a rough end to the fiscal year. Â Sales fell 5% year-over-year, while net income fell more than 70%. The company is projecting year-ahead sales growth, but declining profits.