Frozen French fry maker Lamb Weston names recent CEO, moves to deficit in Q2

A major supplier of frozen French fries to global chains like McDonald’s, KFC and Taco Bell, has named a recent CEO after posting a shock deficit in the second quarter as consumers pull back on the money they spend on food outside the home.

But struggles at the Lamb Weston, which produces the equivalent of 80 million servings of fries every day worldwide, have been no secret on Wall Street and its shares have tumbled more than 40% this year.

In October the Idaho business announced job cuts and said it would close a plant and cut production as demand sagged. Lamb Weston has more than 10,000 employees worldwide.

One of the business’s biggest investors said in a note to the business this week that Lamb Weston needed recent leadership citing what it saw as major mistakes, including a setback to view an erosion in demand as people cut back on dining out.

On Thursday, the business said that Chief Operating Officer Mike Smith would receive over at the commence of the recent year for outgoing CEO Thomas Werner, who will receive on an advisory role during a shift period.

Shares slumped more than 23% on Thursday.

“Mike’s appointment represents the culmination of a considerate, years-long succession planning procedure by our board, and we are confident he is the correct chief to navigator Lamb Weston forward,” Chairman W.G. Jurgensen said in a statement.

Smith has been with the business since 2007 and was named chief operating officer last year.

On Thursday, investors were caught off guard by a whopping $36 million deficit in the budgetary second-quarter. The business last year posted profits of $215 million during the same period. Even stripping out one-period costs, the business missed Wall Street projections for per-distribute returns of $1.02 by 36 cents.

Jana Partners, the investor that sent a note to Lamb Weston on Monday, cited a litany of complaints that included “chronic mis-execution, a bloated outlay structure” and impoverished spending choices.

It also cited what it sees as questionable uses of the corporate jet.

Elevating the business’s chief operating officer is not the fix it was looking for and it blasted the business again Thursday.

“Today’s disastrous monetary results and selection to swap its CEO for another long-standing Lamb Weston executive complicit in its widespread operational and strategic debacles is just the latest stick in the eye from a board that has completely failed shareholders,” wrote Jana, which said it owns more than 5% of the business’s unpaid shares. “Enough is enough: Lamb Weston requires significant board transformation or, in its absence, should be sold.”

Yet Lamb Weston is facing a very challenging operating surroundings after post-pandemic expense boost altered customer behavior in America and everywhere else.

In a conference call Thursday, Lamb Weston said that traffic at hamburger chains fell about 1.5% in the most recent quarter. Major quick food chains have tried to enhance foot traffic by offering worth meals and Lamb Weston said that that has had a negative impact on the volume of frozen French fry sales.

One of those chains includes McDonald’s, whose well being has an oversized impact on the business.

McDonald’s struggled globally in its most recent quarter. Chinese demand was frail as that country’s economy slowed. McDonald’s same-store sales fell 1.5% companywide.

McDonald’s launched a $5 worth meal in late June as its act sagged and it extended that propose to December at most of its U.S. stores because it drew in more low-returns customers.

Lamb Weston now anticipates 2025 returns of between $3.05 and $3.20 per distribute, far below the per-distribute returns of $4.21 that Wall Street had been projecting.