French fry maker Lamb Weston is at a “critical juncture” and needs to take steps to “rebuild” support from shareholders after a series of missteps by prior management, activist investor Starboard warned the company’s board in a letter.
While the Idaho-based company has taken meaningful steps to improve volumes during the last year, Starboard said normalized earnings and “sustainable” growth so far appear elusive. The activist said the potato giant needs to host an investor day to “reset the narrative, clearly communicate its path to durable earnings growth and rebuild investor confidence.”
“At this Investor Day, the Company must first reestablish the foundation of its story: Lamb Weston is a high-quality business with a leadership position within an attractive industry,” Starboard wrote in its April 30 letter.
In March, Starboard first disclosed its stake in Lamb Weston and demanded that it double its cost-cutting targets and consider selling certain businesses in Asia.
Lamb Weston is no stranger to pressure from activist investors. It reached a separate agreement with Jana Partners last summer that gave the firm a larger presence on the company’s board through the appointment of former food industry executives from Nestlé USA and McCormick & Co.
Lamb Weston, which supplies french fries to fast food giants including McDonald's, has struggled in recent years as consumers eat out less in restaurants and curtail their spending in stores due to inflation. The company has also come under fire for adding too much capacity and not properly accounting for a drop in demand.
Lamb Weston has taken steps to better position the company during the past two years. The company announced in 2024 that it would close a processing facility in Connell, Washington, and temporarily curtail certain production lines across North America. Lamb Weston also appointed Mike Smith as its new CEO in early 2025.
During its most recent quarter, Lamb Weston’s net sales rose 3% to $1.57 billion. Smith told investors the company is “taking proactive steps to better align supply and demand, and we are acting with urgency to navigate the competitive international environment.” He added that Lamb Weston expects to exceed its cost reduction target of at least $250 million by the end of its fiscal year 2028.
