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Lamb Weston (NYSE:LW) just dropped a bombshell on investors, reporting a jaw-dropping Q2 loss of $36.1 milliona stark reversal from last year's $215 million profit. Revenue tumbled 8% to $1.6 billion, missing Wall Street estimates, while adjusted EPS was cut to $3.05-$3.20 for fiscal 2025, down from the previous $4.15-$4.35 guidance. Blame it on soaring manufacturing costs, weaker volumes, and softening global demand for frozen potatoes. CEO Tom Werner didn't sugarcoat it, warning that the pain isn't going away anytime soon, with headwinds expected to persist into 2026.
But the headline grabber? A leadership shakeup. Lamb Weston's COO, Michael J. Smith, will take over as CEO on January 3, 2025, as Werner steps aside, staying on as an advisor until August. Smith's been with the company since 2007 and now faces the uphill battle of turning the ship around. Part of the plan includes a $55 million cost-cutting initiativefactory closures and allwhile trying to steady investor nerves after shares nosedived nearly 18.4% at the time of writing. Chairman W.G. Jurgensen called Smith's promotion years in the making, but investors are understandably skeptical given the grim outlook.
Even so, Lamb Weston is dangling a carrot: a $0.37 per share dividend for Q3 2025 and an expanded share buyback authorization by $250 million. That's nice, but the stock is down nearly 41% this year, and activist shareholders like JANA Partners are circling, demanding big changes at the board level. With global frozen potato demand stuck in a rut, all eyes are on whether Smith can lead the comeback or if this is just the beginning of a long winter for Lamb Weston.
This article first appeared on GuruFocus.