Lamb Weston Holdings Inc Q3 2025 Earnings Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Andrew Lazar - Barclays - Analyst : I guess, Mike, in thinking about some of your comments and the outlook around crop prices in North America expected to be sort of down mid-single digit or so. Thinking about the sort of the ongoing weak restaurant traffic trends and some of the additional industry capacity that's coming on stream, I guess as you roll that all up, how do you think this sort of impacts key sort of QSR contract negotiations as you approach it sort of this summer? I'm just trying to get a sense of how you approach that given all these dynamics.

Question: Andrew Lazar - Barclays - Analyst : And then just a quick one on the AlixPartners agreement. I'm just curious on -- obviously, you're just starting -- getting going with that. But where would -- how would you put in context sort of where the bigger buckets of potential opportunities are? Is it mostly really on the cost side and in productivity? Is it more on sort of let's call it, utilization, capital sort of your capital allocation sort of approach? Just trying to guess where you see, potentially, the bigger buckets versus maybe those that are not as compelling?

Question: Thomas Palmer - Citigroup Inc. - Analyst : I wanted to maybe, first, just ask on the 4Q gross margin. I think you called out 330 basis points from higher fixed cost absorption. Why is that more of a headwind, I guess, when we think about 4Q versus last quarter? And then I think you also said gross margin down around 700 basis points in 4Q, but unless I missed something, the two items you called out added up to roughly 600 basis points. So just kind of what else the incremental is there.

Question: Thomas Palmer - Citigroup Inc. - Analyst : And maybe I'll just follow up with kind of on that inventory piece. I think when you initially kind of introduced it a couple of quarters ago, it sounded like it was more isolated to fiscal '25. I guess, just any update on kind of working through the excess inventory and when we might start to see more of a positive inflection from that side?

Question: Ken Goldman Goldman - J.P. Morgan - Analyst : You gave some helpful reasons why the bottom line might be in a little bit more pressure ahead. Just -- I won't regurgitate them here. But if you look at the bottom end of your EPS guidance or implied guidance for 4Q, it does imply little bit of a steep deceleration really a drop-off in that two-year rate, right? So just kind of normalizing for last year. And I'm just wondering, is there any conservatism built into your implied 4Q number on the bottom line that we should be aware of, any more than usual, I guess, is the way to ask it.

Question: Ken Goldman Goldman - J.P. Morgan - Analyst : And then just as we think about AlixPartners, you did talk about the value creation plan and how it's a little broader than maybe it might appear at first glance. I guess my question is this, AlixPartners, they're known not only for helping and identifying with top line and cost saves but also with really kind of broader strategic activities. And I guess my question is, as you think about your work with them, are really kind of all options for value creation on the table? Or should we really think of this more as focused on fundamental top and bottom line efficiency, if that makes sense?

Question: Yasmin Daswani - Bank of America - Analyst : I just wanted to dig a little bit on slide 9 in your slides on just the crop. There was news out a few weeks ago on acreage reductions in the Columbia Basin, I believe, down mid-teens or so. How much of that do you attribute to the Connell closure versus how you see the market shaping up in the next 12 to 18 months in terms of demand?

Question: Yasmin Daswani - Bank of America - Analyst : And then you mentioned the mid-single-digit decline in price in your slides, how much of that do you expect to fall to the bottom line versus reinvestment?

Question: Robert Moskow - TD Cowen - Analyst : I wanted to ask about the Connell plant and what your plans are for the future. I think there was an article in a local paper speculating that you might sell it rather than shut it down. And my concern would be if another operator comes in and keeps the capacity up, it might hurt your capacity utilization outlook. And then similarly, a couple of your biggest competitors here in the US had plans this year to start up new facilities or at least new production lines that were pretty significant. Is it your expectation that those are on track or not?

Question: Max Gumport - BNP Paribas - Analyst : I was hoping to get a bit more commentary on the weakness in QSR traffic that you're seeing, particularly what you think is driving the sequential weakening in trends, in particular for QSR hamburgers and then how that informs your demand forecast for FY26?

Question: Alexia Howard - Bernstein - Analyst : So you've obviously got a pretty fast start on this broad-based turnaround plan. Can you talk about what's been most surprising as you've embarked on this process in terms of the biggest opportunities to improve performance and create value, anything that's been surprising to the negative side as well?

Question: Alexia Howard - Bernstein - Analyst : As a quick follow-up, in terms of diagnosing the continuing and deteriorating weakness in the burger chains, particularly in the US, do you have a good handle on what's driving that at this point? Is it the low income consumer getting worse? Is it a higher-income consumer, maybe slowing traffic in the burger chains. Or is it possibly a GLP-1 drug impact? I'm just wondering what you're turning over to try and figure it out.

Question: Matt Smith - Stifel - Analyst : North America volume was stronger than I think many were expecting. And at the same time, you called out a slight volume decline into the fourth quarter. You walked through some of those factors that benefited the North America volume in the third quarter. But can you help bridge the plus 8 to kind of down sequentially maybe by the factors that most benefited the third quarter that were more unique? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 03, 2025 / 2:00PM, LW.N - Q3 2025 Lamb Weston Holdings Inc Earnings Call

Question: Matt Smith - Stifel - Analyst : And as a follow-up, it sounds like you've done -- you're in process on doing a lot of work with AlixPartners and looking at your expense structure and revenue opportunities. Based on what you've seen to date, can you comment on how you view the 19% to 20% EBITDA margin that I think was discussed last quarter as an achievable level perhaps in the medium term?

Question: Marc Torrente - Wells Fargo Securities - Analyst : I appreciate the update on the capacity outlook. Any change on your level of comfort around pricing to remain rational in North America? And maybe any kind of stabilization in international price/mix, international was pretty weak. Was that in line with your own expectations, maybe an FX? And how are you thinking about that progressing from here? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 03, 2025 / 2:00PM, LW.N - Q3 2025 Lamb Weston Holdings Inc Earnings Call

Question: Carla Casella - JP Morgan - Analyst : Two quick follow-ups. One on CapEx, nice to see you can increase your cash flow by -- as you finish off some of these projects. I'm wondering what's your maintenance level of CapEx beyond that? And do you think you've got more opportunities to change that?

Question: Carla Casella - JP Morgan - Analyst : And in your new business wins, is there a change in how the QSRs are operating? Are you seeing more? It sounds like somewhere it's just open to outsourcing. But is there -- as that happens, are you seeing any different competitive threats as you bid on the project the way you and your competitors go after it or how the QSRs look to bid out those projects or the [price] contracts?