Lamb Weston Holdings, one of the global leaders in frozen potato products, has made a significant announcement about the company's restructuring process. A significant aspect of this restructuring includes the necessity for production cuts and layoffs.
The company has plans to shutter its Connell, Washington plant. Additionally, plans are in place to temporarily reduce production lines and operational schedules across North America. The workforce will undergo a 4% reduction, and unfilled spots will not be refilled. Lamb Weston anticipates that these actions will yield them a cost saving of $55 million and reduce capital expenditures by $100 million in the fiscal year 2025. The cost for these changes is projected to be between $200-250 million.
Interestingly, this announcement boosted Lamb Weston stock, making it one of the S&P 500's top performers with a rise of more than 3%.
CEO Tom Werner emphasized the proactivity of these steps, which aims to enhance the company's overall operating efficiency, profitability, cash flows. This is expected to allow the company to continue facilitating strategic investments to support their customers and generate value for stakeholders in the long term.
In the first quarter of fiscal 2025, Lamb Weston posted adjusted diluted earnings per share (EPS) of $0.73, which surpassed expectations by analysts surveyed by Visible Alpha, despite a 1% reduction in revenue to $1.65 billion, which also defied forecasts.
In response to the anticipated savings from labor costs due to the job cuts, the company has revised its guidance for full-year adjusted net income and adjusted diluted EPS, as well as its outlook for adjusted selling, general, and administrative expenses (SG&A). It was also noted that restaurant traffic has remained 'soft'. Despite these changes and growth in stock, Lamb Weston's shares are currently down by more than 35% for this year.