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    Earnings call· Feb 2026(Q3 FY26)

    Lamb Weston Holdings Q3 FY26 earnings call LW

    Apr 1, 2026 Source

    Executive summary

    Lamb Weston Q3 FY26 — Strong North America Performance Offsets International Headwinds

    Lamb Weston delivered solid Q3 FY26 results, driven by robust North America performance with significant volume growth and customer wins. The International segment faced headwinds from potato surplus, lower demand, and capacity issues, leading to a decline in sales and a potato write-off. The company is executing its "Focus to Win" strategy, achieving cost savings ahead of schedule and maintaining disciplined capital allocation, while navigating a dynamic global market and preparing for leadership transitions.

    Highlights

    5

    • North America volume increased 12%, driving 5% net sales growth in the segment.

    • Cost savings of $100 million for fiscal 2026 were achieved by Q3, ahead of plan.

    • Net sales guidance was raised, and the midpoint increased for fiscal 2026.

    • Free cash flow increased by $417 million year-over-year to $339 million year-to-date.

    • Liquidity remains strong at approximately $1.3 billion at quarter-end.

    Concerns

    5

    • International segment net sales declined 1% (9% at constant currency) and volume declined 2%.

    • Adjusted EBITDA declined $101 million year-over-year to $272 million.

    • A $33 million net pretax charge was recognized for excess raw potatoes in the International segment.

    • Price/mix declined 7% at constant currency due to customer investments and mix shift.

    • Adjusted gross margin is expected to decline 250 to 300 basis points sequentially in Q4.

    Guidance & targets

    11
    CategoryTargetConfidence
    Full-year Net Sales
    $6.45 billion to $6.55 billion
    high materiality
    High
    Full-year Adjusted EBITDA
    $1.08 billion to $1.14 billion
    high materiality
    High
    Full-year Cash Capital Expenditures
    approximately $400 million
    medium materiality
    High
    Full-year Tax Rate
    approximately 28%
    low materiality
    High
    Q4 Tax Rate
    mid-teens
    low materiality
    High
    Full-year Depreciation and Amortization
    approximately $395 million
    low materiality
    High
    North America Volume Growth
    high single-digit
    medium materiality
    High
    International Volume Growth
    still expected to grow
    medium materiality
    Medium
    Q4 Price Mix
    remain unfavorable at constant currency
    medium materiality
    Medium
    Adjusted Gross Margin
    decline 250 to 300 basis points
    high materiality
    High
    Adjusted SG&A
    increase slightly
    low materiality
    Medium

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    North America
    Driven by recent customer contract wins, share gains, and strong retention. Price/mix decline was roughly half from price/trade support and half from mix shift towards new and legacy chain customers and private label products. Underlying fundamentals (volume growth, lower manufacturing cost, lower SG&A) partially offset price/mix impact on EBITDA.
    Volume growth: 12%Price/mix decline: 7%
    		increased 5%5%—declined 4% or $13 million to $290 million (Adjusted EBITDA)
    International
    Volume decline primarily due to softer demand in key markets and challenging comparison (Q3 last year grew 12%). Outside EMEA, volume grew in China and Latin America. Price/mix decline reflects price/trade support, unfavorable geographic/customer mix, Middle East conflict impact, and excess international capacity. EBITDA impacted by lower sales (especially Europe), higher manufacturing costs (including $33M potato write-off), fixed factory burden from underutilized facilities, and input cost inflation.
    Volume decline: 2%Price/mix decline: 7% (constant currency)
    		declined 1%-1% (reported), -9% (constant currency)—declined $76 million to $19 million (Adjusted EBITDA)

    Operational metrics

    28
    Adjusted EBITDA
    $272 milliondeclined $101 million YoY
    Q3 FY26

    Primary drivers were unfavorable price/mix, a $33 million net pretax charge for excess raw potatoes, higher fixed factory absorption costs, and a tougher comparison against last year's strong gross margin.

    Adjusted Gross Profit
    declined $93 millionYoY
    Q3 FY26

    Primary drivers were unfavorable price/mix, a $33 million net pretax charge for excess raw potatoes, higher fixed factory absorption costs, and a tougher comparison against last year's strong gross margin.

    Tariff Expenses
    $4 million
    Q3 FY26

    Most tariff exposure relates to imported palm oil. Recent trade agreements eliminated that tariff, not expected to incur this cost after Q4 FY26.

    Adjusted SG&A
    increased $9 millionYoY
    Q3 FY26

    Cost savings were more than offset by normalized compensation/benefit accruals and a $13 million write-off of capitalized costs from projects no longer under development.

    Adjusted SG&A as a percentage of sales
    7.8%70 bps improvement vs FY23, 70 bps above FY19
    Q3 FY26

    Improved from a peak in FY23, reflecting streamlining actions. Increase relative to 2019 primarily reflects investments in IT capabilities.

    Capital Expenditures
    $257 milliondown $307 million YoY
    YTD Q3 FY26

    Reflects disciplined decision-making and focus on maintenance, modernization, and environmental projects.

    Liquidity
    $1.3 billion
    End of Q3 FY26

    Strong liquidity position.

    Net Debt
    $3.9 billion
    End of Q3 FY26

    Consistent with balance sheet priorities.

    Net Debt to Adjusted EBITDA Leverage Ratio
    3.4xconsistent with last year's Q3
    Trailing 12-month

    Aligned with balance sheet priorities.

    Dividends Paid
    $155 million
    YTD Q3 FY26

    Part of returning cash to shareholders.

    Stock Repurchases
    $50 million
    YTD Q3 FY26

    Part of returning cash to shareholders. No repurchases during Q3.

    Stock Repurchases (post-quarter)
    $43 million
    Through March 30

    Repurchased under a 10b5-1 trading plan after the quarter ended.

    Quarterly Dividend
    $0.38 per share
    Q4 FY26

    Approved by the Board.

    Foreign Currency Benefit (Net Sales)
    $47 million
    Q3 FY26

    Benefit from foreign currency translation.

    Foreign Currency Benefit (Net Sales)
    1.8%
    YTD FY26

    Approximate benefit included in full-year net sales guidance.

    QSR Traffic (U.S.)
    up 1%YoY
    Q3 FY26

    Turned positive for the first time since late fiscal 2024.

    QSR Burger Traffic (U.S.)
    down 1%YoY
    Q3 FY26

    Down for the full quarter despite February growth.

    QSR Chicken Traffic (U.S.)
    continued growth
    Q3 FY26

    Remained a bright spot.

    QSR Traffic (International)
    low single-digit declines
    Q3 FY26

    Most international markets saw declines.

    QSR Traffic (U.K.)
    declined approximately 1%YoY
    Q3 FY26

    Showing improvement versus recent quarters in the largest international market.

    Middle East Sales as % of International Volume
    high single-digit percentage
    YTD

    Reference for potential impact from Middle East conflict.

    Raw Potato Price Decline (North America)
    low to mid-single-digit percent
    Next crop

    Expected for the 2026 potato crop, negotiations nearly complete.

    Raw Potato Price Decline (Europe)
    mid-teen percentfrom 2025
    Next crop

    Indications from fixed-price contract negotiations for 2026 crop.

    North America Utilization Rates
    low 90s
    Q3 FY26

    Reflects adjustments and restarting of previously curtailed lines, allowing for flexibility and thoughtful volume management.

    Excess Raw Potato Write-off
    $33 million
    Q3 FY26

    Due to lower-than-planned sales and stronger-than-expected crop yield.

    Capitalized Costs Write-off
    $13 million
    Q3 FY26

    From projects no longer under development.

    Cost Savings Achieved
    $100 millionahead of plan
    FY26

    Achieved by the end of Q3 FY26, part of the Focus to Win strategy.

    Cost Savings Program Target
    $250 milliontracking ahead
    FY28

    Targeted savings by fiscal year-end 2028.

    Industry KPIs

    7
    MetricValueDetails
    Gross margin20.9%%
    Brand platform growthGrown In Idaho brand
    Organic net revenue growthessentially flat
    Retailer trade negotiation statusnearly complete (North America), underway and progressing as planned (Europe)
    Volume mix vs pricing decompositionVolume increased 7%, Price/mix declined 7%%
    Elasticity consumer response commentarysofter demand
    Category growth benchmark channel shift dataQSR traffic was up 1%%

    Product announcements

    1
    ProductTypeDetails
    Grown In Idaho brandupdate

    Deals & partnerships

    3
    N/A (internal action)Closure of Munro, Argentina plant and consolidation of production

    Consolidated production from the Latin America region into the new modern Mar del Plata, Argentina facility.

    N/A (internal action)Temporary curtailment of production line

    Began temporarily curtailing a production line in the Netherlands at the beginning of the fourth quarter.

    N/A (internal action)Non-resumption of production in Australia

    The company doesn't plan to resume production in one of its previously curtailed Australia locations.

    Risks & headwinds

    7
    Significant surplus in European potato marketCurrent growing season and next crop year

    Mid-teen percent decline in contracted agreements from 2025 for the next crop.

    Mitigation: Temporarily curtailing production in the Netherlands; contracting less acreage for the next crop; evaluating capacity.

    Local sourcing in developing regionsOngoing

    Affecting exports from Europe to markets like the Middle East, China, and India.

    Mitigation: Focus to Win strategy prioritizing markets and channels; disciplined capital investments.

    Persistently lower restaurant traffic in key international countriesQ3 FY26, ongoing

    Low single-digit declines in most international markets; U.K. QSR traffic declined approximately 1% in Q3.

    Mitigation: Taking decisive actions to manage business in the near term and protect profitability; Focus to Win strategy.

    Excess international capacityOngoing

    Competitive backdrop in certain international markets may result in less capacity expansion than previously anticipated.

    Mitigation: Disciplined capital investments; plant closures (Munro, Argentina); production curtailments (Netherlands, Australia).

    Middle East conflictOngoing, Q4 FY26 and beyond

    Middle East represents a high single-digit percentage of the international segment volume year-to-date. Potential for lower volumes to the region and increased volatility in commodities (packaging, fuel).

    Mitigation: Hedging program for key inputs; diversified sourcing; commercial agreements; current assessment included in adjusted EBITDA guidance.

    Unfavorable price/mixQ3, Q4 FY26, potentially into FY27

    Declined 7% at constant currency in Q3. Expected to remain unfavorable in Q4.

    Mitigation: Targeted investments in customers; recent price increase implemented in early March for non-contracted North American business.

    Input cost inflation (non-potato)Q3 FY26, ongoing

    Increased year-over-year for edible oils (canola), fuel, power, water, labor, and transportation costs.

    Mitigation: Hedging program; diversified sourcing; commercial agreements; cost savings initiatives.

    What to watch in Q4 FY26

    5

    FY27 Price/Mix Outlook

    Next quarter (Q4 FY26 earnings call)
    Currentexpected to continue to have some price mix pressure in fiscal '27
    TargetClarity on moderation and specific guidance for FY27.

    Why it matters

    Price/mix is a key driver of revenue and margin, especially with potato cost deflation and prior pricing actions.

    Our expectation is that we're going to continue to have some price mix pressure in fiscal '27. Obviously, with those decisions that we made around pricing in the current fiscal year that will start to -- we will have that lapping effect into fiscal 2027. We'll provide guidance on fiscal '27 like we normally do with our Q4 earnings, and we'll be able to give more clarity on what that might look like for fiscal '27 at that time.

    Q&A highlights

    7

    What are the current North America utilization rates after restarting lines, and will international actions lead to 90%+ utilization?

    North America utilization is in the low 90s, providing flexibility for customer demand and thoughtful volume management. International actions are ongoing, but capacity management is complex due to varied plant capabilities.

    “Overall, in North America, we're in the low 90s with some of the adjustments that we've made to your point. We're excited that we've been able to bring back online, some of those previously curtailed lines.”

    asked by Tom Palmer · answered by Mike Smith

    2 min read6 chapters

    Detailed Narrative

    01

    Focus to Win Strategy Progress

    Lamb Weston is 9 months into its "Focus to Win" strategy, marking a departure from previous growth-at-all-costs approaches. The strategy emphasizes thoughtful geographic and capability positioning, customer- and return-centric investments, and strengthening customer partnerships. This paradigm shift has led to significant improvements in customer positioning, operational execution in North America, and disciplined capital investments, with the company believing it is "just getting started" on its transformation.

    02

    Cost Savings Initiatives Exceeding Targets

    The company has achieved $100 million in cost savings for fiscal 2026 by the end of Q3, ahead of its initial target. This progress also puts them ahead of the broader $250 million cost savings target by fiscal year-end 2028. These savings have enabled selective investments in customer support and are driving structural improvements for enhanced competitiveness and operating leverage, with additional opportunities being evaluated.

    03

    International Market Challenges and Actions

    The International segment faces significant headwinds, including a potato surplus in Europe from expanded acreage and a robust crop, increased local sourcing in developing regions affecting European exports, and persistently lower restaurant traffic. In response, Lamb Weston closed its Munro, Argentina plant, consolidated production into its Mar del Plata facility, and temporarily curtailed a production line in the Netherlands. The company also does not plan to resume production in one previously curtailed Australia location, focusing on controlling costs and capital.

    04

    Potato Crop Negotiations and Outlook

    North America potato contract negotiations for the 2026 crop are nearly complete, with expectations for a low to mid-single-digit percent decline in raw potato prices. In Europe, fixed-price contract negotiations are underway, pointing towards a mid-teen percent decline in contracted agreements from 2025. The company is contracting less acreage in Europe and will provide a full update on crop outlook with Q4 earnings.

    05

    Leadership Transitions and Board Refresh

    Lamb Weston is undergoing significant leadership changes, welcoming Jan Craps as the new Executive Chair and Jim Gray as the incoming CFO. These new leaders are expected to bring fresh perspectives, particularly in evaluating international market opportunities and driving operational execution. The Board has also been refreshed with 7 new members since July, bringing expertise in food, consumer goods, agriculture, supply chain, and finance to focus on improving performance and shareholder value.

    06

    SG&A Efficiency and Investment

    Adjusted SG&A as a percentage of sales improved to 7.8% in Q3 FY26, a 70 basis point improvement compared to its peak in fiscal 2023. This reflects actions taken to streamline the cost structure. While SG&A dollars are expected to increase slightly in Q4 due to an extra week of expenses and incremental innovation/technology investments, the company continues to identify and execute against additional SG&A efficiency opportunities.

    AI-generated summary of the company’s earnings call. Not investment advice.