Lamb Weston Q3 2025: Navigating Contradictions in Capacity, Pricing, and Customer Retention

These are the key contradictions discussed in Lamb Weston Holdings, Inc.'s latest 2025 Q3 earnings call, specifically including: Capacity Utilization and Market Demand, Pricing Strategy and Market Dynamics, and Production Capacity and Idling Lines:



Revenue and Sales Performance:
- Lamb Weston reported an increase in net sales by 4% for the third quarter compared with the prior year. Volume increased by 9%, driven by fully replacing combined regional small and retail customer volume lost in the prior year due to an ERP system transition.
- The growth was offset by soft global restaurant traffic trends, which declined in North America and international markets.

Customer Engagement and Contract Winning:
- The company successfully expanded and retained existing customers while winning new business, with a notable example being a conversion of a large QSR that previously cut its own fries to a frozen product.
- Improved customer relations, innovation, and ability to adapt to evolving customer needs contributed to these successes.

Potato Crop and Pricing Outlook:
- In North America, contract negotiations indicate a mid-single-digit percent decline in the price of potatoes for the 2025 crop, with expectations of a targeted number of acres secured.
- This was influenced by softer demand and higher inventory levels, impacting pricing negotiations.

Operational Costs and Efficiency:
- Lamb Weston is focusing on cost reductions, with a planned restructuring expected to deliver $55 million in pretax savings in fiscal 2025 and $85 million in fiscal 2026.
- The company has identified significant opportunities to reduce complexity and improve performance in areas like logistics and supply chain management.

Impact of Tariffs and Trade Dynamics:
- The recent announcement of new tariffs could impact the business, particularly affecting U.S. imports, although products sourced from Canada, including french fries and edible oils, are exempt.
- Despite the uncertainty, Lamb Weston is evaluating potential impacts, but does not expect significant financial implications for fiscal 2025.