By Evie Liu

Lamb Weston, a producer of frozen potato--based products, saw its stock jump 5% on Tuesday after the company released fiscal first--quarter results that were better than Wall Street had expected. This has injected fresh optimism into a stock that has had a bumpy ride this year.

For the three months ended in August, Lamb Weston reported net revenue of $1.66 billion, roughly flat from a year ago but ahead of analysts' expectations of $1.62 billion. Prices of the company's products have declined 7%, while sales volume has risen 6%.

Adjusted diluted earnings per share declined four cents from the prior year to 74 cents, also beating expectations of 52 cents. Investors were relieved that the results weren't as bad as feared and that the company's cost saving plans have started to bear fruit.

Before Tuesday's report, the stock had tumbled nearly 17% year to date and was down nearly half from its recent peak in 2023.

Following several quarters of profit pressures, the company is working on a multiyear restructuring plan, targeting $250 million of annualized savings by fiscal 2028 including rounds of workforce reductions, elimination of unfilled roles, and tighter capital allocation.

Still, the plan carries risk. Some savings require upfront charges -- including restructuring and severance expenses -- that may weigh on near-term earnings. Soft traffic across the restaurant industry or shifting consumer preferences could also undercut demand.

Lamb Weston believes fries will continue driving its growth in the long term. "Traditional french fries are one of the most profitable items on restaurant menus," said CEO Michael Smith on the earnings call, noting that fries are the most ordered item at U.S. restaurants, appealing to a broad range of consumers across generations.

The fry attachment rate, or how often someone orders fries with their meal, is two percentage points higher than before the pandemic, said Smith. Global demand is also growing, with an estimated 44% of menus offering fries. In the latest quarter, international sales gained 4%.

For the 2025 potato crop, contract prices are expected to drop by a mid single-digit percent in North America. This could help Lamb Weston further expand margins starting in the second fiscal quarter, the company said.

Lamb Weston is also working to drive more sales through product innovation. This fall, it's launching new products such as garlic and Parmesan crinkle cut fries, dill pickle seasoned fries, as well as waffle fries and shaped tots.

Write to Evie Liu at evie.liu@barrons.com

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September 30, 2025 15:32 ET (19:32 GMT)

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