Lamb Weston's Price War: Will It Pay Off?

Ladies and gentlemen, buckle up! We're diving headfirst into the world of frozen potatoes and the price war that's shaking up the industry. Lamb Weston Holdings, Inc. (NYSE: LW) has just reported its third-quarter fiscal 2025 results, and the numbers are in. Net sales are up 4% year-over-year to $1.52 billion, driven by a 9% growth in volume. But here's the kicker: the company is cutting prices to regain market share, and that's got investors on the edge of their seats.



Why is Lamb Weston cutting prices?

Lamb Weston is playing a high-stakes game of chicken with its competitors. The company is slashing prices to win back market share, and it's working—sort of. The North America segment saw an 8% increase in volume, but that came at the cost of a 4% decline in price/mix. The company is regaining lost volumes and securing customer contract wins, but at what cost?

The risks of this strategy

Now, let's talk about the elephant in the room. Cutting prices to regain market share is a risky business. J.P. Morgan analyst Ken Goldman has expressed doubts about whether demand will grow fast enough to match supply in the coming years. And let's not forget about the adjusted net income, which saw a decline of 11% to $157 million, and adjusted diluted EPS, which decreased by 8% to $1.10. That's a red flag, folks!

The uncertainty in demand recovery

The uncertainty in demand recovery for Lamb Weston is influenced by several factors. One of the primary concerns is the ongoing supply and demand imbalance in the French fry market. J.P. Morgan analyst Ken Goldman noted that "medium-term risks tied to an ongoing supply and demand imbalance in the French fry market" are contributing to this uncertainty. This imbalance could persist due to factors such as "ongoing pricing initiatives to win business without guaranteed cost deflation" and "persistent challenges in the quick-service restaurant sector."

Additionally, the company faces challenges related to "a possible rise in overall fry supply" and "uncertainties tied to tariffs." These factors could further complicate the demand recovery process. Goldman also mentioned that "visibility beyond the near term remains limited," indicating that the company's ability to predict future demand is constrained by these uncertainties.

The potential upside

But it's not all doom and gloom. There are potential upside factors such as new customer contracts, lower potato input costs in North America, greater-than-expected cost savings, and increased share repurchases. And let's not forget about the extra week included in fiscal year 2026, which could positively affect results.

The bottom line

So, what's the bottom line? Lamb Weston is playing a dangerous game of chicken with its competitors, and the outcome is far from certain. The company is cutting prices to regain market share, but that strategy comes with significant risks. The uncertainty in demand recovery is influenced by several factors, and the potential upside is far from guaranteed.

But here's the thing: Lamb Weston is a leader in innovation, product quality, customer relationships, and operations. The company has a strong foundation, and it's focused on delivering enhanced shareholder value. So, while the road ahead may be bumpy, Lamb Weston has the potential to come out on top.



So, what do you think? Is Lamb Weston's price war a genius move or a recipe for disaster? Let me know in the comments below, and remember: this is not financial advice. Always do your own research before making any investment decisions.