Why Is Lamb Weston Stock On Track For 6-Year Lows Even After Reaffirming Guidance?

Investors focused on margin pressure and international challenges, overshadowing solid volumes and reaffirmed guidance.

• Second-half margins seen flat to down, pressured by pricing, mix and higher international costs.
• Europe production curbed as weak traffic and excess supply weighed on the region.
• Full-year results guided toward the midpoint, not the high end, despite volume growth.

Lamb Weston (LW) shares dropped after the frozen potato products maker reported quarterly results and stood by its full-year outlook, as investors looked past an earnings beat and focused on warnings about softer margins ahead and ongoing pressure in Europe.

The company did not change its outlook for the year, sticking with its fiscal 2026 revenue forecast of $6.35 billion to $6.55 billion and adjusted EBITDA of $1 billion to $1.2 billion. Lamb Weston now expects results to land roughly in the middle of that range.

At the time of writing, the stock plunged nearly 25% and was on-track to hit its lowest levels in about 6 years. 

Volume Is Growing, But At A Cost

Lamb Weston shipped 8% more product in the quarter, driven by new customer wins, strong retention and market share gains, especially in North America and Asia. That growth came even though restaurant traffic remained sluggish in many markets.

However, the additional volume didn’t fully translate into higher sales. An 8% drag from pricing and mix, driven by customer support and a shift toward lower-margin restaurant and private-label business, largely offset the gains, leaving sales roughly flat year-over-year on a constant-currency basis.

Margins Seen Under Pressure In H2

The company said adjusted gross margins are likely to be flat to down in the second half of fiscal 2026 from the first half. Ongoing pricing pressure, unfavorable mix and higher manufacturing costs in international markets were key factors expected to weigh on profitability.

They said pricing and trade actions taken to support customers, along with mix shifts toward lower-margin channels, are likely to continue through the back half of the year.

Europe Remains A Weak Spot

Lamb Weston reported that its international segment remained under pressure as European operations faced challenging market conditions. A strong potato crop in Europe coupled with weaker restaurant traffic and a softening in export demand have weighed on pricing, the company said.

In an effort to correct supply and demand, Lamb Weston said it would be idling one production line in Europe. International adjusted EBITDA declined in the quarter, hurt by pricing pressure, higher manufacturing costs and start-up expenses related to ramping up its new facility in Argentina.

The company expects international volumes to be flat year over year in the second half.

However, North America remained a bright spot, with volumes up 8%, prompting Lamb Weston to restart previously curtailed production lines to keep up with demand.

How Did Stocktwits Users React?

On Stocktwits, retail sentiment for Lamb Weston was ‘extremely bullish’ amid ‘extremely high’ message volume.

Lamb Weston’s stock has declined 31% so far in 2025.

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