Lamb Weston (NYSE:LW) executives told investors the company delivered its “fifth quarter in a row of in line or better results” in fiscal third-quarter 2026, driven by strong momentum in North America while international markets faced pressure from oversupply in Europe and softer restaurant traffic.
President and CEO Mike Smith said the quarter’s performance supported an updated full-year outlook with “a tighter guidance range and a higher midpoint of net sales and EBITDA,” and credited customer wins, share gains, and improved execution for North America’s growth despite “soft” consumer sentiment.
Quarterly performance: volume up, price mix down
Madarieta highlighted traffic trends discussed on the call, noting U.S. QSR traffic was up 1% in the quarter and turned positive “for the first time since late fiscal 2024,” while most international markets saw low single-digit restaurant traffic declines. In the U.K., the company’s largest international market, she said QSR traffic declined about 1%, improving versus recent quarters.
Adjusted EBITDA declined $101 million year over year to $272 million, according to Madarieta. She attributed the change primarily to unfavorable price mix, a $33 million net pre-tax charge to write off excess raw potatoes in the international segment due to “lower than planned sales and a stronger than expected crop yield,” and higher fixed factory absorption costs tied to underutilized production facilities in Europe and Latin America. Those headwinds were partially offset by higher sales volumes, cost savings initiatives, and improved operating efficiencies in North America.
Segment results: North America outperforms, international remains challenged
North America net sales rose 5% with volume up 12%, which Madarieta said was driven by customer contract wins, share gains, strong retention, and easier comparisons. Price mix declined 7% in the segment, with roughly half due to price and trade support and the remainder from mix as chain customer growth continued and consumers shifted from branded products to private label.
North America adjusted EBITDA declined 4% to $290 million, which Madarieta said was “fully driven by customer price trade support and mix.” She added that volume growth, lower manufacturing cost per pound, and lower segment SG&A partially offset those pressures.
International net sales declined 1% (including a $44 million foreign currency benefit), and fell 9% on a constant-currency basis. Volume declined 2% amid softer demand in key markets and a tougher comparison to the prior year, when third-quarter volume grew 12%. Madarieta said volume grew in China and Latin America outside of EMEIA, and year-to-date volume was up in every region outside of EMEIA.
International adjusted EBITDA fell $76 million to $19 million, reflecting lower sales (particularly in Europe), higher manufacturing costs per pound including the raw potato write-off, higher fixed factory burden from underutilization, and inflation in inputs outside of raw potatoes.
Smith described the international environment as pressured by “a significant surplus in the European potato market” following expanded acreage and a robust crop, as well as increased local sourcing in developing regions such as the Middle East, China, and India that has reduced European exports to those markets. He also cited persistently lower restaurant traffic in key countries.
Operational actions and utilization
Management outlined multiple steps to adjust the company’s global production footprint. Smith said Lamb Weston closed its Munro, Argentina plant and consolidated Latin America production into the newer Mar del Plata facility. He also said the company began temporarily curtailing a production line in the Netherlands at the beginning of the fourth quarter and “doesn’t plan to resume production in one of its previously curtailed Australia locations.”
Asked about utilization, Smith said North America is operating “in the low 90s%” after bringing previously curtailed lines back online, which he said adds flexibility to maintain high fill rates and also enables the company to be “more thoughtful about the volume that we bring on board.” He cautioned that international capacity actions are more complex because plants have different capabilities and product specifications.
Cost savings, capital spending, and balance sheet
Smith said the company’s “Focus to Win” strategy—introduced in July—represents a shift away from prioritizing growth and scale toward “a more thoughtful approach” centered on customer proposition and returns. As part of that approach, he reiterated a target of $250 million in cost savings by fiscal year-end 2028, with $100 million planned for fiscal 2026.
“As of the end of third quarter, we have already delivered on those full year savings and are tracking ahead of our program target,” Smith said, adding that savings have supported selective reinvestment for customers and contributed to improved retention and new customer acquisition.
In Q&A, Smith said incremental cost savings have been concentrated “more…on the cost side, supply chain side of things,” and he indicated additional opportunities are being evaluated, with further details to come later.
Madarieta said cash generation improved meaningfully year-to-date. Through the first three quarters, the company generated $596 million of cash from operations, up $110 million year over year, driven primarily by lower inventories in North America and timing of receivables collections. Free cash flow totaled $339 million year-to-date, up $417 million from the prior year.
Capital expenditures were $257 million through the first three quarters, down $307 million year over year. Madarieta said the company now estimates full-year cash capex of about $400 million, aligned to “maintenance, modernization, and environmental projects.” Responding to a question on environmental spending, she said the company has spent the $100 million it anticipated for environmental expenditures this year and remains on its five-year plan.
Lamb Weston ended the quarter with about $1.3 billion of liquidity. Net debt was $3.9 billion, and the trailing twelve-month net debt-to-adjusted EBITDA leverage ratio was 3.4x, which Madarieta said was consistent with last year’s third quarter and aligned with balance sheet priorities.
On shareholder returns, Madarieta said the company returned $205 million to shareholders in the first three quarters, including $155 million in dividends and $50 million in repurchases. While no shares were repurchased during the third quarter, she said the company repurchased about $43 million of stock (1.1 million shares at a weighted average price of $41.50) after quarter-end through March 30 under a 10b5-1 plan. The board approved the next quarterly dividend of $0.38 per share payable June 5.
Guidance raised; potato contracting and input cost update
For fiscal 2026, the company raised the low end of its net sales guidance and increased the midpoint, projecting net sales of $6.45 billion to $6.55 billion, including an estimated 1.8% foreign exchange benefit (about $95 million year-to-date). Adjusted EBITDA is now expected to be $1.08 billion to $1.14 billion, which Madarieta said includes the company’s “current assessment of the additional risk associated with the ongoing Middle East conflict.”
Madarieta said North America is expected to deliver high single-digit volume growth in the second half, including an extra week of sales in the fourth quarter. International volumes are still expected to grow for the full year, but she projected year-over-year declines in the second half as the company laps strong prior-year results and as the fourth quarter is “further pressured by the evolving conflict in the Middle East.” She noted sales to the Middle East represent a “high single-digit percentage” of international segment volume year-to-date.
Smith also updated investors on potato contracting. In North America, he said negotiations are nearly complete and the company expects a low- to mid-single-digit percentage decline in raw potato price in aggregate, with targeted acres largely secured. In Europe, he said fixed-price contract negotiations are underway, with indications pointing to a mid-teen percentage decline in contracted agreements versus 2025, and he noted European fixed-price contracting typically covers about 70% to 80% of needs, with the remainder in open-price contracts. Smith said the company is contracting fewer acres in Europe this year.
On tariffs and other input costs, Madarieta said non-potato input costs rose year over year, including tariffs affecting imported palm oil. She said recent trade agreements eliminated that tariff, though the company expects some fourth-quarter expense as it sells through inventory purchased before the change. The company recorded about $4 million of tariff expenses in the third quarter and, absent changes to the agreements, does not expect to incur the cost after the fourth quarter.
Madarieta also said she expects a full-year tax rate of about 28% (with fourth quarter in the mid-teens) and full-year depreciation and amortization of about $395 million, up from a prior estimate of $390 million.
The call marked Madarieta’s final earnings call as CFO. She said incoming CFO James D. Gray will step into the role the next day, while Smith also pointed to the addition of Executive Chair Jan Craps and a refreshed board as the company continues executing its strategy.
About Lamb Weston (NYSE:LW)
Lamb Weston, traded on the NYSE under the symbol LW, is a leading global processor and supplier of frozen potato products. The company’s portfolio includes a variety of potato-based items such as French fries, potato wedges, hash browns and specialty cuts tailored to the foodservice and retail grocery channels. Lamb Weston serves quick-service restaurants, full-service operators, grocery chains and food distributors, offering customized product formats, packaging solutions and seasoning options to meet evolving customer demands.
Founded in 1950 and headquartered in Eagle, Idaho, Lamb Weston has grown from a regional processor into one of the world’s largest producers of frozen potato products.
