Lamb Weston Announces Q2 Fiscal 2026 Results, Reaffirms Full-Year Outlook
Lamb Weston Holdings, Inc. (NYSE: LW), one of the world’s leading producers of frozen potato products, reported its financial results for the second quarter of fiscal 2026, highlighting solid volume growth, continued market share gains, disciplined cost management, and a strengthened commitment to shareholder returns. While pricing pressures and competitive global market conditions weighed on certain profitability metrics, the company reaffirmed its confidence in its full-year fiscal 2026 outlook and announced a further increase in its quarterly dividend.
“Our performance this quarter reflects the positive momentum we are building across the business,” said Mike Smith, president and chief executive officer of Lamb Weston. “We delivered robust volume growth and gained share in priority markets and key categories, particularly in North America and Asia. This demonstrates our continued focus on delivering quality, innovation, and value to our customers. Our teams are executing at a high level, and we remain on track to achieve our $100 million cost savings program target for fiscal 2026. In addition, our board approved a 3 percent increase in the quarterly dividend, continuing our track record of returning capital to shareholders every year since becoming a public company.”
Second Quarter Fiscal 2026 Financial Performance
For the second quarter ended in fiscal 2026, Lamb Weston reported net sales of $1.62 billion, representing an increase of $17.2 million compared to the same period last year. The reported growth included a favorable foreign currency impact of $24.4 million. On a constant-currency basis, net sales were essentially flat year over year, as an 8 percent increase in sales volume was offset by an 8 percent decline in price and product mix.
Volume growth during the quarter was driven by customer wins, share gains, and strong retention across key markets, with particularly notable momentum in North America and Asia. The decline in price and mix reflected Lamb Weston’s continued support of customers through pricing and trade investments in a highly competitive global environment, as well as the carryover impact of pricing actions taken in fiscal 2025.
Gross profit for the quarter increased $46.5 million to $324.3 million compared to the prior year. However, adjusted gross profit declined $15.6 million to $327.9 million, primarily due to unfavorable price and mix dynamics. Total manufacturing costs per pound declined overall, reflecting the benefits of cost savings initiatives and improved operating efficiencies, particularly within the North America segment. These improvements more than offset inflationary pressures in several key input categories, excluding raw potatoes. Higher manufacturing costs per pound in the International segment, driven by less favorable operating conditions and elevated production expenses, partially offset these gains.
Cost Discipline and Earnings Performance
Selling, general, and administrative (SG&A) expenses declined $13.7 million year over year to $171.0 million. On an adjusted basis, SG&A expenses fell $7.8 million to $145.1 million, reflecting the ongoing benefits of cost savings initiatives, partially offset by higher compensation and benefits accruals.
Net income for the quarter improved significantly, reaching $62.1 million compared to a net loss of $36.1 million in the prior year quarter. Diluted earnings per share were $0.44, compared to a diluted loss of $0.25 per share in the same period last year. Adjusted net income declined modestly by $8.2 million to $96.7 million, while adjusted diluted earnings per share decreased $0.04 to $0.69. These declines were primarily driven by lower adjusted gross profit, partially offset by reduced adjusted SG&A expenses.
Adjusted EBITDA for the second quarter was $285.7 million, down $8.5 million from the prior year. The decline reflected lower adjusted gross profit and reduced earnings from equity method investments, partially offset by continued SG&A cost discipline.
Tax Rate Dynamics
Lamb Weston’s effective tax rate for the second quarter of fiscal 2026 was 36.7 percent, compared to a negative 59.0 percent in the same quarter of fiscal 2025. Both periods included the impact of certain discrete and non-recurring tax items. Excluding these items, the company’s effective tax rate was 31.8 percent in the current quarter, compared to 24.7 percent in the prior year. The increase was primarily attributable to a higher proportion of losses in jurisdictions where tax benefits are not expected.
Segment Performance Highlights
North America
The North America segment, which includes sales in the United States, Canada, and Mexico, reported net sales of $1.07 billion, essentially flat compared to the prior year quarter. Volume increased 8 percent, driven by recent customer contract wins, share gains, and growth across multiple channels. In response to rising demand, Lamb Weston restarted previously curtailed production lines across its North American manufacturing network.
Price and mix declined 8 percent in the segment, reflecting ongoing pricing and trade support for customers, the carryover impact of fiscal 2025 pricing actions, and an unfavorable product mix.
Despite these pricing pressures, North America segment adjusted EBITDA increased $18.6 million year over year to $287.8 million. The improvement was driven by higher volumes, lower manufacturing costs per pound, and reduced adjusted SG&A expenses, all reflecting the success of operational efficiency initiatives and cost savings programs. These benefits were partially offset by continued pricing and trade investments to support customers.
International
The International segment, which includes all markets outside North America, delivered net sales of $548.6 million, an increase of 4 percent or $19.8 million compared to the prior year quarter. Results included a favorable foreign currency impact of $22.6 million. On a constant-currency basis, net sales declined 1 percent.
International volumes increased 7 percent, led by growth in Asia and expanding relationships with multinational quick-service restaurant chains. However, price and mix at constant currency declined 8 percent, reflecting continued pricing and trade support for customers in a competitive environment, along with an unfavorable sales mix.
International segment adjusted EBITDA declined $21.4 million to $27.2 million. The decrease was primarily driven by higher manufacturing costs per pound, including increased fixed factory burden resulting from lower utilization at international facilities and start-up expenses associated with the company’s new production facility in Argentina. These pressures were partially mitigated by cost savings initiatives and higher sales volumes.
Equity Method Investments
Equity method investment earnings from unconsolidated joint ventures totaled $3.2 million in the second quarter of fiscal 2026, compared to $2.1 million in the prior year period. On an adjusted basis, equity method investment earnings declined to $3.2 million from $11.1 million a year earlier. The $7.9 million decline was primarily attributable to lower production volumes and an unfavorable sales mix. These results reflect Lamb Weston’s 50 percent ownership interest in Lamb Weston/RDO Frozen, an unconsolidated potato processing joint venture located in Minnesota.
Cash Flow, Capital Spending, and Liquidity
During the first half of fiscal 2026, net cash provided by operating activities increased $101.1 million year over year to $530.4 million. The improvement was primarily driven by favorable working capital changes totaling $53.7 million, including lower inventory levels in North America, as well as a $47.4 million increase in net income adjusted for non-cash items.
Capital expenditures for the first half of fiscal 2026 totaled $155.7 million, down sharply by $330.7 million compared to the prior year period. The decrease reflects the completion of major growth investments during fiscal 2025 and early fiscal 2026, positioning the company to benefit from prior capacity expansions without elevated near-term capital spending.
As of November 23, 2025, Lamb Weston reported cash and cash equivalents of $82.7 million and total available liquidity of $1.35 billion under its revolving credit facility, providing ample financial flexibility.
Shareholder Returns and Dividend Increase
Lamb Weston continued to prioritize shareholder returns during the quarter. In the second quarter of fiscal 2026, the company returned $51.6 million to shareholders through cash dividends and repurchased $39.6 million of common stock under its authorized share repurchase program. During the quarter, Lamb Weston repurchased 617,623 shares at an average price of $64.18 per share. Approximately $308 million remains available for repurchases under the program.
Further reinforcing its commitment to consistent shareholder returns, Lamb Weston’s board of directors approved a 3 percent increase in the quarterly dividend, raising it by $0.01 to $0.38 per share. The increased dividend will be payable on February 27, 2026, to shareholders of record as of January 30, 2026, marking another consecutive year of dividend growth since the company’s public listing.
Source Link:https://www.businesswire.com/
