Executive Summary
Lamb Weston delivered a solid start to fiscal 2026 (QQ1) with meaningful volume growth that underscored the momentum behind its Focus to Win strategic program. Reported revenue of $1.6593 billion reflected a net YoY decline of 2.9% and a modest sequential improvement in Q1, driven by favorable currency translation (+$24 million impact) and a 6% volume increase across segments. The company highlighted that price/mix remained unfavorably constrained by carryover pricing actions from fiscal 2025 and ongoing competitive dynamics in Europe, offset by stronger North America/Asia volumes and continued benefits from cost-savings initiatives. Management reaffirmed full-year guidance, calling for revenue of $6.35–$6.55 billion (constant-currency) and adjusted EBITDA of $1.0–$1.2 billion, with a 53rd week in the fourth quarter. They also signaled ongoing benefit from cost-reduction programs and new product introductions (Fall 2025) as catalysts for profitability and cash generation. A key near-term dynamic is margin cadence: gross margin is expected to be flat from Q1 to Q2 before typical seasonality drives step-ups in Q3 and a decline in Q4, with international margins bearing some pandemic-era startup and plant-integration costs, particularly tied to the Argentina facility ramp. As a result, investors should monitor (i) the pace of Focus to Win savings (targeting $250 million of annual run-rate savings by FY2028), (ii) commodity-cost trajectories (potato costs in Europe flat-to-down; NA prices down mid-single-digits), (iii) the ramp-up trajectory of the Argentina plant and its impact on international margins, and (iv) the degree to which new customer wins translate into sustainable volume and pricing power across channels.
Key Performance Indicators
QoQ: -18.96% | YoY:-11.73%
QoQ: -37.07% | YoY:-26.35%
QoQ: -55.96% | YoY:-50.42%
QoQ: -55.34% | YoY:-48.89%
Key Insights
Revenue: $1.6593B in Q1 2026 (YoY -2.9%; constant-currency -1%); gross profit $342.4M; gross margin 20.6% (YoY gross profit down 11.7%); EBITDA (adjusted) $302M; EBITDA (GAAP) $156.5M; operating income $156.5M; net income $64.3M; EPS $0.46; weighted shares outstanding ~139.5M (diluted ~139.8M).
Volume: +6% total; North America volume +5%; Asia-led growth within International; price mix: -7% in constant currency, reflecting carryover pricing and mix effects; currency translation contributed +$24...
Financial Highlights
Revenue: $1.6593B in Q1 2026 (YoY -2.9%; constant-currency -1%); gross profit $342.4M; gross margin 20.6% (YoY gross profit down 11.7%); EBITDA (adjusted) $302M; EBITDA (GAAP) $156.5M; operating income $156.5M; net income $64.3M; EPS $0.46; weighted shares outstanding ~139.5M (diluted ~139.8M).
Volume: +6% total; North America volume +5%; Asia-led growth within International; price mix: -7% in constant currency, reflecting carryover pricing and mix effects; currency translation contributed +$24M to net sales; Foreign-currency impact largely offset by higher local costs.
Cash flow and liquidity: operating cash flow $352.0M; capex $79.0M; free cash flow $274.4M; cash and equivalents $98.6M; net debt $3.869B; net debt/adjusted EBITDA (TTM) 3.1x.
Outlook: FY2026 guidance reaffirmed: revenue $6.35–$6.55B (constant currency), adjusted EBITDA $1.0–$1.2B; 53rd week in Q4; tariffs embedded in guidance; tax rate guidance revised to 26–27% (first half higher); capex guidance around $500M for FY2026 (maintenance ~ $400M, environmental ~ $100M).
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
1.66B |
2.94% |
9.13% |
| Gross Profit |
342.40M |
-11.73% |
-18.96% |
| Operating Income |
156.50M |
-26.35% |
-37.07% |
| Net Income |
64.30M |
-50.42% |
-55.96% |
| EPS |
0.46 |
-48.89% |
-55.34% |
Management Commentary
Key management takeaways from the QQ1 earnings call, grouped by theme:
- Strategy and Focus to Win: Mike Smith emphasized the program’s early progress, noting a target to achieve at least $250 million of annual run-rate savings by fiscal year-end 2028 and that the company is “acting with urgency to implement our new strategic plan.” He highlighted new product launches (Fall 2025) and a more customer-centric, partner-focused go-to-market approach, including realignment of sales teams and broker-enabled coverage in underpenetrated channels.
- Operations and cost structure: Bernadette Madarieta stressed that adjusted gross profit declined due to unfavorable price mix, but was offset by higher volumes and cost savings, with Argentina start-up costs contributing to near-term headwinds. She reaffirmed that the team is on track to meet the fiscal 2026 savings target and underscored ongoing manufacturing improvements and sustainable process enhancements.
- Capacity and portfolio actions: Management discussed restarting a curtailed U.S. line to preserve customer fill rates amid sustained North American volume growth and the Argentina plant ramp, expected to contribute export capacity to Latin America (Brazil). They also noted added capacity from the new Marda Plata facility, with 80% of output directed to export markets.
- Macro and market dynamics: The executives described mixed global demand, with North America strengthening and a softer European restaurant backdrop weighing on price mix; Asia was a bright spot in volume growth, supported by multinational chains.
- Price discipline and contracts: The company indicated ~75% of open global contracts were priced in line with expectations; the rest to be finalized through year-end; tariff exposure (~$25M annualized) was incorporated into guidance, with potential tariff changes in Indonesia under consideration. 75% of North American volume is supported by new contract activity; price/mix is expected to be unfavorable in the first half but to moderate in the second half as new contracts roll in.
“We are restarting a curtailed line in the latter part of the second quarter to ensure we maintain strong customer fill rates.”
— Mike Smith
“We are augmenting our successful direct sales force with a broker model to expand our reach into underpenetrated channels of the business.”
— Mike Smith
Forward Guidance
Investment thesis and outlook based on QQ1 commentary and management guidance:
- Revenue trajectory: LW reaffirmed guidance for FY2026 revenue of $6.35–$6.55 billion (constant currency), implying a range of -2% to +2% year-over-year depending on currency and volume mix. The company expects YoY volume growth in both segments, with NA volume rising in both halves of the year and international volume largely flat in H2 as lapping prior-year wins occurs.
- Margin trajectory: Management projects Q2 gross margins to be roughly flat vs Q1, given offsetting factors (flat input costs due to potato-price dynamics, easing inflation, and ongoing cost savings). They anticipate a seasonal uplift in gross margins in Q3, followed by a typical Q4 seasonal pattern. Tariffs have been incorporated into the full-year margin profile.
- Profitability and leverage: Adjusted EBITDA guidance remains $1.0–$1.2 billion, with net debt to EBITDA (TTM) around 3.1x. Longer-term margin expansion is expected from the Focus to Win cost savings and ongoing manufacturing-automation improvements, though near-term margin headwinds persist from price mix and plant ramp costs (Argentina) and maintenance downtime.
- Cash flow and capital allocation: The company reiterated a capex plan of ~ $500 million for 2026 (maintenance modernization ~ $400 million; environmental ~ $100 million) and expects incremental working-capital benefits from inventory reductions. The near-term emphasis remains on strengthening liquidity, funding strategic investments, and returning cash to shareholders via dividends and share repurchases.
- Key factors to monitor: (i) progress toward the $250 million annual run-rate savings by FY2028, (ii) the ramp-up trajectory and utilization of the new Argentina plant, (iii) commodity-cost evolution (especially potato costs in Europe and NA price dynamics), (iv) currency translation effects and tariff developments, and (v) the pace of new contract wins and their profitability across channels (retail/private label mix progression).