This spud’s a dud: Potato seller’s disastrous earnings show why restaurants are all-in on value deals
Investors are dropping Lamb Weston like a hot potato.
The latest sign of a backlash against US restaurants for foisting higher prices upon consumers too aggressively?
You don’t want fries with that.
Lamb Weston, purveyor of frozen potato products, is having its worst day in history. The stock lost over a quarter of its value this morning after reporting quarterly profits that came in far shy of Wall Street’s expectations and had some dire commentary about the current and near-term outlook.
“The operating environment has changed rapidly over the past 12 months as global restaurant traffic and frozen potato demand softened due to menu price inflation continuing to negatively affect global restaurant traffic,” said CEO Tom Werner. “We believe this supply-demand imbalance will persist through much, if not all, of fiscal 2025 [i.e. the year ahead].”
Lamb Weston going to the market slaughter is also weighing on its customer base, with the S&P 1500 Restaurants Index hitting fresh 2024 lows and McDonald’s off about 2%.
The home of the golden arches was arguably late in pivoting to try to win back price sensitive consumers with its $5 meal deal, a promotion most of its US locations plan to keep.
But if the outlook for fries is the same as the outlook for the restaurant industry at large – and let’s be real, who gets a burger with no fries? – restaurant execs are going to be nervously mumbling, “I think we’re gonna need a cheaper value menu.”
