Lamb Weston activist investor Starboard Value has urged the frozen potato-products maker to restore market confidence and outline a clear path toward “sustainable” profit growth.
In a letter to US-based Lamb Weston’s board, Starboard said the company is at a “critical juncture” and must first “reestablish the foundation of its story”.
The investor added: “We believe the appropriate forum to do so is an investor day, as it allows the company to reset the narrative, clearly communicate its path to durable earnings growth, and rebuild investor confidence.”
New York-headquartered Starboard had disclosed a “significant” shareholding in Lamb Weston in March and called for a strategic review of overseas assets including the possible sale of select operations in the APAC region.
Through its letter yesterday (30 April), the private-equity firm pushed for 25% adjusted EBITDA margins by FY2029 through a “balanced mix of profitable revenue growth and cost reductions”.
That, it said, would be a first step toward to “reset earnings to a more normalised level”.
It suggested that despite a previous $250m cost-savings initiative, “meaningful” opportunities” remain to reset earnings, particularly within SG&A expenses.
“We believe the company must frame this opportunity through explicit margin targets rather than absolute dollar savings, enabling investors to track tangible progress and underwrite earnings improvement potential. Resetting earnings alone is not sufficient.”
Starboard also urged Lamb Weston to assess its global footprint and define its most “strategic” areas.
At the same time, it acknowledged Lamb Weston was a “high-quality” business but criticised previous management “missteps” that it said led to market share losses and a slump in earnings.
“We believe the core attributes that historically drove its premium valuation remain intact, including a concentrated industry structure, high barriers to entry, rational competitive behaviour, and structural pricing power,” Starboard continued.
“While we are confident in this belief, the market is not convinced.”
The investor has called on Lamb Weston to present a “long-term earnings framework” in line with “best-in-class” consumer companies.
It added: “We believe low-single-digit to mid-single-digit revenue growth is achievable and should establish the foundation of the company’s long-term earnings growth algorithm.”
New York-listed Lamb Weston went public through an IPO in 2016. Activist investor Jana Partners entered the picture in 2024, calling the shares “undervalued” but criticising management for a “litany of self-inflicted missteps that have led to underperformance for shareholders”.
