Lamb Weston Holdings, Inc. (NYSE: LW) announced today its results for the second quarter of fiscal 2026 and updated its full year financial targets for fiscal 2026.
© Lamb Westen
"Our performance this quarter reflects the positive momentum we are building across the business," said Mike Smith, Lamb Weston president and CEO. "We delivered robust volume growth and gained share in priority markets and key categories, demonstrating Lamb Weston's commitment to deliver quality, innovation, and value. Our team is executing at a high level, and we remain on track to achieve our $100 million cost savings program target for fiscal 2026. In addition, the board approved a 3 percent increase to the quarterly dividend, which has increased each year since Lamb Weston went public."
Q2 2026 Commentary
Q2 Results of Operations
Net sales increased $17.2 million, to $1,618.1 million versus the prior year quarter, and included a favorable foreign currency impact of $24.4 million. Net sales at constant currency(2) was essentially flat, as an 8 percent increase in volume was offset by an 8 percent decline in price/mix. Volume growth was driven by customer wins, share gains and retention, particularly in North America and Asia. The decline in price/mix reflects the ongoing support of customers through price and trade, including the carryover impact of fiscal 2025 pricing, in a competitive global market environment.
Gross profit increased $46.5 million versus the prior year quarter to $324.3 million. Adjusted Gross Profit(1) declined $15.6 million to $327.9 million, primarily due to unfavorable price/mix. Total manufacturing cost per pound was lower, reflecting the benefits from cost savings initiatives and improved operating efficiencies in the North America segment. These initiatives more than offset inflationary pressures in key input categories other than raw product and higher manufacturing costs per pound in the International segment due to less favorable operating conditions and elevated production expenses.
Selling, general and administrative expenses ("SG&A") declined $13.7 million versus the prior year quarter to $171.0 million. Adjusted SG&A(1) declined $7.8 million versus the prior year quarter to $145.1 million, reflecting the benefits of ongoing cost savings initiatives, partially offset by compensation and benefits accruals.
Net income increased to $62.1 million from a prior year quarter net loss of $36.1 million. Diluted EPS increased to $0.44 versus a prior year quarter diluted loss per share of $0.25. Adjusted Net Income(1) declined $8.2 million over the prior year quarter to $96.7 million, and Adjusted Diluted EPS(1) declined $0.04 from the prior year quarter to $0.69. The decline in Adjusted Net Income(1) and Adjusted Diluted EPS(1) largely reflects the lower Adjusted Gross Profit(1), partially offset by lower Adjusted SG&A(1).
Adjusted EBITDA(1) declined $8.5 million from the prior year quarter to $285.7 million. Lower Adjusted Gross Profit(1) and Adjusted Equity Method Investment Earnings were partially offset by lower Adjusted SG&A(1).
The Company's effective tax rate(3) in the second quarter of 2026 was 36.7 percent, versus (59.0) percent in the second quarter of fiscal 2025. The results in both periods reflect the impact of items outlined in the Reconciliations of Non-GAAP Financial Measures in the tables accompanying this press release. In addition, the Company recorded $14.4 million of discrete tax expense in the second quarter of fiscal 2025, primarily related to the establishment of a full valuation allowance against certain international deferred tax assets. Excluding these items, the Company's effective tax rate(3) was 31.8 percent in the second quarter of 2026, versus 24.7 percent in the prior year quarter. Compared to the second quarter of fiscal 2025, the effective tax rate excluding the impact of these items is higher primarily due to having a larger proportion of losses in certain jurisdictions with no expected tax benefits.
Q2 2026 Segment Highlights
North America Summary
Net sales for the North America segment, which includes all sales to customers in the U.S., Canada and Mexico, was essentially flat at $1,069.5 million compared to the prior year quarter. Volume increased 8 percent, driven by recent customer contract wins, share gains and growth across channels. In response, the Company has restarted its curtailed North American production lines. Price/mix declined 8 percent, driven by the ongoing support of customers through price and trade, including the carryover impact from fiscal 2025 pricing, and an unfavorable mix.
North America Segment Adjusted EBITDA increased $18.6 million to $287.8 million compared to the prior year quarter. The increase was driven by higher volumes, lower manufacturing costs per pound, and lower Adjusted SG&A(1), reflecting benefits from cost savings initiatives, including operating efficiencies. These gains were partially offset by continued price and trade support for customers.
International Summary
Net sales for the International segment, which includes all sales to customers outside of North America, increased 4 percent, or $19.8 million, to $548.6 million compared to the prior year quarter, including a favorable foreign currency impact of $22.6 million. Net sales at constant currency(2) declined 1 percent. Volume increased 7 percent, driven by growth in Asia and with multinational chain customers. Price/mix at constant currency(2) declined 8 percent, reflecting ongoing price and trade to support customers in a continued competitive environment as well as an unfavorable mix.
International Segment Adjusted EBITDA declined $21.4 million to $27.2 million compared to the prior year quarter. The decrease was primarily attributable to higher manufacturing costs per pound, including increased fixed factory burden costs resulting from lower utilization of international production facilities and start-up expenses associated with the new production facility in Argentina. These higher manufacturing costs were partially offset by benefits from cost savings initiatives and higher sales volume.
Fiscal 2026 Outlook
The Company reaffirmed its financial targets for fiscal 2026 as follows:
© Lamb Westen
The Company's guidance includes its current view of the anticipated impact of enacted tariffs by the U.S. and other countries but does not include potential effects of evolving trade policies, such as future changes in tariffs or other trade policies, including retaliatory measures or countermeasures.
