Results at a glance
- Period
- FY2027Q1
- Revenue
- $1.7B (1,670.3 MUSD)
- Net income
- $29.1M (29.1 MUSD)
- Net margin
- 1.7%
From the Lamb Weston Open LedgerView the live ledgerIssuer filing (FY2027Q1)
Lamb Weston sold more french fries in the first quarter of fiscal 2027 and kept less of the money. Net sales rose 0.7% to $1,670.3 million. Volume rose 2% and price/mix fell 2%. Cost of sales rose 6.6%, so gross profit fell 22.2% to $266.5 million and gross margin dropped from 20.6% to 16.0%. Net income fell 54.7% to $29.1 million, or $0.21 per diluted share against $0.46 a year ago. Adjusted diluted EPS was $0.75 against $0.74. The gap between $0.21 and $0.75 is mostly two things: the cost of closing a potato plant in the Netherlands, and $33.0 million of accruals for legal proceedings and other claims. We rebuilt five fiscal years plus this quarter as a plain-text ledger so each of those charges is a posting with an amount.
The Headline Numbers
| Metric | Q1 FY2027 | Q1 FY2026 | YoY |
|---|---|---|---|
| Net sales | $1,670.3M | $1,659.3M | +0.7% |
| Sales volume | — | — | +2% |
| Price/mix | — | — | −2% |
| Gross profit | $266.5M | $342.4M | −22.2% |
| Gross margin | 16.0% | 20.6% | −4.7 pts |
| Income from operations | $82.2M | $156.5M | −47.5% |
| Operating margin | 4.9% | 9.4% | −4.5 pts |
| Net income | $29.1M | $64.3M | −54.7% |
| Adjusted net income | $102.9M | $103.0M | −0.1% |
| Adjusted EBITDA | $285.6M | $302.2M | −5.5% |
| Diluted EPS | $0.21 | $0.46 | −54.3% |
| Adjusted diluted EPS | $0.75 | $0.74 | +1.4% |
The quarter covers the thirteen weeks ended August 30, 2026, and the comparison is the thirteen weeks ended August 24, 2025. All figures come from the Form 10-Q and the earnings release, both filed on October 6, 2026.
Two readings of this table are both true. On the reported lines, operating income almost halved on flat sales. On the adjusted lines, earnings per share went up by a cent. Which one a reader believes depends on whether plant closures and legal accruals count as one-time items for a company that has now recorded restructuring charges in three consecutive fiscal years: $185.8 million in fiscal 2025, $111.6 million in fiscal 2026 and $34.2 million this quarter, with more announced. We come back to that question below.
The company raised its full-year outlook anyway. Net sales guidance moved from growth of 0.0% to 1.0% to "Up Low Single Digits", measured against a 52-week-adjusted fiscal 2026 base of $6.485 billion. Adjusted EBITDA guidance moved from $1.10–$1.20 billion to $1.125–$1.215 billion, and adjusted diluted EPS from $2.95–$3.25 to $3.05–$3.35.
Revenue Deep Dive
| Segment | Net sales Q1 FY2027 | Q1 FY2026 | Reported | Volume | Price/mix | FX | Segment Adj. EBITDA | EBITDA YoY |
|---|---|---|---|---|---|---|---|---|
| North America | $1,141.4M | $1,084.6M | +5.2% | +6.7% | −1.7% | +0.2% | $287.3M | +11% |
| International | $528.9M | $574.7M | −8.0% | −6.4% | −2.0% | +0.4% | $26.5M | −54% |
| Total | $1,670.3M | $1,659.3M | +0.7% | +2.2% | −1.8% | +0.3% | $313.8M | −1% |
The two segments are moving in opposite directions, and the total hides it.
North America is 68% of sales and 92% of segment Adjusted EBITDA. Volume rose 6.7%, and the release says it "grew for the seventh consecutive quarter", "driven by higher demand from existing customers and customer wins." This is the closest the release comes to a strong-demand statement, and one ledger line supports it. Note 4 of the 10-Q shows a $1.3 million credit for potato contract terminations, which the company explains as the reversal of charges for raw potatoes "that we ultimately took delivery of and used in production due to higher-than-expected demand." In fiscal 2025 the company booked $59.3 million for contracted potatoes it would not use. This quarter it took some of them after all.
The volume was bought, though. Price/mix fell 1.7%, "resulting from price and trade support for customers and continued mix shift toward faster-growing chain customers and private-label products", which the 10-Q adds "generally carry lower margins than other channels." Segment Adjusted EBITDA still rose 11% to $287.3 million, a 25.2% margin against 24.0%, because higher volume, cost savings, about $5 million of tariff refunds and higher joint-venture earnings more than covered the price given away.
International lost both volume (−6.4%) and price/mix (−2.0%). Net sales fell $45.8 million to $528.9 million and segment Adjusted EBITDA fell 54% to $26.5 million, a 5.0% margin against 10.0%. The segment table in the 10-Q shows why: International cost of sales was $506.4 million on $528.9 million of sales, or 95.7% of segment revenue, against 89.6% a year earlier. The release attributes it to "lower sales volume and lower net sales mostly in Europe and higher manufacturing costs per pound including the impact of the carry in of prior year higher potato costs, factory underutilization and inflation."
We read the release and the 10-Q for the seven demand and supply themes we track in every earnings post. Apart from the North America volume line, none of the strong-demand phrasings appear. There is no "tight supply" and no "demand exceeds supply". The words that do appear are the opposite: "factory underutilization", "underutilized international production facilities", and "EMEA continues to face challenging market conditions." The fiscal 2026 10-K states the background plainly: "Historically, market demand for value-added frozen potato products has generally been balanced with industry capacity", and then describes "a significant surplus in the European potato market" and "persistently lower restaurant traffic in key countries."
The Margin Story
| Period | Net sales | Gross margin | Operating margin | Net margin |
|---|---|---|---|---|
| FY2023 | $5,350.6M | 26.8% | 16.5% | 18.9% |
| FY2024 | $6,467.6M | 27.3% | 16.5% | 11.2% |
| FY2025 | $6,451.3M | 21.7% | 10.3% | 5.5% |
| FY2026 | $6,612.3M | 20.6% | 8.9% | 4.4% |
| Q1 FY2027 | $1,670.3M | 16.0% | 4.9% | 1.7% |
Gross margin has fallen more than eleven points from its fiscal 2024 peak, counting this quarter's charges. The fiscal 2023 net margin is inflated by $425.8 million of non-cash gains from remeasuring joint-venture stakes when Lamb Weston bought out its partners, so 18.9% is not an operating number.
The Q1 drop from 20.6% to 16.0% has three parts, and the filings give an amount for each.
First, $20.1 million of restructuring charges sit inside cost of sales this quarter, against a $0.4 million credit a year ago. The quarter's $34.2 million restructuring total includes $21.3 million of accelerated depreciation on the Broekhuizenvorst plant in the Netherlands, which the board committed to close on June 1, 2026.
Second, $30.8 million of the $33.0 million legal accrual is in cost of sales. The remaining $2.2 million is in SG&A.
Third, what is left is ordinary margin pressure. The company's Adjusted Gross Profit, which removes those two items and a small derivative mark, fell $22.1 million to $316.8 million, or 19.0% of sales against 20.4%. The 10-Q attributes it to "unfavorable global price/mix and increased manufacturing costs per pound, mostly in the International segment."
So roughly 3 points of the 4.7-point gross margin decline are the two named charges, and roughly 1.5 points are the underlying business. Pricing is the part to watch. The release has no language about rising prices. It says the reverse for both segments. But the outlook changed: in July the 10-K guided to "a low single-digit decline in price/mix for the full year", and the 10-Q now expects "price/mix to be flat to up slightly for the year." With Q1 at −2%, that implies positive price/mix in the remaining three quarters. The ledger does not yet show it.
SG&A rose 10.8% to $170.2 million. The 10-Q says Adjusted SG&A rose $6.8 million, "primarily the result of lapping $7.3 million of non-recurring miscellaneous income" in the prior-year quarter. Interest expense was $42.4 million, which is 51.6% of reported operating income this quarter. A year ago it was 27.9%.
The One Big Question: Is the Capacity Being Fixed, or Just Written Off?
Lamb Weston spent fiscal 2023 through fiscal 2025 building. Additions to property, plant and equipment were $654.0 million, $929.5 million and $638.2 million in those three years, $2.2 billion in total, on new lines in the United States, the Netherlands, China and Argentina. Net property, plant and equipment went from $1,579.2 million at the end of fiscal 2022 to $3,690.0 million at the end of fiscal 2026. Part of that step came from consolidating the European joint venture in February 2023. Net sales grew 61% over the same four years and gross profit grew 63%, so gross margin ended fiscal 2026 at 20.6%, about where it started at 20.3%, on more than twice the plant.
Since October 2024 the company has been taking capacity out again:
- Connell, Washington was permanently closed under the plan announced October 1, 2024. Its demolition is still generating charges.
- Munro, Argentina was closed under a plan announced in January 2026, with production moved to the new Mar del Plata plant. The 8-K estimated $50–$60 million of pre-tax charges.
- Hallam South, Australia was permanently curtailed in February 2026.
- Broekhuizenvorst, the Netherlands is next. The June 2026 8-K estimated $80–$110 million of pre-tax charges, substantially all in fiscal 2027.
The results are uneven. In North America the release says capacity optimization has "led to an approximate 10 percentage point increase in utilization", and segment margin rose. In International, underutilization is still named as a cause of the margin decline, and the 10-Q expects another $30–$50 million of restructuring charges in the rest of fiscal 2027.
Here is the bridge from reported to adjusted operating income, from the release's own reconciliation:
| GAAP → non-GAAP bridge, Q1 FY2027 | USD millions |
|---|---|
| Income from operations, as reported | 82.2 |
| Unrealized derivative losses | 0.7 |
| Foreign currency exchange losses | 12.4 |
| Stock-based compensation | 15.1 |
| Cost Savings Program, Restructuring Plan and other expenses | 34.2 |
| Legal proceedings and other claims | 33.0 |
| Adjusted income from operations | 177.6 |
Two of these five adjustments recur every quarter by nature. Stock-based compensation and currency losses are costs of running the business, and together they are $27.5 million of the $95.4 million bridge. The restructuring line has recurred for two years. Only the legal accrual is new this quarter.
For scale, here is the same quarter at two other packaged-food companies in this series, both with fiscal years ending in May. Conagra is Lamb Weston's former parent: the fries business was separated from it on November 9, 2016. General Mills is the larger branded peer.
| Q1 FY2027, reported | Lamb Weston | Conagra | General Mills |
|---|---|---|---|
| Net sales YoY | +0.7% | −1.4% | −2.8% |
| Gross margin | 16.0% | 23.8% | 33.9% |
| Operating margin | 4.9% | 10.3% | 14.4% |
| Net margin | 1.7% | 6.7% | 9.0% |
Lamb Weston is the only one of the three that grew sales, and it has the thinnest margin by a wide distance. That is the difference between a branded grocery business and a supplier whose largest customers are restaurant chains with purchasing power, in an industry with spare factories.
Tracking a $6.6B Fries Company in Plain Text
Double-entry helps here because Lamb Weston's income statement puts restructuring in three places: its own line, cost of sales, and at times the joint-venture earnings line. In a ledger each piece is a posting with an amount, and the pieces have to sum to the filed line. The conventions match every other company in this series: how we model every company. Income postings are credits (negative), expenses are debits (positive), and Equity:Adjustments absorbs net income, so the transaction sums to zero while the balance assertions pin retained earnings. This is the quarter as pushed to the ledger:
; Check: −1670.3 + 1352.9 + 20.1 + 30.8 + 170.2 + 42.4 + 14.1 − 6.2 + 16.9 + 29.1 = 0 ✓
2026-08-30 * "Lamb Weston Holdings, Inc." "FY2027Q1 Income Statement"
Income:Revenue -1670.3 MUSD ; net sales
Expenses:CostOfRevenue 1352.9 MUSD ; cost of sales 1403.8 as filed, before the labeled items below
Expenses:CostOfRevenue 20.1 MUSD ; Note 4: restructuring and plant-closure charges included in cost of sales
Expenses:CostOfRevenue 30.8 MUSD ; accruals for legal proceedings and other claims included in cost of sales (10-Q non-GAAP reconciliation)
Expenses:SellingGeneralAdministrative 170.2 MUSD ; selling, general and administrative expenses
Expenses:Interest 42.4 MUSD ; interest expense, net
Expenses:OtherNet 14.1 MUSD ; Cost Savings Program and Restructuring expenses (its own line on the statement)
Expenses:OtherNet -6.2 MUSD ; equity method investment earnings
Expenses:IncomeTax 16.9 MUSD ; income tax expense
Equity:Adjustments 29.1 MUSD ; net income offset (RE set by balance assertion)The three Expenses:CostOfRevenue postings sum to the $1,403.8 million the 10-Q reports as cost of sales. The two Expenses:OtherNet postings are the restructuring line and the $6.2 million of earnings from the company's 50% interest in a Minnesota potato-processing joint venture, which the statement shows below income tax. The ledger does not model a separate Q1 FY2026 period, so the prior-year column in the tables above comes from the 10-Q.
The balance-sheet line that carries the narrative is property, plant and equipment:
2022-05-28 pad Assets:NonCurrent:PropertyPlantEquipment Equity:Adjustments
2022-05-29 balance Assets:NonCurrent:PropertyPlantEquipment 1579.2 MUSD ; property, plant and equipment, net
2026-05-30 pad Assets:NonCurrent:PropertyPlantEquipment Equity:Adjustments
2026-05-31 balance Assets:NonCurrent:PropertyPlantEquipment 3690.0 MUSD ; property, plant and equipment, net
2026-08-29 pad Assets:NonCurrent:PropertyPlantEquipment Equity:Adjustments
2026-08-30 balance Assets:NonCurrent:PropertyPlantEquipment 3618.9 MUSD ; property, plant and equipment, netIt more than doubled in four years, and this quarter it fell by $71.1 million. Additions were $88.7 million against $100.9 million on the cash flow statement's depreciation and amortization line, and the accelerated depreciation on the Dutch plant came on top. The build is over. One more oddity is visible in the equity section: the filings carry a negative line called "additional distributed capital", ($410.3) million at quarter end, which has been negative since the fiscal year of the separation from Conagra. The ledger combines it with common stock, so Equity:CommonStockAndAPIC holds a debit balance.
The Multi-Year Arc
| Period | Net sales | Gross margin | Net income | Additions to PP&E | PP&E, net | Total debt |
|---|---|---|---|---|---|---|
| FY2022 | $4,098.9M | 20.3% | $200.9M | $290.1M | $1,579.2M | $2,728.0M |
| FY2023 | $5,350.6M | 26.8% | $1,008.9M | $654.0M | $2,808.0M | $3,462.2M |
| FY2024 | $6,467.6M | 27.3% | $725.5M | $929.5M | $3,582.8M | $3,823.4M |
| FY2025 | $6,451.3M | 21.7% | $357.2M | $638.2M | $3,687.9M | $4,131.4M |
| FY2026 | $6,612.3M | 20.6% | $290.0M | $402.7M | $3,690.0M | $3,915.2M |
| Q1 FY2027 | $1,670.3M | 16.0% | $29.1M | $88.7M | $3,618.9M | $3,928.6M |
Total debt is short-term borrowings plus the current and long-term portions of debt and financing obligations, as each balance sheet shows them. Fiscal 2026 had 53 weeks; the other years had 52.
Read across, the table is a capital cycle. Fiscal 2022 was the low: a 20.3% gross margin, and net income held down by a $53.3 million loss on extinguishing debt and a $62.7 million write-off of the European joint venture's investment in Russia. Fiscal 2023 and 2024 were the peak. Gross margin reached 27.3%, the company bought out its European joint-venture partner and took its Argentine stake to 90%, and it was building new capacity on four continents. Then restaurant traffic slowed while that capacity arrived. Fiscal 2025 revenue was flat and gross margin fell 5.6 points. Fiscal 2026 revenue grew 2% in a 53-week year, on 7% volume growth and a 6% decline in price/mix, and margin fell again.
Debt followed the building. It rose $1.4 billion from fiscal 2022 to fiscal 2025 and has come down about $200 million since. Net income in fiscal 2026 was $290.0 million, less than half of fiscal 2024, on slightly higher sales.
The Verdict: Bull vs. Bear
Bull Case
- North America volume has grown seven quarters in a row, and this quarter it grew 6.7% with segment Adjusted EBITDA up 11% to $287.3 million.
- North America utilization is up about 10 percentage points on the company's own figure, and the segment's margin rose to 25.2% while it was giving price away.
- Capital spending has fallen from $929.5 million in fiscal 2024 to $402.7 million in fiscal 2026, with $380–$410 million guided for fiscal 2027. Operating cash flow was $234.8 million in the quarter against $88.7 million of additions.
- Guidance was raised one quarter into the year, and the price/mix outlook moved from a decline to "flat to up slightly."
- Adjusted diluted EPS held at $0.75 against $0.74 despite an International segment earning less than half of what it did a year ago.
Bear Case
- The release contains no pricing-power language. Price/mix was negative in both segments, and the improved full-year price/mix outlook is not yet in any reported number.
- International cost of sales was 95.7% of segment revenue. A segment with $528.9 million of quarterly sales produced $26.5 million of Adjusted EBITDA.
- Restructuring is in its third fiscal year. $331.6 million of charges have been recorded since fiscal 2025, and the company expects $30–$50 million more this year.
- Interest expense consumed 51.6% of reported operating income in the quarter, on $3.9 billion of debt against $1.8 billion of equity.
- The 10-K itself says additional industry capacity coming online could "restrict our ability to increase or maintain prices." The cycle is an industry condition, and closing Lamb Weston's own plants does not close competitors' plants.
Our Take. The adjusted number flatters the quarter and the reported number understates it. A reasonable middle reading is the Adjusted Gross Profit line, down $22.1 million on higher volume, which says the underlying business lost about 1.5 points of gross margin year over year. North America looks like a business past its trough: volume, utilization and segment margin are all rising together. International does not, and it is the part with the plant closures still ahead. We think the fiscal 2027 guidance is achievable, because most of it rests on North America and on cost savings the company controls. We do not think the ledger supports calling this a recovery until gross margin stops falling in a quarter where price/mix is still negative. The line to watch next quarter is Expenses:CostOfRevenue with the labeled postings removed, against a net sales figure that guidance says should be growing.
