Americans love potatoes—especially deep-fried with salt and ketchup. So for more than half a century, American food processor Lamb Weston Holdings has enjoyed a robust market. That company supplies frozen french fries to fast food giants like McDonald’s, KFC, and Taco Bell. But a surprise financial loss in 2024’s second quarter led to some big changes in the company. The loss happened because many people are spending less money eating out.
Lamb Weston makes enough fries every day to serve 80 million people worldwide. Despite this volume, the company’s stock—pieces of the company that people can buy to own a part of it and reap a serving of its profits—dropped more than 40% in 2024.
In October, the Idaho-based company announced job cuts, a plant closure, and reduced production as demand for fries has fallen. Why are people dropping those potatoes like they’re hot? French fries are a staple at fast food restaurants and a beloved feature of American culture. But as food prices have risen, so have the costs of even previously “cheap” meals. Americans are peeling back on “fun” spending, like eating out. They’re choosing to cook more at home. So fast food restaurants that serve fewer meals are ordering fewer frozen fries.
In December, one of Lamb Weston’s largest investors sent a letter to the company saying it needed new leadership. The investor claimed the company had made big mistakes, including failing to notice the very important trend that fewer people were dining out. Shortly after, Lamb Weston announced a change: Chief Operating Officer Mike Smith would replace the previous CEO Thomas Werner, beginning in January 2025.
But many investors thought that decision was half baked. They showed their disappointment by selling their shares. This caused the stock price to drop again—by more than 23% after the announcement.
One of the chains heavily affecting Lamb Weston is McDonald’s. In its latest report, McDonald’s struggled with sales worldwide. To drive traffic to its restaurants, McDonald’s launched a $5 value meal in June. That brought in more low-income customers. The fast-food giant extended the offer through summer 2025 at many U.S. locations. But will the chain sell enough value meals to close the gap?
Looking ahead, Lamb Weston predicts its 2025 earnings will be between $3.05 and $3.20 per share. That’s small potatoes compared to the $4.21 per share that Wall Street had expected. It shows that investors still aren’t happy with the company and that consumer demand for once-ubiquitous frozen fries has yet to recover.
Why? A company that thrives long term must pay attention to changing markets and environments and act early to stem losses.
