Activist investor Jana Partners has bought a 5% stake in Lamb Weston Holdings, criticising the potato-products supplier of “self-inflicted mis-steps”.
Jana Partners, which has a track record of investing in companies it sees as under-valued and then agitating for change, has paid $336m for the holding.
In an SEC filing, the investor said it believes Lamb Weston’s shares “are undervalued and represent an attractive investment opportunity”.
However, Jana Partners also criticised Lamb Weston for a “litany of self-inflicted missteps” that have resulted in “underperformance for shareholders”.
The investor is working with agri-food investor Continental Grain. In the filing, Jana Partners said it plans to hold talks with the Lamb Weston board and management. It listed “core operating deficiencies” in areas including demand planning, potato procurement, pricing strategy and the management of overheads.
Lamb Weston’s share price jumped on news of Jana Partners’ investment, closing on Friday at $78.22, up 10.15% on a day earlier. The shares closed down 1.2% on Monday (21 October) at $77.31.
Responding to Just Food's request for comment, Lamb Weston said: "We are aware of the 13D filings from Jana Partners and Continental Grain. We regularly engage with our shareholders to better understand and consider their views and will continue to do so."
Earlier this month, Lamb Weston reported fiscal first-quarter financial results that included a 46% drop in group net income.
Alongside the publication of those figures, the company slashed its profit targets in light of a restructuring plan that included the permanent closure of a US factory and job cuts.
Lamb Weston said its Connell facility in Washington would be shut down with immediate effect.
More broadly, the group said it planned to eliminate about 4% of its global workforce, while also cancelling any unfilled new jobs.
The company supplies products to major fast-food chains, including McDonald’s.
The publicly-listed group is seeking to realise around $55m of pre-tax cost savings in the current fiscal 2025 period from the restructuring exercise, which also includes “temporarily curtailing production lines and schedules in North America”.
The sales target for the full fiscal year has been kept unchanged from the figures put forward at the 2024 fourth-quarter stage in July – $6.6bn-$6.8bn.
Guidance for net income, however, was cut to a $395m-$445m range, from the previous target of $630-705m.
Diluted EPS is also now seen at $2.70 to $3.15, compared to the July estimate of $4.35 to $4.85.
On an adjusted basis, net income is projected at $600-$615m and diluted EPS at $4.15 to $4.35.
While the outlook for adjusted EBITDA still stands at $1.38bn-$1.48bn, Lamb Weston said the metric is likely to finish the year at the “low-end” of that range.
