Lamb Weston Holdings, Inc. announced in a press release today its fiscal fourth quarter and full year 2020 results and provided a business update for the first quarter of fiscal 2021.
“The final months of fiscal 2020 were some of the most challenging in our Company’s history. Government efforts worldwide to slow the spread of COVID-19, including restrictions on restaurants and other foodservice operations, as well as shelter-in-place orders, abruptly reduced near-term demand for frozen potato products, which significantly impacted our sales and earnings in the fourth quarter,” said Tom Werner, President and CEO.
“During this time, we have prioritized the health and safety of our Lamb Weston team, and worked closely with our customers and suppliers as they manage through this uncertain environment. In addition, we took steps to strengthen our financial liquidity, and to position our manufacturing and commercial operations for success in fiscal 2021 and beyond.”
“As states began to reopen, we saw clear evidence of frozen potato demand steadily strengthening across our restaurant and foodservice channels,” Werner continued. “In the aggregate, french fry demand from most of our quick service restaurant customers in North America and our international markets, which together comprised a majority of our sales, rebounded substantially by the end of June.
Although fry demand at full-service restaurants remains well below that of a year ago, it has also gradually improved as more states ease on-premises dining restrictions.
Fry demand by our “non-commercial” customers – such as hotels, schools and universities, and sporting venues – remains very soft. Retail demand continues to be a bright spot for the category and for Lamb Weston. After rising sharply in the latter half of the fourth quarter as consumers stepped-up food-at-home purchases, category growth began to normalize in some markets, but in total continues to be above historical rates.”
“This steady improvement in category growth is encouraging, but there is still a great deal of uncertainty regarding its sustainability given the pace of economic recovery, consumer behavior, and governments either postponing lifting dining restrictions or reinstating restrictions on restaurants in response to rising COVID-19 infections in many states.
Accordingly, we are deferring providing a financial outlook until we gain more clarity on the demand environment going forward. Instead, we have provided some observations on what we have seen so far in our first quarter of fiscal 2021.
Although we continue to face an unprecedented challenging environment in the near term, we remain confident in the long-term health and structure of the category, as well as our ability to execute on our strategies, support our customers, generate sustainable top- and bottom-line growth, and create value for our stakeholders.”
Net sales declined $156.5 million to $846.9 million, down 16 percent, or 22 percent excluding the benefit of the additional week of sales versus the prior year. Price/mix increased 1 percent due to improved price/mix in the Retail segment, partially offset by unfavorable mix in the Global and Foodservice segments.
Volume declined 17 percent, or 23 percent excluding the benefit of the additional selling week, due to the sharp decline in demand for frozen potato products outside the home following government-imposed restrictions on restaurants and other foodservice operations to slow the spread of the COVID-19 virus, as well as customers destocking inventories as they adjusted to the abrupt change in the business environment. The decline was partially offset by increased in-home consumption of frozen potato products.
In addition, the volume decline was partially offset by an approximately 1 percentage point benefit from acquisitions.
Income from operations declined $117.1 million, or 79 percent, to $30.9 million versus the year-ago period, reflecting lower sales and gross profit, partially offset by lower selling, general and administrative expense (“SG&A”).
The decline includes approximately $58 million of costs, net of estimated employee retention credits provided by the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) and other labor incentives, related to the pandemic’s impact on operations.
Source: Lamb Weston. Read the full release here