Investor Pressures Lamb Weston to Double Cost Cutting, Divest APAC Operations

In a letter sent to Lamb Weston Holdings Inc. CEO Mike Smith and the company’s board of directors, and also made public via a news release, Starboard Value LP has begun pressuring the potato products company to double its cost-cutting efforts and also consider divesting parts of its APAC division to help the company improve shareholder value.

Jeffrey Smith, managing member of Starboard Value LP, signed the letter, which complimented the company on its progress toward improving the bottom line for investors thus far. After pointing out the changes that have happened and how they’ve helped the company, however, the letter quickly moves into ways by which Lamb Weston can take advantage of what Starboard perceives to be further opportunity.

“The return of volume growth and more rational capacity behavior are important milestones, but stabilization alone will not be sufficient to unlock Lamb Weston’s full earnings potential,” it says. “In our view, the company is well positioned to enter a new phase of value creation ….”

Lamb Weston has announced a $250 million cost-reduction program to be completed by the end of fiscal 2028, but Starboard believes that leaves meat on the bone. Starboard’s letter says Lamb Weston could double its targeted cost reduction to $500 million by cutting more from selling, general, and administrative expenses (SG&A) and overhead.

Furthermore, Starboard’s letter urges the company to review its international portfolio, specifically in the APAC business.

“While international diversification has merit, portions of the APAC segment face increasing competitive pressure, which has weighed on overall profitability and added unnecessary distraction to the turnaround,” the letter said. Starboard suggests that Lamb Weston’s APAC operations generate little in terms of earnings and would be a good candidate for divestiture, where there would be “considerable interest from local players.”

Lastly, Starboard asks that Lamb Weston adjust its goals by stating a 25% EBITDA margin target rather than a less-transparent cost-reduction goal. At the time of this writing, there had not been a response from Lamb Weston that we had seen.