LW - Earnings call transcript Q3 2024 | Lamb Weston Holdings, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, and welcome to the Lamb Weston Third Quarter Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the call over to Dexter Congbalay. Please go ahead.

Dexter Congbalay

Good morning, and thank you for joining us for Lamb Weston's Third Quarter 2024 Earnings Call. our lambweston.com. release, issued on is we website, our morning, earnings which press available This that our are note the we Please during things company's statements some see expected about forward-looking performance that today. based how remarks, on we'll make risks differ to uncertainties. Actual results due and may materially the and refer filings contained SEC risk in to Please more statements. details factors our for on cautionary statements our forward-looking .

together not and non-GAAP Some measures. These read should remarks should measures for replacement include financial our be today's results. a of financial considered GAAP with be non-GAAP

You this the release. an Executive our crop. provide details Financial find President outlook XXXX. ERP then provide Tom quarter will GAAP can Chief in third for to will year's fiscal Chief our With Werner, overview potato as transition, non-GAAP demand the status the current our of earnings Officer; on and are Bernadette as our environment results well Tom and reconciliations Bernadette the Madarieta, of me updated remainder today Officer. our of the

With that, call over me the Tom. to now let turn

Thomas Werner

Thank trade shipments, the and management. cash the pricing transportation orders, rollout. and receiving and first Good morning, was America joining This a North today. inventories scope as functions enterprise management, Dexter. warehousing, global processing customers challenging legacy planning step system scheduling, and areas, The you resource SAP. transition and thank decades-old promotion towards Among treasury is quarter systems of call customer transition a our other we from a for in to certain and multiyear central affected you, this transition invoicing and and managing

hours for spent expected it proved the despite planning, many testing While the the difficult more areas, preparing transition than went transition. and in we we countless well

minimize single centers, lower-than-expected higher shipments which the in more with margins pressured inventory of filling experienced which product resolve the co-locating difficulty team had in processing than ultimately, data delays, third-party quarter. quarter. of processes closely SAP. to shipment significant adjusting distribution margin we canceled our loads, are and and mixed partnered the inventory included these volumes we generally members time of and In with loads. distribution Weston between balancing Specifically, we orders impact distribution real This and to distribution at centers systems our led errors particular, and for challenges. at shipments centers visibility in issues to challenges This and centers company-owned Lamb product

and the We thank work operations, and our customers limit on also them their to commitment with transition. I the to through manage closely we impact for patience want their as

our clock service who Importantly, pre-transition Weston also restore want to levels. customer around members thank Lamb worked team the and to I to help back shipments

points in by sales the As later, the percentage more growth about ERP we by Bernadette in volume approximately detail transition will X $XXX quarter. estimate third cover reduced and million that net

EBITDA that to half transition. related that estimate impacted unfulfilled negatively to lower due approximately costs due directly with remainder was customer also $XX of to and and We the by million, orders expenses the adjusted more and incremental than sales

secured we that adapting our are our the our by service levels. have in order confidence effected alternative may that customers understand gain or supply they to canceled either fulfillment delayed until shipments We rates some sources temporarily levels. pre-transition from system. to visibility pleased inventory effect the quarter issues transition, any third with still restored contained have new As I'm teams and the customer to of fiscal

warehouse actively engaging sales healthy and direct with system, and their the our their to earn flows we're throughout business. levels customers With inventory force trust

inflation adjust restaurant generally X%. the but during demand fry rate months environment. remains past effect now it's to consumers of the X industry at U.S. below Turning in french on Overall, to According about continue global flat resilient, or traffic to believe of currently growth restaurant providers, to demand as to X the the down historical we data the have to trends annual menus. been slightly cumulative to X%

by year the this during overall environment. affected as full-service traffic has the disposable the of by was the versus at flat versus less growing Outside after fiscal quarter lower-income traffic restaurants QSRs during quarter key modestly each more year U.S., attributed in to been inflationary have most has traffic the their Meanwhile, third our restaurant visits fiscal income to first increase QSR continued consumers XXXX. during prior XXXX. half Several markets. prior declined the of

at to cumulative fiscal also well our effect from is U.S., as these sequentially slowed adjusting third as traffic to Restaurant also by inflation has growth in and other first markets the was Similar macro mixed. but fiscal during of the believe XXXX. than Germany we Traffic Italy the of headwinds. in notably our second growth half quarter markets in slower But quarter. affected traffic the larger Europe in consumers up rates was France, in

the in the in down Japan both down. traffic U.K. and traffic solid, was while was East, Traffic Middle Asia, growth and China Spain. was In in

traffic North the restaurant attachment rates America has global stable. been and slowed, markets in international key our While in generally fry have

as consumers to hand, eat often. less popular But going with on are So consumers. as the out fries remain ever the on one other hand,

expect these of recent demand would in our the up the restaurant financial In cautious Because view quarter. previous we're the outlook, trends, of more pick traffic a taking consumer. fourth we and

more our We volume prudent will modest fourth and opposed in in volume to sales previous more cover the of our volume the growth digits as in anticipate approach mid-single we're currently decline taking performance will expected near to Bernadette quarter. a expectation As now detail, term.

rates we to higher will that demand to is continue Despite this and its fry return historical the adjust to pressure as we prices. menu near-term believe category traffic growth consumers caution, confident the global restaurant on remain and temporary,

the crop. targeted aggregate Turning acres have In the largely potato across America, secured upcoming X% a crop in be decline North potato planted of the growing now XXXX we've and agreed for to to contract primary number prices to the our regions. and

end varieties, expect potato we completed to and the planning of for early by April. harvest main for schedule on is the Planting the be

in likely a by potato our decline Europe, to to fixed amount second rise costs crop, our for governed other assuming in up during expect contracts North targeted our of offset In America half contracted XXXX, the we've mid- fiscal of single high be prices somewhat they input under price acres. digits, we costs. an average and Although are will

We'll provide Europe our typical earnings update on America we fourth our and for when quarter July. the outlook crops North in issue in late potato

of adjust as higher the to been order to continue pre-transition restaurant in believe resilient, quarter levels. remains in issues summary, has traffic contained Overall, have we prices. trends been impact restored So although the fry service menu third as levels demand global the fulfillment consumers be challenged to

largely in our to trends Europe. these the of targets the and reduced financial acreage And XXXX this year's we softer locked impact higher-than-expected have for We financial fiscal finally, transition. America traffic reflect and have needed pricing crop the in and ERP North

on turn over results detailed a for third discussion our the call updated now Bernadette and outlook. more to me Let quarter

Bernadette Madarieta

Thanks, Tom, everyone. morning, good and

to transition our As and Tom our noted, we're business our not customers, the P&L. happy the with of ERP the on impact magnitude

quarter. on who their close fulfillment . I rates impact back members want we our I take tirelessly our stayed who customer do proud to also to to did order moment our sales Lamb as businesses. levels and customers the I the bring team the as want remedy our However, a work am team pre-transition issues within experienced Weston possible and to how to of members thank limit to say much

quarter since quarter last Let's million This increase increased million business. review to was XXXX. incremental the $XXX that EMEA of our receive incremental third consolidate from billion. driven $X.XX we EMEA the $XXX results. consolidation the sales is The beginning the EMEA XX% Sales benefit to in of quarter from or the the by fiscal fourth sales entire of began acquisition we'll

to declined million continued ERP the the incremental or majority transition. North benefit as or acquisition, XX%. net from Price/mix the was fiscal the actions due sales in X% pricing was approximately to the the $XXX both exclude $XXX and taken in of that We we year we from orders actions America segments. our taken international pricing If XXXX up unfilled this and inflation-driven million decline to EMEA sales estimate attributable

type to to during of we related benefit mix were orders unfavorable ERP the of offset However, the the the actions. transition partially fill able pricing

were charges lower to of volume customers. freight about shipped customers customer X the Total of the In associated products shipping XX%, nearly to volumes due system sales points driven when the addition, unfilled pass-through which rates by with ERP headwind, and X-point lower freight was with transition. a lower decline to declined orders

half was softer-than-expected reflected international in points other than The and restaurant X primarily factors: first, of trends traffic North driven key X markets. more America the by decline

traffic believe menu as As the remain higher adapt trends Tom to consumers to continue mentioned, prices. challenging we

U.S. in January negatively weather traffic poor unusually addition, in In the affected

fiscal of we in last to will the reflected meaningful the customer product lower-margin of last second Second, mix. headwind exiting carryover XXXX. the half notable the any exited impact the decline manage which business of This that contracts and strategically remainder during X quarter the see we from year is volume

Moving million, profit $XXX pricing business. of EMEA and actions incremental million consolidation by sales. was of on to from Adjusted increased earnings inflation-driven which gross the $XX from the benefit driven the

cost ERP for raw The well of was mid-single-digit pound trends softer the North restaurant input the write-off as million increase as the by volume basis partially on impact offset inflation a potatoes higher-than-expected traffic we excess charge as from $XX on in and the considered a America per transition.

We negatively that that adjusted impacted profit estimate $XX estimate due approximately lower million transition In million. approximately to negative addition, volumes we gross the was $XX ERP mix. and by

from fill to $XX shipment and and sought additional well ERP penalties as associated or as million primarily consolidation of arising higher inability the about on SG&A freight from the coverage due and for to customers well our amortization. orders. that noncash with impact planned about million the the as reduced system as to with of downtime factories transition, SG&A incremental to delayed was $XX our ERP the inefficiencies $XXX shipments EMEA $XX million, cost million to transition due reduce in increased associated Adjusted million including remaining fixed delays as $X with for charges the customer we expenses

of costs to restore levels. system the accruals to customer including includes tempered rates pre-transition in $X SG&A. order approximately increase million go-live, and The reduction support benefit the incremental in A to efforts fulfillment compensation post increase

impact benefit All a the business consolidating from of year. estimated than pricing from Lamb $XX Lower prior is versus EMEA of of offset $XXX excess an down to includes write-off million this which actions. transition in income which Weston the $XX business, more the the inflation-driven incremental base X% and potatoes and EBITDA of million ERP led million, earnings the adjusted

have $XXX So the ERP on have transition X% impact the around while million, excluding of these down adjusted an would underlying sales items, been basis, to EBITDA excluding been acquisitions would and X%.

or XX% customers America Sales unfavorable to North which ERP that mix the declined sales to includes essentially decline in and the our Mexico orders attributable segment, due million We in Moving U.S., channels to segments. in and was of our all to the all quarter. $XXX Canada that transition. estimate in unfilled

higher X% by took year. as primary up as that issues was of customers, sales unfavorable in complex pricing have mixed were actions our was inventory volume taken fill some the pricing fiscal margin; related were the each harder resolved. carryover to orders to benefit the Mix actions visibility of Price/mix XXXX lower this typically driven product until which as well more transition ERP across channels effect

addition, restaurant by XX% second as partially fiscal of customer half soft decline, ERP X the more customers orders reflects with increase the resulting percentage trends as impact declined The Volume of XXXX. retail In freight business carryover of unfilled to than and in during lower-margin the half transition. from of offset the traffic primarily well more exiting charges lower remainder the than reflecting the points. price/mix decline

incurred at of impact the joint of benefit pound by volumes million actions. America our driven also million The $XX potatoes, of adjusted decline North from to was ERP decline. EBITDA The venture. inflation-driven per charge These about lower largely cost contributed for write-off million. was million American $XXX more of $X than the offset and an and which excess segment the North $XX potato the pricing the impact of declined transition to write-off higher XX% excess factors estimated

segment, North grew $XXX America, includes incremental were channels customers sales Sales of of the million, which all million from outside in sales EMEA our International in to which nearly acquisition. $XXX

year declined this the attributable unfilled as sales X%, transition. primarily XX%. driven acquisition, approximately carryover estimate $XX last to benefit by up to million or the the pricing taken of actions that relates of pricing Excluding We $XX million ERP as Price/mix orders decline year. net was EMEA well taken actions

business impact of mix than of to the the half in volume freight Lower charges the percentage partially with more customers points. X offset orders during declined increase XX% exports by reflecting second ERP price the by decline, XXXX. North the lower-margin carryover of customer Sales about as a transition. exiting volume the reflects served half remainder The result American of decline fiscal of unfilled

$XXX the International earnings billion. EBITDA financial segment's increase. adjusted the EMEA's from XX% Incremental drove to increased consolidation results of

acquisition, and for a $X the EMEA per million than mix. pound, potatoes from $X excess volumes transition, an the impact price lower cost allocated the Excluding higher of charge write-off estimated ERP favorable raw offset million more

Let's to cash flow. position move our liquidity and

We leverage sheet ratio a quarter Our fiscal up at remains end debt ended balance the adjusted from second strong. of with X.Xx of X.Xx net quarter. EBITDA, the the

as about capital to revolver drew needs expenditures. the during we as capital million to as $XXX system billion Our increased net increased working on $X.X debt finance our transition ERP well increased largely

months million is under credit than primarily up related year, as earnings. primarily prior expenditures, X capital year that of China the to million $XXX our started We million reflects our $XXX increase the capacity prior nearly continue have November about new Idaho, in cash factory costs In about more from construction in generated ample and first $XXX operations, expansion for more in and to of up versus million Netherlands to the spent available as costs higher including our $XXX We we Argentina. The up equipment year which well period, million the facilities. projects $XXX period. from revolving liquidity, due than

And shareholders, repurchases. in than million $XXX finally, $XXX of in we've our and of cash share $XXX returned million to million comprised dividends more

system We near-term trends. year and full sales outlook. updated ERP demand as impact reflect to Turning our updated XXXX the targets the earnings fiscal transition to well of our as

EMEA target Specifically, to billion $X.X billion incremental year. of the billion. target of of previous the we attributable X sales reduced to to from sales first our the annual updated $X.X net during range $X.XX $X to range our $X.X The billion billion acquisition quarters includes

to sales sales with a fourth quarter, updated which of the compared Our flat target our billion fiscal period to $X.XX same is ago. $X.XX implies billion in X% up year

quarter, fiscal carryover sales expect XXXX in price/mix actions reflecting the and the taken actions benefit our we've XXXX. drive will fourth pricing taken We growth in of inflation-driven fiscal continued in

partially will to offset We to expect charges freight increase customers lower continue the in price/mix.

growth. expected. trends than pre-transition that and America more point in have to were part North rates the in restaurant that markets soft softened we key international of expect volume our than expectation restaurant digits, affected the and primary of The our driver noted, include our also will positive reasons generally in we And fourth softer the performance since as in fulfillment initially levels. our that trends back mid-single key Tom will America As volumes anticipated. previous to from longer our attachment is quarter for which down decline our target fry change have transition rates of international trends restaurant the North that We as continue customer markets traffic traffic volume our several North stable been traffic are order America in ERP affecting

the alternative expect be least fourth volume America transition temporarily some that North in sources. quarter by supply customers by ERP seeking may addition, impacted the affected at in In were we from

For EBITDA decrease million million write-off $XX transition, midpoints billion trends earnings, from to of down of markets. X and of impact international reduced North billion $XX billion. a to estimated largely $X.XX of The we about impact traffic to an potatoes charge key softer a That's America previous the range for million the $XX ranges. restaurant $X.XX our the reflects and from the our $X.XX raw in ERP excess the billion adjusted using $X.XX range

transition the as impact and as compensation of accruals. well some financial by offset benefit the of partially reducing absorbing We ERP the decrease

implies EBITDA target of of year of an midpoint million million $XXX quarter $XXX prior the in the updated versus fourth quarter, to adjusted Our the increase X% the range. using

sales partially higher of adjusted by $XXX drive growth, million expect the to SG&A We million. profit and gross offset to adjusted $XXX

lowered we a to to per We're financial earnings diluted updating adjusted to other respect also targets. couple of full With year target share, $X.XX. our $X.XX

$XXX which We million expect end is our $XXX capital range $XXX to expenditures of previous million, of million. of upper the

annual end of at expect effective targeted also rate which our XX% of XX%. We our range to around is low the be XX%, to tax

expense Our million unchanged. $XXX are depreciation of of and amortization interest $XXX for and million targets expense

now back Tom me turn some for closing it Let to over comments.

Thomas Werner

Thanks, Bernadette.

issues impact us, of out our fulfillment With close the serving we we order behind the focused remain on customers fiscal as XXXX.

our and continuing well category. near-term execute the the trends remain And to and growth the long-term we health outlook that term. demand the deliver long create we in will While may remain by sustainable, for value be strategies, to our we positioned shareholders profitable believe of growth soft, over confident

joining now we're ready and you questions. today, Thank your us to for take

Operator

go We'll Barclays. to Andrew first Instructions] [Operator with Lazar

Andrew Lazar

getting industry comments of traffic all of this really sort all ERP to is more one time years. restaurant think of was last particularly I'm from has going portend the to around anywhere related, forward, separate of frankly, questions for with start do probably capacity pricing sort building I being cost not the much couple once could what the things most and sort that what morning, again in set when pressure your slowing of it with near

curious address that starting to sort So this concern on guess, point. really at you as would of a get your I'd I point, how be perspective

Thomas Werner

trends have thing in everybody on to capacity comes and Yes, the Andrew, as been capacity knows we the stated Certainly, equal. is it's the our restaurant question. remember thank industry. created coming on, you not got for we've soft the the traffic in comments, And all as

we're the online different -- opportunities as in and going as closely past. the capabilities the based -- on look we be the the had be in have going and at have the markets capacity coming when online, very coming the we we've capacity we it to different. have capacity are in very And past, of to So we're manage

are And the so restaurant difference the -- obviously, is, the in trends softer. traffic

expect point. manage tell, confident at we ourselves have X% but and the has we'll that a We will capacity category, Time and been minimum. the get category outlier X% remain which in to expect growth at trajectory temporary a back be online and to the we past to like this to we the and competitors, this resilient, coming long-term of with

Andrew Lazar

to number in necessarily think And then a year. Weston costs, are don't next there expect you know Lamb absorbed right, that repeat that would I fiscal 'XX, of I

such. of mean, sort some those ERP envelope, obviously, would of base. would of a for write-offs, be as $X.X if -- this billion So disruption EBITDA and it this back like, the weren't just it to associated the I costs with, inventory the seem things, again, year closer even to closer like maybe

trying And for that of how to to I'm your off Or about be those just a you think EBITDA sort am a kind 'XX? 'XX let's in math? fiscal that closer would say, if to of something sense we get for costs, algorithm, we I baseline would of missing exclude EBITDA expect which hopefully grow -- in

Bernadette Madarieta

this is Bernadette. Andrew,

thinking costs, 'XX. those as add We you did to about I fiscal correctly. you look it and absorb think You're would back those absolutely

we to we're going July. what's we key impact be as translates trends to on outlook rolling and more in and and of information a think traffic the how I process that to give the our look now, move fiscal that is 'XX. restaurant forward have right when up And we'll in at we'll need take volume

Operator

Galbo Bank We'll go next with America. of Peter to

Peter Galbo

Bernadette. that wanted I made you the just volume comment to underlying maybe unpack

like was it mean at piece been volumes underlying don't down, know, the total that right, the company level, points ERP, X%. I out from if obviously or a we have seems So there's strip business would I walkaway X% and X

And into XQ. of that's you're what kind extrapolating

that's kind forward? Just of the applying of want you're kind whatever rate how to to if the logic XQ as was understand

Bernadette Madarieta

Yes.

XX% our in then of to So trends and remain that you're points sequentially the volume expect year, we had related was traffic softness. the in did soft exactly softer a and improve continued It underlying outlook. see, in this we we're QX the the right. do that's those we it updating quarter, what X That to to that decline but transition ERP expected

Peter Galbo

again much based up versus as least Okay. you be sequentially year, forward or And rate in kind as fourth considering. starts is it. contribution that updated else the wasn't Got it anything of steps back is that just again about of thinking I implied And at guidance? quarter guidance, get think I of what's next sure that this into how mix might rolling on fulfillment the we just back kind the to price/mix

Bernadette Madarieta

things. of you're Yes, part be going couple of to Mix see a will it.

quarter, more lot that the were mixed said, the just we loads to higher margin, orders more we order a third weren't given and fulfillment are the fill of able As those we issues having.

quarter. that between you'll impact have see periods. then to as fourth sequential a change you you quarter, that So But there's into and will generally and fourth in the previous see third continue

Operator

with We'll go Goldman Samuelson Adam Sachs. next to

Adam Samuelson

I about and guess, on impact of share. first, that's Peter's continuing of kind of I volume mean, the seeking of where alternative -- market think want line sources I questioning. So to are who supply customers definitionally,

just those get higher kind going volumes that, back? volumes where targeted kind getting that incremental that seem related volume one Now could get it with about on I'm were to explanation targeted away that on temporary. and back share backfill time, you be at from does business headwinds point, and was categories. trying from, is But perspective the get foregone to the you trying the that mix to and margin uplift that customers and are talked just walked like end? on the that with update And products, a ability we're you on your of from higher to your we've a And say

Thomas Werner

Yes, this is Tom.

do we this We're front year We're couple our season it. on time. a So at of end go the things. to ready contracting through every as of getting

work a how to plan on we through have So robust going we're that.

and team that. Mike direct are and on focused and our sales commercial his the leaders confident I'm Smith force so And

the It's volume. time. So of we've past take more to come in to matched the that, on not as some in terms perfectly stated going but it's

it the and what at in we're do exited to going marketplace, right margin versus the We've targeting levels. we're

is a transition. one. this we're it. that's it and number Number And materially So no company, question about it. the about happy tough There's impacted two, not

to the so some do that direct we're win unfortunate a that And our customers, time. an smaller hard a trust has thing happened, But we it's of force. back some working plan. take but we have of going with that's lot of our And and to confident have I'm to sales

We've our got sales XXX street on but activated force, going your salespeople market question some to everybody time. about your point direct about the And true. take it's share is absolutely

we're back going have to hard work so And will. we and to get to it

a have and I'm going that place, but We but team, confident great take we take there. going it time, to time, got sales resilient plan get will some force, in and to it's we're the some a

Adam Samuelson

about slightly in of how spend to upgrading in as be 'XX quickly happen? about brought CapEx Argentina and Okay. And and question to the should how then to be 'XX needs spend -- get quickly facilities think CapEx at this a relate I'm a That's and capital And the guess CapEx. on just sense higher I had helpful. for year? facilities end allocation higher of in second need near projects. should I on with thinking it trying the been there on -- slower -- capital Is demand the payments any or still Netherlands Has 'XX of there 'XX a thoughts given timing in of on this the those spend just we year and other how range timing that's to a about now we term? environment high capital and

Thomas Werner

Yes.

as you committed level it. Investor in we in Adam, are and an this to we're The baked, October, we're So mentioned those our have Day year. to year, communicated projects elevated next that going

as we levels to are all we'll continue base expect elevated evaluate capital we happening in forward of so will as And going needed. the that 'XX our terms market what's And evaluate capital we and stated. be of expenditures

Bernadette Madarieta

the at Day, guidance to consistent would we 'XX. fiscal Investor in XX% with Yes, what XX% sales of be shared

Operator

go to Citi. We'll with Palmer next Tom

Thomas Palmer

Peter you just When [ have some these a whether ] play trajectory? a of and could on visibility on Is you over wanted of up, basis it I kind question, of guess, sustained win or I to out even it's customers. starting on little and customers follow back. these Or Adam's have clarity over by next more to dropped might quarter, going real we'll really take them kind you're to that -- this longer? have XQ whether

Thomas Werner

X sit, this clarity we we'll now, That's to is be it. contracting go No. lot X with in some next my going belief the conjunction months, that have Right customers over the we a on cycle. as to of to through

Tom, good we in call we'll color visibility next the to have some get time our think it So and . get I we'll then. by more July, on by

Thomas Palmer

kind is to industry and is Lamb meaningful? And then the mid-single-digit volume piece XQ. If and just a Weston to decline consider I more break smaller Weston Okay. then piece is down it industry that in the versus specific, mean we just Lamb between were of I mean here? any help

Bernadette Madarieta

any it's traffic trends other be but impacting ERP more Yes. industry with the the And definitely that's then have No, seeing trends. be that piece that. that softer we the you're from is I transition, traffic that hangover say more to where would softening going will

Operator

next Cowen. with go Robert TD to We'll Moskow

Robert Moskow

months A few I you small ones. few this. before wait tell maybe you don't a know, us

[indiscernible] with more it. Are your growers I And You've I other need volume terms that those then already of you you project you're that for or you any possibly contracted with 'XX. the know and execution I about ERP guess customers. assumption there to us along the volume steps say impact multiyear, that secondly, you a give potatoes. fiscal for related can is to much how with would way growers. think will on demand have internally contracting like imagine a in

Bernadette Madarieta

Robert. Thanks,

First, plants. of in and ERP. The the your the ERP I'll terms our that be in will next at North last will phase of take America question be first

plant capabilities move where other do before we its that test pilot the earn to we'll a we waves. do right of to all first will We in will the plants, and

will in and out the impact much have but for roll So we'll we're an deployment that design it then build the middle in strategy. of right our plants given of completing now less phases, to do we . Whereas do was just then in scope. year. like that it And crop every as volume this estimates XXXX, yes, use we the relates larger much we potato for one contracted

have level into acres, the but the traffic going have with year at any this from we the this of We we restaurant trends. given crop. don't the of to number what excess that year inventories seeing terms share of taken taken the end of have down we're of contract information of that did just in elevated acres we're But number consideration

Robert Moskow

And a maybe follow-up Okay. to that.

traffic I Just think does decline? that restaurants volume better. I have would good. numbers a still kind qualitatively would put held together, think are rates a mid-single-digit How up attachment X you just little is bit volume translate I to pretty mathematically, at flattish said If those and of

Bernadette Madarieta

Yes.

seeing declines lot I driving a decreases what's our the are think a seeing. volume QSRs, from that's of volume that perspective, volume we you're sequential in and

Robert Moskow

declines? Sequential

Bernadette Madarieta

Yes.

Robert Moskow

year-over-year decline Or Yes. it Is also? is that of... a kind

Bernadette Madarieta

that decline. were in Yes. QSR the well flat saying foodservice we it's Absolutely, more We've a continued year-over-year about to was see traffic as sequential. as space. When

Robert Moskow

Foodservice.

it. Got Okay, separate.

Operator

We'll to Jefferies. with Dickerson Rob go next

Robert Dickerson

Great.

October not the sure temporary. everything think long-term X% walked X%, changes are to in outlook. at is. the, at temporary more guess, Just a least the couple outlook, you that broadly of through saying, outlook of [indiscernible] quick of kind you speaking, there given the of kind ones in, Day like traffic of Is of for I'm how me. anything guess, long-term Investor shift speaking, kind near-term broadly the let's you kind I regarding say, of just kind I kind

years. then But over each also margin year was uptick the next an implied few there

moving to gauge all trying the Just term. longer as kind think pieces we of

Thomas Werner

we've a we've as been had grow, on been don't and market as through do. is got a talking -- certain yes, right Yes, adjust to believe prolonged, we while. sit I footprint. right have believe some can now, any category And things activate is X here the in. that -- what our even here right algorithm, decisions traffic, investment for softer going years now, it's going about sit we have and made I period. based that's now, in I'm we've But I continue to this softer the continue we if to Rob, confident we've the I -- the to company to ago long-term

any over adjust term, rhythm at the so this to need that believe have don't I long And reason our to we point.

Robert Dickerson

quickly, potentially back you increasing Super. just activity it. October, dividend time, had then exercises. in also And over I stated but right, repurchase then clear. employee option of think Got the outside very incremental That's some

curious, can think your XX to buyback today. we appetite mean gauge all stock to I next you just looks a on I'm potential forward pressured I'm see months. clearly, trying as little the So

Thomas Werner

Yes.

And as dividend. we'll take we're do. to share we dividend evaluate our So as time. to we look at over certainly always the CapEx, we'll our a buyback our committed committed And

on absolutely, price, going evaluate our today on And equity so with what's going we're yes, based that. to

Operator

with We'll go Smith Stifel. Matt to next

Matthew Smith

in home at traffic, you away We've restaurant factors the higher. from level moving the slowdown When the one look of have pricing. of inflation continued see been to

pressure inflation? Is Or talked that One and a benefiting consumers to that couple lean past, here. menus adjusting on fries offerings traffic expect value periods heavily. of of today? seeing to softness to Any activity operators about been performance and So heavily of fry economic you in to what's more fairly in the QSRs, you Are on into would featuring promotions resilient level firm considerations related that? questions up? value of has needed the from thoughts you've

Thomas Werner

here things. X there's I think sit we today, As

going when consumers adjust more we're offerings a case drive I typically to traffic to trends. think to the past bit. been inflation. mill going forward I the slowed of the menu menu things the pricing terms start believe down have in seeing has to the in value That's

some it's a both forward, to think it's of time. I take combination going going but So

Matthew Smith

It expect be they're potato of higher digits your follow-up some lower the single low like costs going would you from on your for that costs to cost. down potato potato of from America pressure by North instances the Is rest year-over-year. to pricing pricing expected customers? the forward on then a just costs? Is your one pressure lower sounds And few crop. basket? input down of in actually XXXX potential offset Or where across the are question the That's

Thomas Werner

Yes.

So to though down X% like just even X%. we to stated reset, it's

right and basket in significantly. And If years, the last 'XX, basket. our other it's inflationary in our now commodity it areas up when been up pressures as you X the entire rolling there input of go input stack are we're stated, up of middle back for we've

our be don't has last been the it in it years. X to expect while So like inflation, we digits double X to

of still July in our of going we're right the specific now. in not because to We'll up rolling middle number. that be point. going a plan operating about We're 'XX dealing give with inflation I'm some you kind at talk to this

Operator

we'll with move next Torrente Wells to Securities. Fargo Marc

Marc Torrente

process. net steps. the for the It sort of the have those impact some touched how a transition recent You recent are the on steps different you implementation though are as more was on ERP from heavy to confident next in Maybe transition? and the lift. -- next limit ability you sounds learnings of the The gained

Bernadette Madarieta

Yes, sure.

impact, ordering, we're next the plant able central was go live that one difficult. limiting customer time different and affecting of the of therefore, systems were management in some So whereas isolate more at this inventory are that the steps and that and to others with all

and I think move and those going of learned, an inventory you're we always change other phases. will from to are shared management we in as we've things. that focus be do terms to to lessons things perspective that that plant our as the into And there's on more able things continue forward visibility

Marc Torrente

mix? will through normalizes, contributor both pricing, due how as we fulfillment quarter considering then Okay. And [indiscernible] should the more third a and several mix going forward? about, then And of how much actual in flowing price/mix be underlying pricing wraparound guess, next the new quarters, trends underlying transition, I think that to potentially muted the

Bernadette Madarieta

Yes.

and we in mix, about transition. to talked relates it off the as the coming fourth impact So ERP of quarter

to go more in capacity will Falls, we to products. on where American continue example, As we premium impact see able new fiscal we to for are bring 'XX, as offer we more mix our favorable

things won't next we then in we year, So changes mix. by And see had . that those 'XX. exits those fiscal in made way lower-margin are of of you'll that some the be lapping of some

Operator

Max go Gumport We'll BNP to with Paribas. next

Max Andrew Gumport

trends you curious you have play confidence can about And be I'm now out? in sense But we know any of Turning temporary in how confidence? [ horizon. nature. prices how line the right for of restaurant the the menu of curious back they'll talked of giving on and the improvement slower just comments to I just in type to you and restaurant see impacting visibility trends that what's higher seeing that's expectation ] impact that some in it the time consumers your what sort eventually. will adjust that traffic

Thomas Werner

Yes.

one, attachment years. has for number past the historical X, fry rate So we got consistent. X pretty above stayed levels the It's been

that's So one thing.

at. based things every kind other thing discussed recently, some that the is and while -- look going traffic of as we model on we've that that consumer call, inflationary the been we forward. it's we restaurant we on continually month is get monitor The expect slowing we to to the adjusted to expect how to that menu And we pricing, here that return believe

But to over assumption a making. return time, business. not it's linear that restaurant think it's perfect, going we're to So in-store back we

Bernadette Madarieta

related of the menus. they margin we products the a fries only that in the past to restaurants. lot highest one And talked about continue types on is fact then Yes. and thing of pushing by I'd likely And we've the that other French those that see restaurant comment are to the will items on towards

Max Andrew Gumport

feel turning impacted like ], bit, transition. the right you back the transition. going to with backfilling to trying you're right, that maintain just 'XX given to been the it by But ERP Got that were it. feels I'm a be the exit pushed then off ERP I it's customers in curious contracts now, of sort like And relationships of [ the

ability you higher margin some been far a start of there. ]. make leave to exited progress 'XX-type it has your on of those contracts more Is to that with [ backfilling event that I'll has of middle So business how pushed now?

Thomas Werner

Yes.

and as we unfortunately, we're customers earlier, plan customers and right So a contracting impacted, of that put relationships together ERP we've some with thinking with of our rebuilding we end on now, start our the the lot customers 'XX about the stated targeted and as situation. front of FY with got I a

And that. all it's through But that business take going in our as approach expect our recapture that. several to work the be months targeted next to will team will I to

customers so need those we're with at target always we're we that going feel we to going some relationships. time of as our to opportunities talk on time are contracting And to that take year go this And we and we rebuild be it's after. to the as mindful to

Operator

Bank with We'll go of Reuter next William America. to

William Reuter

I X. have just

any is, point put finer at orders there that are wanted on I be The to to delayed? first point, a that. continue this just

Bernadette Madarieta

our previous to rates. order back We're fulfillment

William Reuter

to sense have your then upon Okay. you recent midst Good have existed? And customers in customers that that you second, fact the that early conversations the the past in negotiations, hear. on the given based would are any they of the with challenges more leaning than you and gotten contract are

Thomas Werner

we standpoint, No, a were -- -- have well customer any don't from don't I we communicating them. with

bigger through. the they we're the With things our sure we understood had, a all going customers, of made challenges lot we

a And no everybody as understood. protect there's didn't we bigger So as generally, our to customers went through did we like they they lot But it, fallout could. from best this. but we our of

William Reuter

Got more. have actually, it. one I And

I ERP that that right the and that's just is it think be Is in on regions you'll going future. in doing implementation in right? now international North America the

Bernadette Madarieta

That's correct.

planted the America. international. central North did And America. after phase we next So in we be systems will in will then North that, The go

Operator

to with go Carla We'll next JPMorgan. Casella

Carla Casella

opportunities? you've you looking until the get you're market? past, just of now are all talked that ERP And can Is you for kind still the off and the seeing internationally. talk the you done? what at table system In about about M&A in Or

Thomas Werner

of always -- international acquisition depends it's off evaluate Yes, the the on of to depends other not timing certainly, that those table, continuing speak. we're clear side on to the table. been this so I've the And pretty it opportunities, on

if something can't evaluate based you perfectly, itself, we'll to continue we're it. presents move to to and always on So time today, these on continue going forward. what's going And

happen, but going can't be going on pursue we sense the you when are But mindful about it, those. what's to to we're have predict these things going a of absolutely organization. we've got continue But in to to

Carla Casella

the getting you the -- given looks the more? market? of opening Are market QSR more has softness the more today internationally And past? the -- mean, is on us in in can are kind the give I up you market Anything there

Thomas Werner

return markets going we're this yes, performing to that my But the I'm right of in category the mean to now, that have. and not in well, And believe is, is obviously. we going softness I some remarks. resilience as get lot And we are category a globally. into pockets dealing the some on stated international to prepared of remember I seeing Yes. question belief have long-term with specifics of a we're thing

long evaluate going something term, if So presents over the to itself, absolutely we're it.

Operator

the With over no to remarks. questions back closing this any call additional additional turn in or queue. our for to I'd like time, At speakers

Dexter Congbalay

This Dexter. is

joining have a If you good and can we call, a or Other have schedule to the e-mail follow-up day, do thanks like call. any than that, for please questions me send an so. and

Operator

call. your today's will That participation. appreciate conclude We

Lamb Weston (LW) 4 Apr 242024 Q3 Earnings call transcript