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Investor Starboard Value has delivered a letter to Lamb Weston, urging the potato product producer to double its current cost savings targets and review its portfolio.
According to reporting by the Wall Street Journal, investor Starboard Value has significantly increased its stake in Lamb Weston and is now one of the company’s biggest shareholders.
Lamb Weston, headquartered in Idaho, US, is a major player in the production of frozen food products including French fries and potato sides, as well as a range of other appetisers. It supplies foodservice chains including fast food giant McDonald’s, as well as retailers and distributors in over 100 countries.
In a letter delivered to Lamb Weston's CEO, Michael Smith, Starboard said the company should expand on its previousy announced cost savings programme and conduct a strategic review of certain international operations, particularly within the Asia-Pacific (APAC) region.
Starboard's managing member Jeffrey Smith describes Lamb Weston's current goal of $250 million in cost savings by the end of FY2028 as "a welcome first step," but notes that there is a larger opportunity to cut costs within selling, general and administrative expenses (SG&A) and overheads.
"Most of the company’s revenue growth since IPO has been price-driven, as opposed to volume-driven. Therefore, we would expect Lamb Weston to have realised significant operating leverage," the letter reads. "You have not. It is time to catch up."
Starboard states that Lamb Weston should target approximately $500 million in total cost reductions, bringing adjusted SG&A to approximately 4.5% of net sales. It describes the company's current SG&A burden as "striking," given its high proportion of revenue from foodservice – a channel that "should support a leaner go-to-market model and lower SG&A intensity".
Additionally, Starboard's letter recommends that the company considers a divestiture of certain APAC operations, which face "increasing competetive pressure" that weighs on profitability and adds "unnecessary distraction" to the company's onoing turnaround efforts.
"We believe a deliberate assessment of these operations will sharpen capital allocation, improve consolidated margins, and unlock additional value," Starboard stated.
Starboard said the measures outlined would "provide a clear path" to restoring Lamb Weston's EBITDA margins to 25%, proposing that the company introduces this as a medium-term goal.
In February, the French fry producer announced several leadership updates with the appointment of Jan Craps as executive chair and James Gray as chief financial officer. The changes came as Lamb Weston reiterated its fiscal year 2026 guidance and continued the execution of its long-term growth strategy, aimed at improving returns.
"We are encouraged by the meaningful progress made since the leadership transition, including improved pricing discipline, a clear volume inflection and deliberate capacity curtailments that have begun to restore utilisation toward normalised levels," Starboard's letter says.
"Lamb Weston remains a strong business with durable competitive advantages in a concentrated industry. We look forward to engaging constructively as the company moves into this next phase of value creation and stand ready to support actions that strengthen Lamb Weston’s performance and long-term shareholder value."
A spokesperson for Lamb Weston commented: "Lamb Weston values ongoing and constructive dialogue with its shareholders and appreciates productive feedback to drive long‑term shareholder value".
"The board and management are acting with urgency and have taken significant steps to position Lamb Weston for long-term success in a dynamic marketplace."
