Activist investor starboard pushes lamb weston to boost operations, cut costs

Starboard pushes Lamb Weston to double cost cuts, review business after building stake

Starboard Value Urges Strategic Changes at Lamb Weston

Activist Investor Reveals Stake and Calls for Increased Cost-Cutting

March 9 (Reuters) - Starboard Value on Monday urged Lamb Weston to double its cost-cutting targets and review its international operations, as the activist investor revealed a stake in the frozen potato supplier.

Background: Previous Activist Involvement and Board Changes

The company, which supplies potato sides and appetizers to fast-food chains such as McDonald's and Yum Brands, had settled with activist stakeholder Jana Partners for board representation last year, avoiding a bruising proxy fight.

Starboard's Recommendations for Cost Reductions and Operational Review

Doubling Cost-Cutting Targets

Lamb Weston should aim for about $500 million in total cost reductions, Starboard said, up from the company's current plan to cut at least $250 million by the end of 2028.

Review of International Operations

The activist also called for a review of the company's Asia Pacific operations, citing rising competition and concerns that the business may be diverting focus from a broader turnaround.

Details on Starboard's Stake

The size of Starboard's stake was not immediately clear.

Starboard has been an investor "for a while" and recently increased its position, the Wall Street Journal reported on Sunday.

Financial Targets and Margin Goals

Setting New Financial Benchmarks

In its letter, the activist investor also urged the Lamb Weston board to set targets for adjusted selling, general and administrative expenses at 4.5% of revenue and a 25% core profit margin as a medium-term goal.

Rationale for Margin Targets

"A margin target, rather than a cost-reduction target, provides greater transparency and accountability by allowing investors to easily track the company's progress over time," Jeffrey Smith, managing member at Starboard, said.

Company Response and Recent Developments

Lamb Weston's Statement

Lamb Weston "values ongoing and constructive dialogue with its shareholders and appreciates productive feedback to drive long-term shareholder value", the company said in an emailed statement.

Financial Performance and Leadership Changes

Maintaining Forecasts Amid Market Pressures

The company in December kept its annual forecasts intact for a second time despite an upbeat quarter, against the backdrop of demand and commodity cost pressures.

Executive Appointments

Last month, Lamb Weston named James Gray as chief financial officer and beverage-industry veteran Jan Craps to a newly created executive chair role.

It had appointed insider Michael Smith as CEO last year following pressure from Jana Partners.

Stock Performance

Shares of the company were down 1.5% in early trading amid broader market weakness. They had declined around 37% in 2025.

(Reporting by Neil J Kanatt and Koyena Das in Bengaluru; Editing by Krishna Chandra Eluri and Sriraj Kalluvila)