The change in ERP system at Lamb Weston Holdings has caused the US potato products group to revise its sales and profit forecasts. The company now anticipates annual net sales between $6.54bn and $6.6bn, compared to the initial forecast of $6.8bn to $7bn. This adjustment is a result of the challenges faced during the transition to a new ERP system in the third quarter, which impacted orders. Additionally, soft trends in restaurant traffic and retail markets in North America and other key international markets contributed to the revised forecast.
The company also lowered its predictions for adjusted EBITDA, net income, and adjusted net income. Analyst Robert Moskow from TD Cowen expressed concern over the outlook, describing it as “not good.” As a consequence, shares in Lamb Weston closed 20% lower at the end of trading in New York.
In conjunction with its fiscal third-quarter results, the company shared the revised forecasts. Net sales in the period increased by 16% to $1.46bn, driven by recent M&A activity. However, net sales in North America saw a 12% decline to $947.5m due to the ERP system change and market conditions.
Despite the challenges, Lamb Weston President and CEO Tom Werner remains optimistic, stating that the impact of the ERP transition is now behind them. The company has adjusted its operations and processes to normalize order fulfillment rates.
Looking ahead, Lamb Weston projects adjusted EBITDA of $1.48bn to $1.51bn and anticipates net income in the range of $770m to $790m. These figures represent a downward revision from the previous forecasts. The company’s adjusted net income is also expected to be lower, ranging from $800m to $820m.
Analysts are closely monitoring the situation, as Lamb Weston’s 3Q performance fell short of expectations. Despite management’s reassurances, there are concerns about meeting sales targets in the upcoming quarter. The company’s ability to address the challenges posed by the ERP transition will play a crucial role in its future performance.
