(SQAUK) — Lamb Weston, the leading producer of French fries in North America and a significant supplier to McDonald’s has announced substantial restructuring plans due to decreased consumer demand for fast-food French fries. The company will close its Connell, Washington facility, laying off approximately 375 employees. Lamb Weston is committed to supporting these employees during this transition. Additionally, it will temporarily reduce production lines across North America, impacting about 4% of its global workforce.
Lamb Weston remains resilient despite the recent decrease in consumer spending, which has reduced orders for items like french fries at fast-food establishments. As a result, suppliers such as Lamb Weston are experiencing lower demand for their products. In its most recent earnings report, Lamb Weston reported a 1% decline in net sales and a 46% drop in net income compared to last year.
McDonald’s, Lamb Weston’s largest customer, accounted for 14% of its fiscal 2024 sales. However, McDonald’s also faced challenges, with same-store U.S. sales dropping 0.7% in the last quarter compared to the previous year.
Lamb Weston CEO Tom Werner stated, ‘Restaurant traffic and frozen potato demand, relative to supply, continue to be soft, and we believe it will remain soft through the remainder of fiscal 2025. However, we have made strategic decisions to better manage our factory utilization rates and ease some of the current pressure.’
The restructuring efforts are expected to yield around $55 million in pre-tax cost savings and decrease capital expenditures by $100 million in fiscal 2025.
