March 8, 2026
Lamb Weston Holdings, Inc.
599 S. Rivershore Lane
Eagle, Idaho, 83616
Attention: Mike Smith, Chief Executive Officer
CC: Board of Directors
Dear Mike,
We appreciate the time you and the Lamb Weston team have spent with us over the past year.
As we have discussed, we believe Lamb Weston Holdings, Inc. (“Lamb Weston” or the “Company”) is a high-quality business operating in a structurally attractive industry. Since the leadership transition, we have been encouraged by the significant progress the Company has made in improved pricing discipline, a clear inflection in volumes, and prudent capacity removals, which have begun to bring utilization rates back to normalized levels.
In our view, the opportunity extends beyond the initial recovery. The return of volume growth and more rational capacity behavior are important milestones, but stabilization alone is insufficient to unlock Lamb Weston’s full earnings potential. We believe the Company is now well positioned to enter a new phase of value creation — one characterized not just by normalization of industry conditions, but by structural improvements in margins, capital allocation, and profitability. Specifically, we believe you should expand the announced cost reduction program and conduct a strategic review of select international operations, particularly in the Asia Pacific (“APAC”) region.
The Company has announced a cost reduction program targeting at least $250 million in annual run-rate savings by the end of fiscal 2028. While this is a welcome first step, it is important to recognize that the vast majority of the announced savings are expected to come from cost of goods sold, with a relatively limited impact on selling, general, and administrative (“SG&A”) and overhead expenses. We believe the larger future opportunity lies within SG&A.
As shown in the table below, since its IPO, Lamb Weston’s sales have roughly doubled, yet the Company has generated almost no operating leverage. A substantial portion of the Company’s revenue growth since the IPO has been driven by price rather than volume. As a result, we would have expected Lamb Weston to realize significant operating leverage. But you have not. It is time to catch up.
Lamb Weston’s SG&A burden relative to its revenue base has now exceeded the median for its peer group on an annual basis. This is particularly striking given that Lamb Weston derives a much higher percentage of its revenue from foodservice channels than its peers — a channel that should inherently support a leaner go-to-market model and lower SG&A intensity — while its peers have greater exposure to branded products and retail sales.
We believe Lamb Weston should target total cost reductions of approximately $500 million, representing an additional ~$250 million in savings on top of the already announced program. Achieving this level of savings would bring adjusted SG&A² to approximately 4.5% of net sales, which we view as more appropriate for the Company’s business model and customer mix. Notably, even at this level, Lamb Weston’s SG&A intensity would remain above that of certain foodservice-focused peers, including Tyson Foods and Pilgrim’s Pride.
¹ Indexed sales growth, indexed dollar sales growth, and indexed volume growth include the impact of acquisitions and the 53rd week.
² Adjusted SG&A refers to the Company’s reported non-GAAP SG&A. Adjusted SG&A is adjusted for unrealized derivative losses, foreign currency exchange losses, stock-based compensation, pension settlements, acquisition expenses, and other SG&A-related adjustments as reported by the Company. Starboard has calculated the Company’s adjusted SG&A for fiscal years 2017 through 2020 based on these criteria.
³ Normalized SG&A is defined as reported adjusted SG&A excluding research and development, transportation and handling, and advertising expenses; also excludes stock-based compensation.
⁴ As of fiscal 2023; foodservice revenue calculation includes Global and Foodservice segment revenue for fiscal 2023.
Sincerely,
Ward
Executive Chairman
Starboard Value LP
In our view, a total cost reduction program of $500 million is both achievable and necessary to ensure that margin expansion reflects not just improved industry conditions, but lasting structural discipline. To be clear, we do not want you to simply focus on a cost reduction target in dollar terms, as that can often become opaque in reported results. We want you to announce a target of 4.5% adjusted SG&A as a percentage of revenue and want the Board to focus on and incentivize achieving the 4.5% adjusted SG&A target.
Beyond cost optimization, we believe the Board should conduct a focused strategic review of the Company’s international portfolio, particularly select APAC operations. While international diversification has its merits, certain APAC operations face intensifying competitive pressures that are weighing on overall profitability and adding unnecessary distractions to the turnaround process. We believe a thoughtful evaluation of these operations will optimize capital allocation, improve consolidated margins, and unlock additional value. Importantly, our due diligence indicates that the Company’s APAC operations are only marginally profitable, but local players would have strong interest should the Company seek to divest these operations.
We believe that expanding cost savings with a focus on the SG&A opportunity, combined with thoughtful divestitures of underearning APAC operations, provides a clear path for Lamb Weston to restore EBITDA margins to 25%. Critically, this level of profitability is not dependent on revenue growth, but rather on the Company’s cost discipline and ability to concentrate its portfolio in high-return geographies. We therefore recommend the Board adopt a 25% EBITDA margin target as a medium-term goal, and budget and incentivize accordingly. Again, a margin target rather than a cost reduction target provides transparency and accountability by allowing investors to easily track the Company’s long-term progress through a measurable earnings outcome.
Mike, we greatly appreciate the hard work you have done so far and are excited to build a significant position at this valuation. We believe that on a pro forma basis for 25% EBITDA margins, a 6.7x EV/NTM EBITDA valuation is highly attractive, particularly for a high-quality business in a stable and capacity-constrained industry. While we are pleased with the progress to date, we believe more remains to be accomplished, and we are excited to participate at this valuation. We look forward to working with you and the Board, with a focused commitment to achieving and exceeding this margin target.
Lamb Weston remains a strong business with durable competitive advantages in a concentrated industry. We look forward to constructive engagement as the Company enters its next phase of value creation and stand ready to support actions that strengthen Lamb Weston’s performance and long-term shareholder value.
Sincerely,
Jeffrey Smith
Managing Member
Starboard Value LP
⁵ Source: Bloomberg. Note: Includes Starboard’s estimate of APAC business earnings contribution.