Starboard Value LPLetter30 Apr 2026Source: starboardvalue.com

Starboard Value LP Letter to LW Board

Starboard Value is a New York activist hedge fund that Jeff Smith and partners spun out as an independent firm in 2011 (the strategy dates to 2002 at Ramius). It targets undervalued U.S. small- and mid-caps, pushing board overhauls and operational fixes — famously its ~300-page Darden/Olive Garden deck.

Jeff Smith · 2011 · 美国纽约Operational activist

In plain words

This is a letter from activist investor Starboard Value to the board of Lamb Weston, a frozen potato giant. Starboard says the company has strong market position and pricing power, but past management wasted money—SG&A (selling, general & administrative expenses) tripled over ten years while sales barely grew. They want Lamb Weston to hold an Investor Day, publicly commit to a 25% profit margin by 2029, and use zero-based budgeting (starting from scratch on every expense) to cut overhead. For ordinary investors, the key is whether the company actually does this—if yes, it signals direction and could lead to a stock recovery.

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starboard_value has submitted a report to the Lamb Weston board, pointing out that while the company holds an industry-leading position (high barriers to entry, pricing power), management missteps have led to market share loss, declining profitability, and a loss of investor confidence. The report's

~4 min full read · 5 sections

Deep Analysis

Theme and Background

This chapter focuses on Lamb Weston's current predicament: while the company holds an industry-leading position (high barriers to entry, pricing power), strategic missteps by the previous management have led to market share losses, declining profitability, and a collapse in investor confidence. Starboard Value believes the company is at a critical inflection point and must hold an Investor Day to reset the narrative and rebuild trust.

Core Views

Starboard’s core judgment is that Lamb Weston should achieve a 25% adjusted EBITDA margin by FY2029, via a combination of profitable revenue growth and cost reduction.
The counterintuitive point: what the market overlooks is not top-line growth, but runaway SG&A—SG&A has nearly tripled over the past decade while volumes have grown only modestly. Starboard believes the current $250 million cost savings plan is too heavily focused on COGS and calls for zero-based budgeting on SG&A, guiding investor expectations toward margin targets rather than absolute dollar amounts.
The report also stresses that earnings recovery cannot stop at "returning to normal"; the company must establish a long-term earnings growth framework (low-single-digit to mid-single-digit revenue growth, coupled with ~40% incremental adjusted EBITDA margins) to achieve low-double-digit forward earnings growth.

Key Arguments & Data

Argument	Data
Capacity utilization has recovered to normal levels	Low 90% range
Existing cost reduction plan	$250 million (primarily targeting COGS)
Long-term SG&A bloat	Nearly tripled over the past decade, while volumes grew only modestly
Long-term earnings growth framework	Revenue growth low-single-digit / mid-single-digit; incremental adjusted EBITDA margin ~40%
Ultimate target	25% adjusted EBITDA margin by FY2029
Forward earnings growth	Low double digits

Companies/Assets Involved

Lamb Weston Holdings, Inc.: The target company, characterized by Starboard as a "high-quality business," but its valuation premium has now disappeared. Starboard is bullish on its long-term value, provided management executes the reforms.
Starboard Value LP: The activist investor behind the report, holding a majority position, and committed to pushing the board and management to adopt the above action plan.

Investment Implications

Investors should closely monitor whether Lamb Weston holds an Investor Day and publicly commits to the FY2029 25% adjusted EBITDA margin target. The absence of a clear timeline suggests management still lacks direction.
SG&A cost control represents the single largest marginal improvement variable—if zero-based budgeting is adopted, it is expected to unlock substantial earnings upside, especially on the lower income statement.
The company must first achieve a stable pricing environment (capacity utilization above the low 90% range is a precondition), then rely on low-single-digit volume growth to drive earnings. If volume growth falls short or pricing competition intensifies, the target may be missed.
Over the long term, if both the 25% margin and ~40% incremental margin targets are realized, Lamb Weston’s earnings growth should recover to low double digits, and its valuation could shift from its current discount back to a premium.

📝 Full Text

Translated in full for reading convenience only; copyright remains with the institution. Removed immediately upon a rights holder's request.

April 30, 2026

Lamb Weston Holdings, Inc.

599 S. Rivershore Lane

Eagle, Idaho, 83616

Attn: Board of Directors

Dear Members of the Board of Directors:

This past month, the report met with Mike, Jim, and Jan to share its views on the path forward for Lamb Weston Holdings, Inc. (“Lamb Weston” or the “Company”). It is pleased to have the opportunity to continue a constructive dialogue and looks forward to working together to restore Lamb Weston’s profitability and premium valuation. As a follow-up to its meetings, the report is submitting this presentation to the full Board of Directors (the “Board”), outlining its assessment of the Company’s current state and the actions needed to restore earnings growth and credibility.

Lamb Weston is a high-quality business that has historically commanded a premium valuation. Today, however, that premium no longer exists, as missteps by previous management have led to market share loss, earnings deterioration, and impaired investor confidence. Although Lamb Weston has made meaningful progress in improving volume trends over the past year, the core problem remains: earnings are not growing, and investors lack confidence in a path back to normalized profitability and sustainable growth. The Company is at a critical inflection point and must clearly articulate a path forward. The report believes that an Investor Day is the most appropriate platform for the Company to reset its narrative, clearly communicate a path to durable earnings growth, and rebuild investor confidence.

At this Investor Day, the Company must first restate the foundation of its story: Lamb Weston is a high-quality business that is a leader in an attractive industry. The report believes that the core elements that historically drove its premium valuation remain intact, including a concentrated industry structure, high barriers to entry, rational competitive behavior, and structural pricing power. While it is confident in this view, the market is not convinced. The Company must clearly articulate these advantages, not only to restore investor confidence, but also to demonstrate management’s commitment to maintaining the fundamentals that underpin long-term success. As part of this, the Company should also critically evaluate its business portfolio, identify which areas are most strategically important for the future, and tilt capital and resources toward these priorities. On this foundation, the Company must then further outline a clear path to restoring profitability to normal levels and, more importantly, to driving sustainable growth thereafter.

The first step is to restore profitability to normal levels. The report believes that the Company should target a 25% adjusted EBITDA margin by fiscal 2029 through a balanced combination of profitable revenue growth and cost reduction. Thanks to the actions taken by management over the past year, the Company’s capacity utilization has already recovered to slightly above 90% of normal levels, which should help return to a stable and balanced pricing environment. Over time, as the Company continues to advance initiatives in innovation, commercialization, product quality, and supply chain reliability, low-single-digit volume growth will support pricing. The report believes there are significant cost reduction opportunities that can help the Company achieve its fiscal 2029 target of a 25% adjusted EBITDA margin. While the Company has announced a $250 million cost savings plan, this is primarily focused on cost of goods sold. The report sees significant opportunities in SG&A—an expense line that has nearly tripled over the past decade while volumes have grown only modestly. Addressing this imbalance will require a more rigorous zero-based cost management approach. The report believes the Company should frame this opportunity in terms of a clear margin target rather than an absolute dollar savings amount, allowing investors to track tangible progress and assess the earnings improvement potential.

Restoring profitability alone is not enough. The Company must also demonstrate that, after returning profitability to normal levels, it has the ability to deliver sustained long-term earnings growth. Therefore, the report believes that Lamb Weston should clearly articulate a long-term earnings framework consistent with the best-in-class consumer companies. It believes that achieving low- to mid-single-digit revenue growth is feasible and should form the foundation of the Company’s long-term earnings growth algorithm. Combined with an incremental adjusted EBITDA margin of approximately 40%, the report believes that after first achieving a 25% EBITDA margin by fiscal 2029, the Company can deliver long-term earnings growth in the low double digits.

Most importantly, management must clearly communicate these targets and the advantages that come from the Company’s position in the industry. Management needs to win back the trust that has been lost and convince shareholders that the team knows how to steward a high-quality business and create value. Rebuilding shareholder credibility requires a consistent and sustained articulation of the strategy, backed by disciplined execution.

The report believes these actions are both achievable and essential to restoring investor confidence and driving long-term value creation. To ensure focus and accountability, its presentation includes a list of key actions, provided below for reference. This list highlights the critical priorities needed to execute the plan and measure long-term progress.

The report shares these views in order to support the Board and management team in unlocking the Company’s full potential. It looks forward to continued dialogue going forward.

Sincerely,

Jeffrey Smith

Managing Member

Starboard Value LP