What more can be done to potatoes? Plenty, according to executives from Lamb Weston Holdings, Inc. The potato processor reported strong fiscal 2019 results due to innovation that propelled its largest business unit.
For the year ended May 26, Lamb Weston Holdings earned $478.6 million, equal to $3.19 per share on the common stock, and an increase compared to fiscal 2018 when the company earned $416.8 million, equal to $2.83 per share.
Sales for the year rose to $3,756.5 million from $3,423.7 million the year prior.
In the company’s Global business unit sales rose 12% to $1,961.5 million. Unit volume rose 7% driven by sales to strategic customers in the U.S. and abroad, and price/mix increased 5% during the year.
“To accelerate category and customer growth, our global innovation and supply chain teams work closely to develop, produce and sell a higher amount of limited time offering (L.T.O.) products in the U.S. and key markets in Asia,” said Thomas P. Werner, president and chief executive officer, during a conference call with securities analysts July 23. “These L.T.O.s enable customers to expand their menus with exciting new products and increase traffic into their stores. For the year, about a quarter of our Global segment volume growth was driven by increased L.T.O. penetration.”
Reorganization of Lamb Weston’s sales force for its Foodservice business unit, which markets products to small and regional restaurant chain customers in the U.S., drove the business unit’s sales growth during the year. Foodservice segment sales rose 5% to $1,156.1 million and price/mix increased 5%, according to the company.
“Over the long term, we expect our direct sales force will lead to deeper customer relationships and broader customer coverage leading to faster growth and optimized product mix,” Mr. Werner said.
In the company’s Retail business segment, which features such brands as Grown In Idaho and Alexia, sales rose 11% to $498.3 million. Volume increased 7%, primarily driven by distribution gains of Grown In Idaho and other branded products, the company said.
In fiscal 2020, the company is forecasting sales growth in the mid-single digits that will include volume gains as well as a “modestly higher price/mix,” according to the company.
“We believe the overall operating environment will continue to be generally favorable assuming no significant economic shocks or material changes to trade policies,” Mr. Werner said. “In the U.S., we expect restaurant traffic will continue to grow, supported by low unemployment, rising disposable income and additional promotional activity by quick-service restaurants, including more limited-time product offerings. This increased traffic typically translates into solid demand growth for our products.
“We also see continued solid demand growth in Europe and our other key developed markets like Australia, Japan and South Korea, largely fueled by many of the same factors driving U.S. demand.”