By Juveria Tabassum
(Reuters) -Lamb Weston on Thursday named insider Michael Smith to replace its CEO following pressure from activist investor Jana Partners to revamp its top management or sell itself.
Its shares tumbled 17% in premarket trading after the frozen potato snacks maker trimmed its annual profit and sales forecasts.
Smith, currently the operating chief, will take over from Thomas Werner on Jan. 3, the company said. Smith, who joined Lamb Weston in 2007, became the COO in May 2023.
“… (The results)and decision to swap its CEO for another long-standing Lamb Weston executive complicit in its widespread operational and strategic debacles is just the latest stick in the eye,” Jana Partners said in a statement.
Lamb Weston did not immediately respond to a request for comment on Jana Partners’ statement.
The activist investor, which revealed a roughly 5% stake two months ago, on Thursday also reiterated its call for a significant board change or sale. In a letter to Lamb Weston’s board this week, Jana said the company’s management had wasted a chance to sustain and grow shareholder value.
Lamb Weston, which was spun off from packaged foods maker Conagra Brands (NYSE:CAG) in 2016, has a market value of about $11 billion.
Grape Nuts cereal parent Post Holdings (NYSE:POST) was working with investment bankers toward a potential buyout of Lamb Weston, Reuters reported last week.
The company’s decision to hire internally was “surprising” and suggests the board had a detailed succession plan in place for some time, said Arun Sundaram, senior equity analyst at CFRA Research.
Demand for Lamb Weston’s frozen potato sides has weakened from restaurants and retailers in the U.S. as cost-conscious consumers avoid pricier menus and shop for cheaper pantry alternatives.
In October, the company announced job cuts and said it would curtail production to save costs.
Lamb Weston will look to further reduce manufacturing and supply chain costs, as well as operating expenses to improve profitability, outgoing CEO Werner said.
It cut its fiscal 2025 adjusted profit expectations to $3.05 to $3.20 per share from $4.15 to $4.35, and lowered annual net sales target to between $6.35 billion and $6.45 billion.
