Idaho french-fry giant sued over ‘artificially inflated’ share prices. Stock drops 30%

AMERICAN FALLS (Idaho Statesman) — Lamb Weston Holdings Inc. and two senior executives violated federal securities laws as the frozen-potato giant rolled out a software system, according to a class action lawsuit.

Lamb Weston, based in Eagle, is a leading producer of french fries and other frozen-potato products sold around the world to restaurants and retailers. McDonald’s is a major customer.

The company employs more than 1,000 people in Idaho, according to the Idaho Department of Labor. Besides its headquarters near the intersection of Eagle Road and State Street, Lamb Weston has has two plants in Idaho, in Twin Falls and American Falls, supplied by nearby potato farmers. It also employs more than 3,000 people in the Tri-Cities area of Washington state.

Lamb Weston toiled quietly for decades in the Treasure Valley while building itself into a global frozen-potato-products powerhouse under the ownership of ConAgra, one of the largest food manufacturers in the nation, the Idaho Statesman previously reported. It spun off from ConAgra in 2017, becoming an independent, publicly traded company.

Now the Cleveland Bakers and Teamsters Pension Fund is suing Lamb Weston, its president and CEO, Thomas Werner; and its chief financial officer, Bernadette Madarieta; alleging the company’s stock price was artificially inflated when the company misrepresented problems it was having with its new software system.

Lamb Weston has not issued a formal response to the lawsuit, which seeks a jury trial. A spokesperson could not be reached for comment this week.

LAWSUIT SAYS COMPANY’S ASSURANCES WERE FALSE

The pension fund sued on June 13 in federal district court in Boise. It seeks to represent the pension fund and any other investors who bought shares of Lamb Weston’s common stock between July 2023 and April 2024. The fund is based in Valley View, Ohio, a Cleveland suburb.

According to the lawsuit:

Lamb Weston announced that it had completed the design of a new Enterprise Resource Planning software system on July 25, 2023, and said it would begin implementing it across its network.

The system would interface with important aspects of the business and was meant to drive efficiency through increased automation. The company’s financial and operating systems transitioned to the new software in November 2023.

Lamb Weston indicated it experienced the “usual bumps” as it rolled out the new system, but those comments were “false,” and defendants “knew of, or recklessly disregarded,” problems with the way the new system functioned.

Lamb Weston and executives discussed the software in various filings with the Securities and Exchange Commission, which regulates publicly traded companies, and to analysts and in news releases.

As a result of the “premature launch,” Lamb Weston sales projections for its 2024 fiscal year “lacked a reasonable factual basis.” The result was that “shares of Lamb Weston common stock traded at artificially inflated prices.”

LAMB WESTON DISCLOSED PROBLEMS IN APRIL

Lamb Weston disclosed the challenges with the software system when it released a third-quarter earnings statement on April 4, a date marked by a sharp drop in its share prices that has not yet recovered.

The earnings statement said the company lost $135 million in sales. Lamb Weston lowered its projected sales for the fiscal year by $330 million.

The lawsuit said the disclosures caused Lamb Weston stock, which trades on the New York Stock Exchange under the symbol LW, to fall by $19.59 per share, or over 19%. On Tuesday, Lamb Weston shares were trading at about $79 per share, 30% below their 52-week peak of $113.28, set on July 23, 2023.

The pension fund said it bought Lamb Weston stock at artificially inflated prices.

Lamb Weston is expected to provide a fresh view into its financial position on July 24, when it releases its 2024 fourth-quarter and full-year results.

The pension fund is represented by Boise attorneys Nathan Pittman and Scott McKay of Nevin, Benjamin & McKay LLP, together with several New York firms.

Several unrelated law firms issued news releases based on the case, soliciting possible plaintiffs.