COOKED? McDonald’s Fry Supplier is in Hot Oil Over Alleged Cover Up (-30%)

Idaho’s beloved french fry mogul, Lamb Weston, is in some hot water, or you could say hot oil. 

News recently dropped that the frozen potato powerhouse is facing a class-action lawsuit that’s likely going to send the share price underground.

Lamb Weston, headquartered in Eagle, Idaho, isn't just your run-of-the-mill frozen potato producer. They supply french fries and other potato delights to eateries and retailers worldwide, with McDonald’s being one of its biggest customers. If you’ve ever enjoyed crispy fries with your Big Mac, you might owe a small thank you to this Idaho giant. 

(Source: Lamb Weston)

But the company's golden-crispy reputation is now facing some major heat. The Cleveland Bakers and Teamsters Pension Fund has thrown down the legal gauntlet, accusing Lamb Weston and its ringleader—President and CEO Thomas Werner, and CFO Bernadette Madarieta—of artificially inflating their share price while the company was covering up problems with its new software system.

Back in July 2023, Lamb Weston proudly announced they’d wrapped up designing a fancy new Enterprise Resource Planning (ERP) software system. This tech upgrade was supposed to streamline operations and make everything more efficient. By November, they were all set to switch over their financial and operational systems to this shiny new software. 

But here’s where it gets juicy! While the company downplayed the rollout issues as “usual bumps,” the pension fund claims that Lamb Weston’s execs either knew about—or should have known about—serious problems with the system but kept investors in the dark.

When Lamb Weston finally came clean in their third-quarter earnings statement on April 4, things took a turn for the worse. They admitted to a massive $135 million loss in sales and cut their annual sales projection by $330 million. As a result, the stock price plummeted by 19%, losing $19.59 per share in just one day.

In response, a pension fund from Ohio has filed a class-action lawsuit, representing all investors who bought Lamb Weston’s stock between July 2023 and April 2024. They claim the company's premature launch of a new software system caused the stock prices to be unfairly high, leaving investors with the losses. This lawsuit was filed on June 13 in Idaho, and Lamb Weston hasn't yet responded to these serious allegations.

As the legal battle heats up, Lamb Weston’s stock continues to simmer. From its 52-week high of $113.28 in July 2023, the stock has plunged to around $77 per share—a crispy 30% drop. The market is eagerly awaiting July 24, when the company is expected to release its 2024 fourth-quarter and full-year results. And while this may not have directly affected Mcdonald's share price, the stock is currently down 15% over the last 12 months.

Stock.News has positions in Mcdonalds.