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Speaker 1: This is the business ow, this is the news talks.

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Speaker 1: He'd be and I welcome to the program. Our senior

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Speaker 1: analyst from Milford Asset Management, Stephanie Bachelor. Good evening.

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Speaker 2: Hey there.

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Speaker 1: Now, you'd think that even in bad times, people would

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Speaker 1: still be eating chips and there'd still be money in chips,

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Speaker 1: but apparently there isn't. With one of the world's largest

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Speaker 1: frozen French fry producers, Lamb Western, in some trouble today.

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Speaker 1: So tell us about that stuff.

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Speaker 2: Yeah, that's right. So Lamb Western, which is the largest

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Speaker 2: French fried producer in the US, they've had a bit

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Speaker 2: of a rocky year. Shares were already down about thirty

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Speaker 2: percent this year before they reported financial results, and there

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Speaker 2: are a lot of investors thinking, you know, this is

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Speaker 2: starting to look pretty attractive and shares are looking pretty cheap.

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Speaker 2: But it's a great lesson in that the cheap can

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Speaker 2: always become cheaper. So shares actually felt further twenty eight

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Speaker 2: percent on the day of the result, which was the

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Speaker 2: biggest one they move in the history of the company.

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Speaker 2: And so shares are now down almost fifty percent this year.

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Speaker 1: The chips are down, they are they are What were

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Speaker 1: the key issues in the result that would call it

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Speaker 1: a severe price reaction.

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Speaker 2: Well, there are a few things going on. They've been

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Speaker 2: losing market share because they did a bit of a

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Speaker 2: software transition and they also had a voluntary product withdrawal.

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Speaker 2: But the main issue is soft restaurant traffic. So people

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Speaker 2: are feeling the pinch from the cost of living crisis,

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Speaker 2: and with restaurants and fast food companies having raised prices

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Speaker 2: so much of the last couple of years, it's now

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Speaker 2: just too expensive to eat out, so people are choosing

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Speaker 2: to eat at home instead, and that obviously means a

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Speaker 2: lot fewer French fries are being bought. At the same time,

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Speaker 2: lamb Wiston has been building new production plants, which isn't

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Speaker 2: great if the demand isn't there, and now they're actually

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Speaker 2: having to cut prices to try to win back some

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Speaker 2: of that market share that they've lost.

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Speaker 1: Are other producers of French fries or chips also seeing

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Speaker 1: the same thing?

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Speaker 2: Yeah, so I mentioned land Western is the largest one

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Speaker 2: in the US. They've got about forty percent market share,

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Speaker 2: and there are two other large players with about fifty

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Speaker 2: percent share between them. Pretty cozy sort of oligopoly. And

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Speaker 2: what lam Western is saying is pretty representative of the

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Speaker 2: overall industry. But they've said they've seen negative restaurant traffic

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Speaker 2: trends before, but they've never seen them this prolonged, and

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Speaker 2: the trends are actually still continuing to decline even over

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Speaker 2: the last months, so it doesn't look like there are

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Speaker 2: any green shoots.

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Speaker 1: And everyone's getting hurt. We reported earlier about the report

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Speaker 1: from McDonald's, which is that's aligning with what LAMB western

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Speaker 1: is saying.

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Speaker 2: Really yeah, So McDonald's one of LAMB Weston's largest customers,

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Speaker 2: and the result was also pretty weak. They actually had

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Speaker 2: their first global sales decline since twenty twenty, and they

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Speaker 2: said the consumer's becoming increasingly pressured. They're really looking for value,

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Speaker 2: particularly in those lower income households, and following a lot

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Speaker 2: of those price increases, McDonald's just no longer seen as

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Speaker 2: a value option, so they're trying to combat this. They've

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Speaker 2: launched a five dollar meal deal in late June, and

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Speaker 2: management seemed pretty upbeat about the early traction from this,

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Speaker 2: but they did also kind of hint that there's going

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Speaker 2: to need to be more value going forward. And despite

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Speaker 2: the negative result of McDonald's shares were actually up about

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Speaker 2: four percent, which shows just how negative investors were going

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Speaker 2: into the results. So it was weak, but it wasn't

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Speaker 2: as terrible as they expected. So you know, sometimes the

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Speaker 2: share price reaction can be quite hard to pick quarter

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Speaker 2: to quarter.

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Speaker 1: Thank you so much, Stephanie, Senior analyst from Milford's Asset

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Speaker 1: Management Sefany Bachelor, if you go have some chips for dinner.

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Speaker 2: Thank you. Thank you for more from Heather Duplessy Allen Drive.

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