Lamb Weston Holdings, Inc. (NYSE:LW) Q1 2021 Earnings Conference Call - Final Transcript
Oct 07, 2020 • 10:00 am ET
has created in our manufacturing operations, as well as controlling costs across the business.
With respect to the operating environment, we are optimistic about the sequential improvement, breadth and pace of recovery in restaurant traffic and fry demand. However, we also remain cautious about the uncertainty of the recovery stability with COVID continuing to be a challenge in the U.S. and some key international markets.
In the U.S., overall restaurant traffic and fry demand steadily improved early in the quarter, then largely stabilized at levels that were below what we saw just before the pandemic. Traffic at large quick service chain restaurants approached prior year levels, especially during the latter half of the quarter, by leveraging drive-through, takeout and delivery formats.
Full-service restaurant traffic also improved as the quarter progressed, then stabilized at about 75% to 80% of prior year levels as governments relaxed restriction for on-premise dining, and restaurants lean more on carry-out delivery and outdoor dining to generate sales.
Traffic and demand at non-commercial customers, which includes lodging and hospitality, healthcare, schools and universities, sports and entertainment and workplace environments remained at less than 50% of prior year levels for the entire quarter, although it did improve modestly as the quarter progressed.
In Retail, demand growth in the quarter was strong. After peaking at more than 50% weekly category volume growth in April and May, weekly volume growth steadily moderated to between 15% and 20% growth by August, as restrictions on restaurants eased.
In Europe, which is served by our Lamb-Weston/Meijer joint venture, fry demand approached prior year levels by the end of the quarter, although it's important to note that demand at this time last year was somewhat soft for us due to a poor potato crop.
Demand improvement in our other key international markets was mixed. In China and Australia, demand steadily improved and approached prior year levels by the end of the quarter. In our other key markets in Asia and Latin America, the improvement in demand was uneven as governments employed differing approaches to contain the spread of the virus.
In short, demand steadily improved in the U.S. and across most of our international markets as summer progressed, then stabilized below pre-pandemic levels.
Along with that steady recovery in demand, our teams leveraged lessons learned when COVID first hit and have adapted our operations to better manage through the current environment. As I noted earlier, since the onset of the pandemic, we've stepped up our employee safety and sanitation protocols at each of our manufacturing, commercial and support locations, which has resulted in earlier detection of COVID among our workforce.
We've also steadily become more efficient in minimizing disruptions to our manufacturing facilities and service levels, including isolating specific areas of our facilities that would be needed to shut down, sanitize and restart after members of our production team are affected by the virus, as well as increasing flexibility to adjust production schedules and run times across the network.
Our supply chain team has