By Dhirendra Tripathi

Investing.com – Lamb Weston shares (NYSE:) fell more than 4% Thursday as the company cut its guidance for the year and said annual gross profit margins would remain below pre-pandemic’s 25% level.

As a result, the company expects that annual sales growth will be low to mid single digits in comparison to July’s low-to-mid single figures. The muted outlook came in as the company’s first-quarter sales and earnings came in below estimates.

Tom Werner is the President and CEO. He says that there are many issues facing French-fries suppliers and other appetizer providers in the future.

The extreme heat in summer has had a negative impact on potato crop production in the Pacific Northwest. There are also industry-wide challenges like high inflation, transportation and labor costs and disruptions in upstream and downstream supply chains.

Werner predicts that all this will cause higher expenses as the year goes on and put pressure on earnings.

However, Werner said shipments in each of the company’s core restaurant and foodservice sales channels is improving.

The company will be raising prices to offset inflation in commodity commodities, restructuring freight policies and changing production and crewing times to lessen labor volatility. He also stated that the company plans to adopt new methods to retain and attract staff. Werner also stated that it is rationalizing its product line.

Net sales for the first quarter rose 13%, to $984 millions. This was due to increased demand from restaurants and customers of frozen potato products. The main dampeners were lower shipments of private-label products and weaker at-home demand. The price hikes were a positive factor.

As sales increased, net profit dropped by 2/3 to $29.8million. Selling, general and administrative costs also rose.