- Edward and Ludmila Smolyansky, owning 27% of Lifeway Foods (LWAY, Financial), aim to overhaul the Board due to poor governance and performance issues.
- Despite a 44% EPS increase, key performance metrics reveal operational challenges, including a 55% decline in operating income.
- Proposed changes include nominating independent directors to improve strategic direction and restore financial discipline.
Edward and Ludmila Smolyansky have filed a revised preliminary consent statement seeking to remove and replace Lifeway Foods' (LWAY) directors, raising concerns about the company's governance and first-quarter 2025 performance. Although Lifeway Foods reported a significant 44% year-over-year increase in earnings per share (EPS), this growth was attributed to a one-time $3.4 million investment gain, not from improvements in operations.
In reality, the company faced notable operational setbacks. Key performance figures indicate a 55% decline in operating income and a significant drop in operating margin from 7.9% to 3.4%. Additionally, sales growth was weak, at just 3.3% year-over-year, while expenses rose sharply. These developments have compelled the Smolyanskys to advocate for a new slate of independent directors to potentially restore operational discipline and explore strategic alternatives.
The Smolyanskys further criticized the Board’s management, particularly concerning the handling of Danone's offer, the failed acquisition of Glen Oaks, and the controversial $8.5 million compensation for CEO/Chair Julie Smolyansky. They argue that the combined role of CEO and Chair held by Julie Smolyansky results in poor governance due to a lack of independent oversight. They contend that effective change requires a restructured Board to better align with shareholder priorities and possibly re-engage with Danone to create shareholder value.
