A federal securities lawsuit claims potato processor Lamb Weston deceived shareholders about problems with an inventory and sales system overhaul that decreased revenues by millions of dollars.

A pension fund for union workers has filed a complaint against the publicly traded company based in Eagle, Idaho, alleging its “misrepresentations and omissions” resulted in a steep stock price plunge.

The lawsuit seeks class action status, which would allow other shareholders to join in the case and seek compensation from Lamb Weston.

The complaint alleges Lamb Weston engaged in misconduct related to “enterprise resource planning,” or ERP, software meant to integrate its inventory management with customer orders and automate invoicing, shipping and other operations.

The plaintiff, Cleveland Bakers and Teamsters Pension Fund, claims the potato processor and its top executives concealed and minimized the system’s deficiencies, portraying them as minor “bumps” that wouldn’t seriously hurt revenues.

“In truth, defendants knew of, or recklessly disregarded, significant problems in the functionality of the new ERP system that would impact its successful implementation,” the complaint said. “Notwithstanding those problems, Lamb Weston proceeded with the implementation, knowing that a premature launch would negatively impact its business and operations.”

Lamb Weston did not respond to requests for comment on the lawsuit. In a regulatory filing, the company said changes to the ERP system were more financially damaging than anticipated but they’re expected to be temporary.

“While we are disappointed with the magnitude of the ERP transition’s effect on the quarter, after implementing systems adjustments and modifying processes, we believe the impact is behind us as our order fulfillment rates have normalized,” the regulatory filing said.

According to the pension fund’s complaint, the company unveiled its plans for the ERP system in July 2023, touting its potential to boost efficiency by replacing Lamb Weston’s “antiquated operating and financial systems,” which had resulted from “decades of underspending” on information technology.

At the time, Lamb Weston estimated its 2024 fiscal year revenues would range between $6.7 billion and $6.9 billion, with net profits between $725 million and $790 million, the lawsuit said.

Through the rest of 2023 and early 2024, the company repeatedly told investors the ERP project wouldn’t adversely affect its financial targets, which were revised upward to $7 billion in revenues and $870 million in profit, the complaint said.

The plaintiff claims these statements were “materially false and misleading” because Lamb Weston executives “lacked a reasonable factual basis” for lauding the ERP changes, which they approved despite knowing the system was “not ready to go live.”

“The truth emerged on April 4, 2024, when Lamb Weston reported financial results for its fiscal third quarter 2024, and disclosed significant problems with its transition to the new ERP system,” the complaint said.

Transitioning to the new ERP system “reduced visibility” of its inventory of frozen potato products ready for distribution, delaying shipments and hindering its ability to fulfill orders, the complaint said. These problems eventually reduced Lamb Weston’s revenues by $135 million and profits by $72 million, partly due to a 17% decline in North American sales volumes.

Within a day of these disclosures, the company’s stock plunged more than 19%, from roughly $101 per share to $81.50 per share, resulting in “economic loss” by the pension fund and other investors, the complaint said. “Defendants engaged in this misconduct to conceal Lamb Weston’s true condition from the investing public and to support the artificially inflated prices of Lamb Weston common stock.”

The lawsuit seeks compensation for damages “in an amount to be proven at trial” as well as litigation expenses.

Originally a subsidiary of the Conagra agribusiness conglomerate, Lamb Weston was spun off as an independent publicly traded company in 2016. The company has six production facilities in Washington, two in Oregon and two in Idaho, as well as 12 in other states and countries. The company’s stock was trading at about $85.21 per share as of noon June 24.