UPDATE:Sara Lee Narrows 4Q Loss;Gives Downbeat View For Year
August 12 2009 - 11:46AM
Dow Jones News
Sara Lee Corp. (SLE) posted a narrower fiscal fourth-quarter
loss, but the food maker's sales dropped as some of the company's
European operations continued to face pressure from private-label
competitors.
Excluding write-downs and other items, the company's earnings
for the quarter exceeded Wall Street's forecast. But Sara Lee gave
a downbeat forecast for its new year, projecting earnings below
expectations. The stock was recently down 8% to 9.95.
The packaged food company said it is facing price competition in
its North American bakery business as some competitors push to gain
share by cutting prices sharply. Sara Lee said it won't attempt to
drive volume through unjustified price cuts in any of its
categories. The company's bakery business sells fresh and frozen
baked goods like breads and cheesecakes.
For the coming year, the company projected earnings excluding
items of 84 cents to 90 cents a share on net sales of $12.9 billion
to $13.2 billion. Analysts polled by Thomson Reuters were expecting
earnings of 92 cents a share and on revenue of $13.33 billion.
The income forecast is only slightly higher than the latest
year's profit of 82 cents a share, with projected declines at Sara
Lee's North American foodservice unit nearly offsetting expected
earnings growth at the rest of the company.
The packaged-food industry has seen benefits as consumers cut
back on eating at restaurants and spend more on groceries. But the
food companies also face greater competition from cheaper
store-brand items.
Sara Lee's loss for the period ended June 27 narrowed to $14
million, or 2 cents a share, from $672 million, or 95 cents a
share. The latest quarter included a $207 million write-down on its
Spanish bakery business while the prior year had $850 million in
write-downs. Excluding items such as the write-downs, earnings were
flat at 29 cents a share.
Foreign-exchange fluctuations also dragged down sales in the
quarter. Net sales fell to $3.16 billion from $3.51 billion. The
drop was 1.3%, excluding divestitures and foreign-exchange
impacts.
Analysts polled by Thomson Reuters were expecting the maker of
its namesake cheesecake, Jimmy Dean sausages and Hillshire Farm's
meats to report earnings, excluding items, of 24 cents a share on
revenue of $3.27 billion.
Gross margin rose to 62% from 61.5% as volume fell 1.9% in the
North American retail business.
Sales in its North American fresh-bakery and retail segments
rose 8.5% and 5.9%. Sales fell in all other segments.
In April, Sara Lee said it was exploring options for its
international household and body care business, including a
possible sale, after receiving interest in the division. Wednesday,
it said it was continuing to consider "all alternatives" for the
segment, including a divestiture. Sara Lee said Wednesday that it
would provide an update on that move in the "near future." The
company has been in restructuring mode since 2005, spinning off or
selling slower-growth businesses in the process.
-By Anjali Cordeiro, Dow Jones Newswires; 212-416-2200;
anjali.cordeiro@dowjones.com
(Mike Barris contributed to this report.)