Sara Lee net rises 15% in first quarter

by FoodBusinessNews.net Staff
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DOWNERS GROVE, ILL. — Sara Lee Corp. posted higher income and sales during the first quarter buoyed by price increases, favorable foreign currency exchange rates and strong unit volumes in the North American retail and fresh bakery segments. Despite the gain, the company lowered its full-year outlook, an announcement that contributed to a decline of more than 14% in the company’s share price in late afternoon trading on Nov. 5.

For the quarter ended Sept. 27, net income at Sara Lee was $230 million, equal to 33c per share on the common stock, up 15% from $200 million, or 28c per share, during the same quarter of the previous year.

Net sales for the quarter were $3,349 million, up 10% from $3,054 million during the same quarter of the previous year.

"During the first quarter, we saw strong performance in our North American business segments, particularly in North American retail and fresh bakery, building on a strong fourth quarter and driven by outstanding execution over the summer," said Brenda C. Barnes, chairman and chief executive officer. "Both businesses achieved increases in unit volumes, net sales and operating income, and experienced market share gains across virtually every major brand in each major category. Our North American foodservice business did a terrific job increasing sales and profits in a very challenging market."

The North American Retail segment had an operating income of $57 million, up significantly from $19 million during the same quarter of the previous year. Net sales for the quarter were $680 million, up 11% from $615 million during the same quarter of the previous year.

The North American Fresh Bakery segment had an operating income of $19 million, up 36% from $14 million during the same quarter of the previous year. Net sales were $571 million, up 17% from $487 million during the same quarter of the previous year.

In the North American Foodservice segment, operating income was $30 million, up 38% from $21 million during the same quarter of the previous year. Net sales were $537 million, up 4% from $516 million during the same quarter of the previous year.

Despite the strong results in North America, Sara Lee said it did not fair as well in its international operations, where weak volumes in the company’s international bakery segment were particularly troublesome.

"We made a number of strategic investments in our international businesses in the quarter aimed at spurring growth both this year and over the long-term," Ms. Barnes said. "At the same time though, some of our largest European markets are experiencing challenging economic conditions that have offset strength in other markets. However, I continue to be confident that Sara Lee will deliver a strong year based on the early success in North America coupled with anticipated contributions from our investments in the higher-margin international businesses."

The company noted that it expects its full-year earnings per share guidance to be in the range of 99c to $1.06 per share. The guidance includes 21c per share of contingent proceeds received during the first quarter of fiscal 2009 from the sale of Sara Lee’s tobacco business in fiscal 1999, and a 1c per share gain from significant items realized in the first quarter of fiscal 2009.

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