Sara Lee earnings rise, full-year guidance raised

by Keith Nunes
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DOWNERS GROVE, ILL. — Sara Lee Corp. swung from a loss during the second quarter of fiscal 2009 to recording a profit for the same period during fiscal 2010. Net income for the most recent quarter ended Dec. 26, 2009, was $371 million, equal to 53c per share on the common stock. The company lost $17 million during the second quarter of fiscal 2009.

Sales for the quarter were $2,858 million, on par with sales of $2,856 million for the second quarter of fiscal 2009.

“We’re pleased to report a strong second quarter, which was even better than our first quarter, and was highlighted by significant profit growth,” said Brenda C. Barnes, chairman and chief executive officer. “On an adjusted basis, every segment of our continuing business, along with Household and Body Care, delivered income growth in the quarter. During this period we recalibrated pricing, which helped us deliver improved volume trends.”

The positive results prompted Sara Lee to raise its earnings guidance for the year. The company said full-year 2010 adjusted earnings per share are expected to be in the range of $1 to $1.05 per share, compared with 82c in fiscal 2009.

“Based on the strong first-half performance, we have raised guidance and feel very confident in our full year outlook,” Ms. Barnes said. “We also are making significant investments across our business designed to drive growth this year and beyond. We believe that we will have a strong 2010 and are confident that in 2011 we can deliver meaningful additional profit improvement.”

Within Sara Lee’s North American Retail unit, which consists of its processed meats business, operating income increased 67% to $122 million during the quarter, compared with the same period of the previous year. Sales for the quarter were $745 million.

The company said unit volumes declined 2.7% in the second quarter due to significantly lower volumes for commodity meats, which the company is exiting, and the impact of the exit of the kosher meats business. Excluding these planned business exits, unit volumes for the core retail business were up 3.3% in the second quarter, according to the company.

Sara Lee’s North American Fresh Bakery business operating income was $16 million during the quarter, an improvement over the loss the division suffered during the second quarter of fiscal 2009. Net sales decreased 7.5% to $499 million in the second quarter of fiscal 2010, primarily due to lower unit volumes, unfavorable sales mix in private label bread and price decreases following lower input costs and competitive pressures, according to the company. Unit volumes decreased 4.2%, as higher volumes for private label bread could not fully offset volume declines for branded bakery products, the latter as a result of intense price competition in the category.

Operating income within the North American Foodservice business was $45 million during the second quarter of 2010, which compared favorably to the loss of $48 million a year ago. Net sales decreased 14% to $529 million in the second quarter of fiscal 2010, primarily due to the divestiture of the direct-store delivery food service coffee business in fiscal 2009, as well as lower unit volumes and lower pricing.

For the first six months of fiscal 2010 Sara Lee’s net income was $655 million, or 71c per share. The results compared favorably to net income of $213 million, or 21c per share, the company earned during the first half of fiscal 2009. Sales for the period were $5,446 million, a slight decline compared with 2009 when sales were $5,650 million.

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