Strong results for Sara Lee retail segment
May 6, 2010
by Eric Schroeder
DOWNERS GROVE, ILL. — Operating income for the Sara Lee North American Retail segment surged 60% in the third quarter ended March 27 versus the same period a year earlier. Buoyed by the strong results, Sara Lee Corp. raised earnings guidance for fiscal 2010.
Overall, Sara Lee Corp. sustained a loss of $336 million in the third quarter ended March 27. The loss compared with net income of $165 million, equal to 24c per share on the common stock, during the same quarter of the previous year. The loss reflected a previously announced $518 million charge on the repatriation of overseas earnings. Overall, special items reduced earnings during the quarter by $547 million.
Despite the loss Sara Lee said it expects to earn 60c to 64c per share for the full year, or $1.06 to $1.10 per share on an adjusted basis, up slightly from its guidance in March.
Sales for the quarter were $2,578 million, up narrowly from $2,575 million during the same quarter of the previous year.
For the North American Retail segment, operating income was $101 million in the third quarter, compared to $64 million in the year-ago. Sara Lee estimated adjusted operating segment income up 48%.
“The increase in operating segment income was primarily driven by the strong performance of the segment’s core retail business, favorable supply chain performance, Project Accelerate savings and lower input costs, which were partially offset by higher brand support spending, primarily behind the Jimmy Dean and Hillshire Farm brands,” Sara Lee said.
Sales in the segment were $672 million, up 4% from $646 million in the same quarter of the previous year.
The North American Foodservice segment had operating income of $26 million, up narrowly from $25 million in the same quarter of the previous year. Sales for the quarter were $427 million, down 12% from $487 million.
Sara Lee’s North American Fresh Bakery business was slightly profitable with operating income of $6 million versus $2 million during the third quarter last year. Sales in the segment were $501 million, down 6% from $530 million.
“Our strong third-quarter operating results, highlighted by the performance of our North American Retail and International Beverage businesses, reflect the foundation we’ve built over the past five years and the real momentum we’ve developed,” said Brenda C. Barnes, chairman and chief executive officer. “By improving our sales mix, increasing market share, launching and supporting successful new products worldwide and driving efficiencies through our Project Accelerate initiative, we have the ability to raise our guidance for the third consecutive quarter.
“To further build on the success in our core businesses, we plan to make a significant investment in marketing behind key new product launches in the fourth quarter. As we look to the future, we remain well-positioned for success and expect adjusted operating income from continuing operations to increase in fiscal 2011. I’ve never been more confident in our ability to deliver sustained, high-quality growth and increased shareholder value.”
For the nine months ended March 28, net income at Sara Lee was $319 million, or 46c per share, down from $378 million, or 54c per share, during the same period of the previous year. Sales for the nine months were $8,024 million, down from $8,225 million during the same period of the previous year.