Sara Lee fresh bakery unit posts solid earnings

by Eric Schroeder
Share This:

DOWNERS GROVE, ILL. — The North American Retail Fresh Bakery unit of Sara Lee sustained an operating loss of $14 million in the second quarter ended Dec. 27, which compared with operating income of $3 million in the same period a year ago. The decline reflected a $30 million charge for a partial withdrawal liability relating to a multi-employer pension plan. Excluding the charge, operating income was $16 million. Net sales in the segment rose 11% to $539 million from $488 million, driven by higher prices and higher unit volumes.

"Unit volumes increased 3.1% in the second quarter, driven by volume growth for both branded and non-branded bakery products, the latter due to consumer trade-down in a tough economy," the company said. "The Sara Lee brand continued to improve its position as the No. 1 fresh bread brand in America with a year-over-year market share increase of 0.3 percentage points to achieve an 8.4% share, according to I.R.I. data, 12 weeks ended Dec. 14, 2008. For the first six months, unit volumes increased 4.9%."

For the six months ended Dec. 27, operating income in North American Fresh Bakery totaled $5 million, down 71% from $17 million in the same period a year ago. Excluding the $30 million pension plan charge, though, operating income for the six months was $35 million. Net sales for the first six months was $1,110 million, up 14% from $975 million.

In its International Bakery business, Sara Lee sustained a loss of $19 million, which compared with operating income of $9 million in the same period a year ago. The most recent quarter included $29 million in charges for exit activities, asset and business dispositions. Excluding those charges, operating income was $10 million. Sales fell 16% to $196 million from $234 million.

"Unit volumes, excluding acquisitions/divestitures, decreased 11.2% in the second quarter, primarily resulting from weak unit volumes in Spain as consumers traded down to private label breads, as well as lower unit volumes in Australia resulting from the planned exit of certain low-margin product lines," Sara Lee said.

For the first six months of fiscal 2009, the company’s International Bakery business suffered a loss of $4 million, which compared with operating income of $22 million in the same period a year ago. Excluding $29 million in charges, operating income was $25 million for the period. Net sales for the first six months totaled $425 million, down 7% from $455 million.

Overall, Sara Lee Corp. sustained a loss of $17 million in the second-quarter, which compared with net income of $182 million, equal to 25c per share on the common stock, in the same period a year ago. Sales for the second quarter were $3,340 million, down from $3,408 million. For the first six months of fiscal 2009, Sara Lee posted income of $213 million, or 30c per share, down from $382 million, or 53c per share. Sales totaled $6,689 million, up from $6,462 million. Sara Lee said income for both the second quarter and first six months of fiscal 2009 was adversely affected by various significant items.

"Despite challenging economic times, our North American businesses continued their strong performance in the second quarter," said Brenda C. Barnes, chairman and chief executive officer. "The retail and fresh bakery businesses drove net sales and adjusted operating segment income growth, effectively managed their costs and pricing and gained market share in most key categories.

"In our international businesses we are adjusting our plans and refocusing our resources to help offset significant economic downturns in many of our key markets, most notably Spain, France and the United Kingdom. I have no doubt that we will weather these difficult times abroad and continue to deliver strong growth over time in these high-margin businesses."

The company said it expects its full-year earnings per share guidance to be in the range of 72c to 79c per share, down from its previous guidance of 99c to $1.06 per share. Sara Lee said the reduction primarily reflects 23c in significant items recognized in the second quarter and weaker results in the international household and body care and international bakery business segments.

Comment on this Article
We welcome your thoughtful comments. Please comply with our Community rules.








The views expressed in the comments section of Baking Business News do not reflect those of Baking Business News or its parent company, Sosland Publishing Co., Kansas City, Mo. Concern regarding a specific comment may be registered with the Editor by clicking the Report Abuse link.