Sara Lee baking unit sustains small quarterly loss
November 9, 2010
by Josh Sosland
DOWNERS GROVE, ILL. — The North American Fresh Bakery Division of Sara Lee Corp. sustained an operating loss of $1 million in the first quarter ended Oct. 2, compared with $14 million in operating income during the same period in 2009. Net sales were $516 million, down 4.6% from $541 million a year earlier.
Financial results were issued coincident with the announcement that Grupo Bimbo would be acquiring the North American baking business from Sara Lee.
Sara Lee said lower prices and decreased unit volumes accounted for the depressed quarterly results. Improved sales mix was a mitigating factor.
Overall, unit volume was down 2.4% in the first quarter versus the year before, but Sara Lee said the majority of the volume decline was attributed to the timing of the July 4 holiday relative to the company’s fiscal year end.
“The ‘sell in’ week for the holiday fell in the fourth quarter of fiscal 2010,” the company said.
Sara Lee branded fresh bakery unit volume was up in the quarter.
“Branded volumes increased following price recalibration actions in the second half of fiscal 2010 and were helped by the successful reformulation of certain top-selling Sara Lee brand breads,” the company said. “The segment also improved its total braded fresh bakery share by 0.7 points to 9.6%.”
While volume of private label was down in the first quarter, Sara Lee said an improvement was expected in the months ahead “on the back of new business bids won.”
Elaborating on the small quarterly loss, Sara Lee said the impact of lower prices and volumes was partly offset by lower commodity costs and decreased operating expenses.
Overall, Sara Lee net income in the first quarter was $192 million, equal to 29c per share on the common stock, down 32% from $287 million, or 41c per share, in the first quarter last year.
Net sales were $2,575 million, down from $2,588 million.
“As anticipated, our first-quarter operating income came in below the prior-year period,” said interim chief executive officer Marcel Smits. “We see our price increases coming through across the board, but in the first quarter they still lagged sharply increasing commodity prices. We are confident that the additional price increases we have announced will mitigate commodity inflation for the full year. We also continue to execute against our capital plans with further share repurchases and the successful refinancing of $800 million of debt at an attractive rate in the first quarter.
“We are confident that the full year will reflect an acceleration of growth in our top-line and a further bottom-line improvement in our business, building on the past several strong years.”
Sara Lee offered an update on its board’s process of selecting a new chief executive officer, to replace Brenda C. Barnes who stepped down for health reasons in August. The company said both internal and external candidates for the c.e.o. position were under consideration. The company noted that until a permanent c.e.o. is named, Mr. Smits was acting as interim c.e.o. and Mark Garvey was serving as interim chief financial officer. James S. Crown, an independent director, is chairman of the board.