Sara Lee turnaround plan gains momentum

Food maker Sara Lee Corp. said Wednesday its fourth-quarter profit soared, and executives pointed to the success of a turnaround plan that has helped sales rise in nearly every division.

The better-than-expected results were boosted by growing revenue in the company's bakery, household products and body care businesses.

"I really can say confidently that we are in a very different place than we were a year ago," Chief Executive Brenda Barnes said. "We are well-positioned for growth and are ready to build on the progress achieved last year."

Barnes said Wednesday's strong results capped a turnaround year for the Downers Grove-based company, which is now entering a "growth phase."

Analysts remained cautious about the company's prospects, saying weak sales volumes could weigh down results.

"Their margins are still low," Morningstar analyst Greggory Warren said. "They're still in a rebuilding phase. It's going to take them a few years to get a more secure footing."

For the quarter ending June 30, the maker of frozen cheesecakes, Ball Park hot dogs and Hillshire Farm deli meats said its profit grew to $117 million, or 16 cents per share. That's a more than 14-fold increase from its $8 million profit a year ago.

The company said its fourth-quarter results included 6 cents per share in one-time impairment charges and transformation costs as well as a tax benefit of 5 cents per share. Excluding those items, the company earned 15 cents per share, beating Wall Street forecasts.

Revenue rose 8 percent to $3.20 billion from $2.97 billion in the fourth quarter of 2006. Analysts surveyed by Thomson Financial expected revenue of $3.16 billion and earnings of 13 cents per share.

The company is in the midst of a massive restructuring to turn around its operations after years of lackluster results. As part of the multiyear plan, Sara Lee closed one of its fresh pork and meat facilities in West Point, Miss., in March and spun off its branded apparel business as Hanesbrands Inc. in September.

Barnes said Sara Lee may consider cutting more underperforming products.

Even more challenges could be ahead as Sara Lee continues to fight with Kellogg and General Mills for customers while seeing no immediate relief to rising commodities prices.

For the year, net income fell 9 percent to $504 million, or 68 cents per share, from $555 million, or 72 cents per share in the prior year.

Revenue grew 7 percent to $12.28 billion from $11.46 billion.

Sara Lee shares fell 7 cents to $15.93 Wednesday.