Sara Lee says food prices may rise again
Sara Lee Corp., which has already increased prices on many of its products in the wake of unprecedentedly sharp increases in commodity costs, may well have to increase them even more, the company's chief executive said Wednesday.
"It's pretty likely," Brenda Barnes said when asked about price increases during an interview with Reuters.
She declined to give timing or an amount for the price increases and said pricing would depend on assorted costs.
Downers Grove-based Sara Lee Wednesday also posted a second-quarter profit versus a year-earlier loss, as the weaker dollar, new products and increased spending on marketing helped boost sales.
But its shares edged lower as earnings missed analysts' estimates. The company also stood by its full-year profit forecast instead of raising it, despite saying it now expects the dollar to be even weaker than it thought against the euro. A weaker dollar boosts the dollar value of sales outside the United States.
The company is not reflecting the weaker dollar outlook in its forecast because of concerns about volatile commodities costs and economic weakness, Barnes said in a conference call with analysts.
Sara Lee, like most food companies, has been coping with soaring costs for commodities like wheat. The company has raised prices and improved its operations to mitigate the higher costs.
The maker of Sara Lee baked goods, Jimmy Dean sausage and Hillshire Farm deli meats said profit was $182 million, or 25 cents a share, for its quarter ended Dec. 29, compared with a loss of $62 million, or 8 cents a share, a year earlier.
The year-earlier loss included charges for job cuts and to write down the value of several assets, including Sara Lee's Brazilian coffee business.
"While the miss seems mainly related to the timing of marketing spending (vs. the Street's and our expectations), sentiment may be hurt given Sara Lee did not increase core EPS guidance on forex tailwinds," Pablo Zuanic, analyst at J.P. Morgan Securities, said in a research note.
Sales rose 9.7 percent to $3.5 billion, Sara Lee said. But excluding the benefit of the weak dollar sales were up 4.2 percent. Analysts on average forecast sales of $3.4 billion, according to Reuters Estimates.
Sara Lee media advertising and promotion spending for continuing operations rose 14 percent.
Sara Lee stood by its fiscal year 2008 earnings forecast of 82 cents to 88 cents a share, before one-time items. Analysts on average forecast 84 cents a share, according to Reuters Estimates.