Sara Lee 3Q profit falls, but results still beat Wall Street expectations

MILWAUKEE - Food maker Sara Lee Corp. said Thursday that its fiscal third-quarter profit fell 22 percent as softness in its North American foodservice division and the stronger dollar pushed sales lower. Still, adjusted results beat Wall Street expectations.

The Downers Grove-based maker of Jimmy Dean sausages, Hillshire Farm deli meats and Ball Park franks earned $165 million, or 24 cents per share for the period ended March 28. That's down from $211 million, or 30 cents a share, a year ago.

Excluding a tax adjustment, profit was 25 cents per share. Analysts polled by Thomson Reuters expected net income of 18 cents per share. Analysts' estimates generally exclude one-time items.

Sales slipped nearly 7 percent to $3.03 billion, missing Wall Street's estimate.

Shares rose 28 cents, or 3.1 percent, to $9.24 in morning trading Thursday.

At its North American foodservice unit, which sells supplies to commercial customers like restaurants, sales dropped 6.7 percent to $487 million mostly on the sale of a coffee business and its sauces and dressings operations. Unit volumes also fell as consumers cut back on eating out to save money.

The North American retail business, which sells products to grocery stores, saw net sales rise 3.1 percent to $646 million, largely on price increases and sales mix, or the types of products people buy. Unit volumes fell 6.1 percent, including drops in retail meats and the discontinuation of certain lines. Sara Lee said Ball Park Angus beef franks, Jimmy Dean breakfast entrees and breakfast bowls and Hillshire Farms sliced meats all sold well.

Sara Lee's fresh bakery business in North America, which includes its namesake breads, saw volume rise 2.5 percent, driven by its non-branded bakery products, which are sold by retailers as their own brands. Consumers are trading down to store brands to save money, so while that can hurt the makers of brand-name goods, many of those same companies produce the non-branded products. Net sales in the unit rose 6.4 percent to $530 million, helped by higher prices. But profit fell to $4 million from $14 million on higher costs and unfavorable sales mix.

International businesses were hurt primarily by the stronger dollar. As the U.S. currency gains strength, that can hurt revenue results. Internationally, beverage sales fell 8.8 percent to $736 million, while bakery revenue slid 23 percent to $178 million and sales at the household and body care segment declined 20 percent to $459 million.

Sara Lee said in December that it would cut 700 jobs as it outsources parts of its business. The company, which has about 44,000 employees globally, also says it now expects to exceed the $200 million and $250 million in savings in the next three years that were initially expected.