Sara Lee posts 23 percent higher 1Q profit
Sara Lee Corp., with leaner operations and more profitable product line, reported that its first-quarter profit jumped 23 percent and raised its outlook for the year.
The maker of products such as Jimmy Dean sausages, Hillshire Farm deli meats and its namesake desserts, Sara Lee lagged the rest of the food industry for some time in terms of profitability.
But the company said Thursday that its long-term efforts to cut costs and launch better-selling new products helped its bottom line, along with prices for key ingredients stabilizing below last year's highs.
Sara Lee reported that it earned $284 million, or 41 cents per share, up from $230 million, or 32 cents per share, earned in the same quarter last year. Adjusted for one-time items in both quarters, the company earned 38 cents per share, up from 31 cents per share in the prior year.
Revenue fell 7 percent to $2.59 billion, as it sold fewer products, shed some product lines and saw a negative impact from the stronger dollar.
Sara Lee Chairman and CEO Brenda Barnes said years of cost-cutting and planning for new products work paid off during the first quarter and will continue to.
The company plans to launch several new products soon, it has secured new partnerships such as an exclusive distribution deal for its commercial products with Sysco Corp. and it has plans to sell two business segments.
Sara Lee has slowly been shedding less profitable products and business segments to focus on its core food and beverage products. It expects to sell its personal care products business to Unilever NV for $1.88 billion in 2010. Executives said they are in discussions to sell the company's household products unit but did not provide details.
Analysts expected the company to earn 16 cents per share on $3.16 billion revenue, according to a poll by Thomson Reuters. Analyst expectations typically exclude one-time items.
The higher-than-expected profit and strong outlook sent shares of Sara Lee, which is based in Downers Grove, up 44 cents, or nearly 4 percent, to $11.84 in midday trading Thursday.
But some analysts did not share the enthusiasm.
Stifel, Nicolaus & Company Inc. analyst Christopher Growe told investors the company benefited by comparison with a tremendously weak quarter a year ago and after stripping out several one-time items, produced a less impressive quarter than it appears. However, he said the company is "no doubt headed in the right direction" and maintained a "hold" rating on its shares.
Sara Lee now predicts it will earn $1.12 to $1.18 per share for the year, or 90 cents to 96 cents per share excluding one-time items, on revenue of $12.9 billion to $13.2 billion. In August, it forecast earnings of $1.03 to $1.09 per share.
Analysts expect full-year profit of 89 cents per share and revenue of $13.12 billion.