Sara Lee 2011 profit forecast trails analysts' projections
Sara Lee Corp. returned to fourth-quarter profitability, but investors were wary of the food maker's future as it faces rising commodity prices and said it expects fiscal 2011 profit at the low-end of analyst expectations.
The company's shares fell 2 percent by midday Thursday.
Sara Lee leaders remained confident, saying the company remains on the trajectory put in place by former CEO Brenda Barnes, who stepped down this week to focus on her health following a stroke.
Sara Lee, based in Downers Grove, has been trimming costs and product lines for several years to focus on its core food and beverage businesses.
The moves appeared to pay off as the company reported net income above Wall Street expectations. It earned $187 million, or 28 cents per share, for the quarter that ended July 3. That's up from a loss of $14 million, or 2 cents per share, a year earlier, when a large tax charge cut its profit.
Excluding one-time items, Sara Lee earned 19 cents per share, while analysts surveyed by Thomson Reuters on average forecast 16 cents per share.
Revenue rose 4.2 percent to $2.8 billion, helped by an extra week in the quarter. Analysts anticipated revenue of $2.86 billion.
Sara Lee said lower prices on some items and higher marketing costs dragged on its results, but it made important gains -- increasing market share for key units and selling off noncore lines like body care.
Revenue rose in Sara Lee's biggest units -- North American retail and international beverages. The increase was less pronounced in sales to businesses such as hotels due to weak demand. And Sara Lee's international bakery business struggled due to store-brand competition and weak sales in Spain.
Sara Lee said it is now focused on three core businesses: coffee, frozen bakery and branded meats like Hillshire Farms products and Jimmy Dean sausage.
"We showed substantial progress in developing our capabilities and laying the groundwork for future growth," said Marcel Smits, the company's chief financial officer and acting CEO. "Our ongoing commitment to investing in our best brands and best ideas is paying off."
For the full year, the company earned $506 million or 73 cents per share. That's up from $364 million, or 52 cents per share, the prior year. Excluding one-time items, it earned $1.08 per share for the year. Revenue fell less than 1 percent to $10.79 billion.
Sara Lee said it faces rising commodity prices for meat, coffee and wheat and pricing pressure from grocery stores, which want to offer discounts to appeal to budget-minded shoppers.
For fiscal 2011, Sara Lee expects to earn 93 cents to $1.02 on revenue of $11.2 billion to $11.5 billion. Analysts expect the company to earn 94 cents on revenue of $10.97 billion.
The company also said the search for a successor for Barnes will happen in a timely manner but did not disclose details.
Smits has been handling CEO duties since the 56-year-old Barnes took medical leave in May. Sara Lee, based in Downers Grove, Ill., said its board is looking at both internal and external candidates.
Shares of Sara Lee fell 29 cents, 2 percent, to $14.18 in midday trading.