Processed and packaged foods company Sara Lee Corp. (SLE) Wednesday reported a narrower loss for the fourth quarter, helped by lower expenses and impairment charges, despite a fall in sales. For the full year, the company reported a profit, compared to a loss last year, although sales dropped. Further, Sara Lee issued guidance for fiscal 2010.
Sara Lee reported fourth-quarter net loss of $14 million or $0.02 per share, compared to a net loss of $672 million or $0.95 per share last year. Loss from continuing operations was $14 million or $0.02 per share, narrower than $657 million or $0.93 per share in the prior year quarter.
In the latest period, the company incurred non-cash, pre-tax impairment charges of $207 million associated with goodwill balances and other long-lived assets at the Spanish bakery business, as well as $61 million of other charges for significant items.
On average, 12 analysts polled by Thomson Reuters expected the company to report earnings of $0.24 per share. Analysts' estimates typically exclude special items.
Net sales for the quarter declined to $3.164 billion from $3.507 billion in the year ago quarter. Adjusted net sales decreased to $3.139 billion from $3.181 billion in the previous year period. Adjusted net sales exclude acquisitions/divestitures and present fiscal 2008 net sales at fiscal 2009 foreign currency exchange rates, the company noted. Analysts estimated revenues of $3.27 billion.
Sara Lee has operations organized under six business segments: North American Retail Meats, North American Retail Bakery, Foodservice, International Beverage, International Bakery, and Household and Body Care. Its major brands include Ambi Pur, Ball Park, Douwe Egberts, Hillshire Farm, Jimmy Dean, Kiwi, Sanex, Senseo and Sara Lee.
For the fourth quarter, North American Retail reported net sales of $695 million, up from $683 million in the previous year, primarily driven by favorable sales mix at retail and pricing actions, which were slightly offset by lower non-retail commodity meat sales. North American Fresh Bakery had net sales of $560 million, higher than $554 million in the previous year, driven by higher selling prices and unit volume growth.
At North American Foodservice, net sales slipped to $454 million from $537 million. The company attributed the decline primarily to the divestiture of the DSD foodservice coffee and the sauces and dressings businesses earlier in the year, as well as lower unit volumes in the weak foodservice market.
At International Beverage, quarterly net sales dropped to $761 million from $881 million, mainly due to unfavorable foreign currency exchange rates and lower unit volumes. These factors were partially offset by the impact of the Café Moka acquisition in Brazil earlier this year.
Due mainly to unfavorable foreign currency exchange rates and lower unit volumes in the Spanish fresh bakery business, fourth-quarter net sales at International Bakery segment slipped to $187 million from $243 million in the prior year.
International Household and Body Care generated $514 million in net sales for the just concluded quarter, a decline from $617 million reported last year, owing to unfavorable foreign currency exchange rates and lower unit volumes, partially offset by pricing.
The company noted that the increase in net sales made at the North American fresh bakery and retail segments, were more than offset by the impact of unfavorable foreign currency exchange rates, most notably the euro, and divestitures made during the year.
In a research note on Packaged Foods, Credit Suisse noted late last month that Sara Lee's sales growth decelerated during the last 4-week period. Bread and baked goods were down 4.9% and 7.1%, respectively, it said, while sales of sausages and frankfurters were up 10.4% and 5.5%, respectively. Sara Lee lost 0.3 points in fresh bread share and gained 1.3 points in sausages.
Sara Lee today reported fourth quarter operating income of $65 million, compared to an operating loss of $506 million for the year-ago period. Adjusted operating income was $331 million, down 6.2% from last year.
Total expenses for the quarter dropped to $3.130 billion from $4.036 billion in the previous year, primarily due to lower impairment charges in the just concluded period.
For the full year, net income was $364 million or $0.52 per share, in comparison with a net loss of $79 million or $0.11 per share in the prior year, due primarily to lower expenses. In 2009, results included several items that had a net negative impact of $0.53 per share, while significant items in fiscal 2008 had a net negative impact of $1.12 per share. Adjusted earnings per share were $0.84 in fiscal 2009, compared to $0.82 per share in fiscal 2008. Full year net sales slipped to $12.881 billion from $13.212 billion in the prior year. For the full year, analysts estimated earnings to be $0.82 per share on revenues of $12.98 billion.
Commenting on the results, Brenda Barnes, chairman and chief executive officer of Sara Lee, said, "Our 2009 results reflect the significant progress we have made in transforming Sara Lee and focusing the company on core businesses with large and growing brands in important categories. We've dramatically improved efficiencies and productivity across the board, while fostering a culture of innovation and collaboration.''
In May, the maker of Hillshire Farm deli meats, Jimmy Dean sausages and Sara Lee breads, reported a 21.8% fall in profit for the third quarter, mainly on the absence of prior year's one-time benefit. Reduced sales in the North American foodservice and international business segments, reflecting foreign currency headwinds and unit volume softness, also impacted quarterly results. Third-quarter net income fell to $165 million or $0.24 per share from $211 million or $0.30 per share in the year-ago period, while net sales fell 6.6% to $3.03 billion from last year's $3.24 billion.
Among others in the industry, Kraft Foods Inc. (KFT) said last week that its second quarter profit increased by 11%, driven by solid performance across all geographies, improved product mix and lower costs due to the completion of the 2004-2008 restructuring program. Net earnings attributable to the company grew to $827 million from $745 million in the prior year quarter. Earnings per share rose 14.3% to $0.56 from $0.49 in the previous year quarter. Second quarter net revenues declined 5.9% to $10.2 billion from $10.8 billion in the same quarter last year.
Meat products producer Tyson Foods, Inc. (TSN) last Monday reported that profit for the third quarter soared from last year, despite a quarterly sales decline of 2.8%. The company reported net income of $134 million or $0.35 per share, sharply higher than $9 million or $0.03 per share in the prior-year quarter. Sales for the quarter declined 2.8% to $6.66 billion from $6.85 billion in the same quarter last year.
Looking ahead, Sara Lee expects fiscal 2010 earnings per share from continuing operations to be in the range of $1.03-$1.09 per share, which includes $0.19 per share of contingent sale proceeds received in the first quarter of fiscal 2010 from the sale of its tobacco business in fiscal 1999. Adjusted earnings per share is expected in the range of $0.84 - $0.90 per share. Net sales for the year are expected in the range of $12.9 billion - $13.2 billion. Analysts expect 2010 earnings in the range of $0.82-$1.08 per share. Revenues are estimated to range between $13.11 billion and $13.58 billion.
Additionally, Sara Lee expects five out of six business segments to show an increase in adjusted operating segment income in fiscal 2010. The only exception to this is North American foodservice due to the continuing industry-wide pressure affecting most foodservice manufacturers and operators.
SLE is currently trading at $9.96, down $0.84 or 8.15% on a volume of 9.27 million shares. For the past year, the stock traded in the range of $6.80-$14.95. Credit Suisse has a "Neutral" rating and $11 price target on the shares of Sara Lee.
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