Sara Lee sees 40 percent profit slump

Source: Food and Drink Digital

Date :11/7/2007 11:36:59 AM

Food maker Sara Lee Corp. have announced its fiscal first-quarter profit fell 40 percent due to higher commodity costs and an increase in marketing and advertising spending.

For the quarter ending Sept. 29, net income fell to $200 million, or 28 cents per share. That's down from $333 million, or 44 cents per share in the prior year quarter.

Still, the company managed to beat Wall Street forecasts and its shares rose in pre-market trading.

Analysts polled by Thomson Financial expected earnings per share of 27 cents and revenue of $3.12 billion.

Revenue at the Downers Grove-based company, which is in the midst of a restructuring meant to boost sales, rose 8 percent to $3.13 billion, up from $2.89 billion in the first quarter of 2007.

Sara Lee said its profit was hurt by "a very challenging input cost environment" as prices for commodities such as wheat, poultry, pork and green coffee continued to climb.

Higher marketing and advertising spending, which rose 21 percent, also cut into its profit, the company said.

"Our first fiscal quarter saw important investments in our business," chief executive Brenda Barnes said in a statement. "Marketing and R&D spending increased significantly to develop and support new, innovative products that will be the bedrock for a successful fiscal 2008."

Discontinued operations also added 10 cents per share to the year-ago quarter's results.

Sales in the company's international beverage division jumped 25 percent and the segment's overall operating income grew 30 percent. Household and body care sales rose 12 percent in the quarter, but the division's profit fell more than 27 percent because of the higher spending on marketing and advertising.

Meanwhile, Sara Lee also boosted its 2008 fiscal year guidance for earnings from continuing operations. The company said it expects to earn $1.00 to $1.06 per share -- a five cent-per-share increase -- because of higher-than-expected foreign exchange rates. Sara Lee forecast sales of about $13.2 billion.

Sara Lee shares climbed 37 cents, more than 2 percent, to $16.68 in pre-market trading Wednesday.

November 7 2007