7 November 2007 - Hit by another quarter of high commodity costs, Sara Lee Corp. posted a 40% decline in fiscal first-quarter net income but said it won't stop pumping money into marketing and product development.
"We expect to offset virtually all of our commodity-cost [increases] with our price increases," Chief Executive Brenda Barnes said in an interview.
The Downers Grove, Ill., maker of Jimmy Dean sausage, Sara Lee cheesecake and Ball Park hot dogs has been raising the price of its bread in response to high wheat costs. Another price increase in the company's baked goods in September was "fairly well received" by retail customers, Ms. Barnes told analysts.
The company has been boosting its marketing spending to support new products such as Sara Lee Soft & Smooth Honey Wheat Bread, Jimmy Dean D-Lights breakfast sandwiches and several air-freshener and body-care products in the company's international division. The increased spending to promote and develop new products squeezed profits in the quarter, but Ms. Barnes said the innovations will "be the bedrock for a successful fiscal 2008."
Ms. Barnes deflected questions about potential acquisition targets, such as Folgers coffee and Interstate Bakeries Corp., that could fit with Sara Lee's business. Procter & Gamble Co. reportedly is seeking buyers for Folgers, and private-equity firm Yucaipa Cos. and the U.S. arm of Mexican bakery company Grupo Bimbo have offered to buy Wonder bread maker Interstate Bakeries. Ms. Barnes declined to comment on those assets but told analysts, "Rest assured, we're always looking at things."
Ms. Barnes announced changes in reporting structure that she said should help provide focus and drive efficiency. For example, all three of the North American business units -- meat, bakery and food service -- will now report to one person.
Sara Lee raised its full-year outlook for earnings from continuing operations to $1 to $1.06 a share, from its August outlook of 95 cents to $1.01.
Shares of Sara Lee fell 47 cents, or 2.9%, to $15.84 in 4 p.m. composite trading on the New York Stock Exchange.