Sara Lee Narrows Loss

Sara Lee (SLE - Analyst Report) reported a fourth-quarter net loss of 2 cents per share, compared to the Zacks Consensus Estimate that called for a profit of 24 cents. However, the quarterly performance was an improvement over the loss of 95 cents per share recorded in the prior-year period.

Quarterly net sales fell 9.8% year over year to $3.2 billion, primarily due to significant declines in four of the six operating segments: International Bakery (-22.8%), International Household and Body Care (-16.6%), North American Foodservice (15.5%) and International Beverage (-13.6%). Organic revenue also dropped 1.3% during the quarter, primarily on lower unit volumes, which was partially offset by pricing and mix.

North American Retail segment is primarily benefiting from the increasing demand for cheap, fast and satisfying meal options that include processed and packaged food. With commodity inflation and global recessionary trends, consumers are increasingly preferring to dine at home and opting for Sara Lee’s packaged meat product lines.

Overall volume slumped 3.1% even though declines in North American Retail, North American Foodservice, International Beverage, International Bakery, International Household and Body Care were partially offset by a volume gain in North American Fresh Bakery.

For fiscal 2009, net sales contracted 2.5% to $12.9 billion, while organic revenue grew 2.7% year over year. Overall volumes for the year fell 2.5% and were partially offset by a 5.2% gain from pricing and mix.

Media advertising and promotion (MAP) spending declined 15.4% in fiscal 2009. Other than a shift from MAP spending to trade spending in the troubled economic environment, unfavorable foreign currency translations and lower media and agency costs also contributed to this decline.

Cash flow from operating activities grew 48.5% to $900 million in fiscal 2009, attributable to efficient working capital management, which was partially offset by higher pension contributions.

Sara Lee is reviewing strategic options, including divestiture, for its International Household and Body care business.

Management expects earnings in the range of $1.03 to $1.09 per share for fiscal 2010. It sees five out of the six business segments posting growth during the period. The North American Foodservice segment is the sole exception as industry wide pressure will continue affecting most foodservice manufacturers and operators.