001062 Sara Lee Profits Dip 2 Percent

Chicago - Food and consumer products maker Sara Lee Corp.'s profit fell 2% in its first quarter under new leadership, hurt by weak international bakery sales, higher hog costs and the shaky euro.

The results announced Wednesday were in line with the estimates of Wall Street analysts, who had modest expectations for a company in the midst of streamlining.

Net income for the first three months of the company's 2001 fiscal year was $254 million, or 29 cents a share, down from $258 million, or 28 cents a share, a year earlier.

Per-share earnings matched the consensus of analysts interviewed by First Call/Thomson Financial.

Sales rose 5% to $4.5 billion from $4.27 billion in the same period last year.

Sara Lee stock closed Wednesday up 50 cents to $20.31 on the New York Stock Exchange. Shares are down about 20% over a year ago but have climbed steadily since bottoming out at $13.37 in March.

Steven McMillan, who took over as chairman and chief executive July 1 when longtime chief John Bryan retired, told analysts this month that Sara Lee is "clearly embarked on a period of rather draconian changes."

McMillan kicked off the restructuring in May, before even taking over, by announcing the company would slim down its portfolio of 150-plus brands by selling all or part of several businesses including Coach leather goods and Champion athletic wear.

Sara Lee subsequently agreed to sell PYA/Monarch, its food service distribution business, to Royal Ahold for $1.57 billion.

Expected to make $2.5 billion from the sale and spinoff of such businesses, the Chicago-based company is considered by analysts to be a candidate for a major acquisition.

"We continue to make progress on our remaining divestitures, and we will use proceeds to repurchase stock, reduce debt, make acquisitions and invest to support our strong brands and businesses," McMillan said in a statement.

Sara Lee Foods sustained a 22% drop in operating income for the quarter despite a strong showing by the long-struggling U.S. packaged meats division. The company blamed a weak performance by its bakery operations abroad.

Beverage sales grew by 59% thanks largely to the recent acquisitions of Chock full o'Nuts and Nestle's roast coffee operations in the United States.

But the household products division reported a 7% sales decline, largely reflecting the impact of currency translation from the weak euro.

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