020131 Sara Lee Profits Fall 80%January 24, 2002Chicago - Sara Lee Corp. said its second-quarter profits plunged 80% from the previous year amid difficult global market conditions and heavy marketing spending to promote new products. The results fell short of Wall Street's expectations, and the diversified company's stock skidded to a four-month low. Net earnings were $160 million, or 20 cents a share, down from $798 million, or 92 cents a share, in the same quarter of 2001. Adjusted for special items, earnings were 37 cents a share, or 2 cents less than estimated by analysts surveyed by the Thomson Financial/First Call marketing research firm. The company saw overall sales rise 5% to $4.99 billion from the previous year's $4.76 billion. But excluding acquisitions and divestitures, corporate unit volumes declined 1%. While households products registered a 7% sales gain and the newly acquired Earthgrains products performed well, Sara Lee's U.S. meat sales were flat, coffee was lower and sales of intimates and underwear also were down amid a stiff challenge from discount competitors. "It's going to take awhile to turn this around," Prudential's John McMillin said of the company's 1 1/2-year-old makeover. "They've still got some issues, though not all of their own doing. Retail apparel is in a difficult environment, and the coffee business was surprisingly bad" as foodservice sales declined after the Sept. 11 sales, he said. Sara Lee shares fell 91 cents, or 4%, to close at $20.98 on the New York Stock Exchange. Sara Lee, whose products range from Chock full o'Nuts coffee to Hanes underwear, has been undergoing a reshaping since May 2000 to focus on three core areas: food and beverage, intimates and underwear, and household products. The company's media advertising costs rose 9% in the most recent quarter as it promoted new products launched over the past year, including Jimmy Dean pre-cooked sausage, Senseo Crema in-home coffee system, Playtex seamless bra and Ambi-Pur Car air freshener. "Sara Lee continued its program of accelerated investment in its brands, its portfolio and its business infrastructure during the second quarter as our company becomes a more innovative and effective organization," said C. Steven McMillan, the chairman, president and chief executive officer. For the first six months of its fiscal year, earnings were $402 million, or 49 cents a share, down from $1.05 billion, or $1.20 a share. Sales were $9.5 billion, up 3% from $9.21 billion a year earlier.
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