Sara Lee Corp. (SLE) reported strong operating income growth for the second quarter of fiscal 2010, driven by significant improvement in operating segment income across the company, particularly in the North American Retail and International Beverage business segments, and lower corporate expenses.
Net income was $66 million in the second quarter versus $23 million in the year-ago period. EPS was 43 cents compared to a loss of 6 cents during the same period of fiscal 2009. Reported EPS was well above the Zacks Consensus Estimate of 23 cents.
Net sales of $2.9 billion were same as the year-ago period as the favorable foreign currency exchange rate gains were partially offset by the impact of divestitures, slightly lower unit volumes, and lower selling prices. Total Sara Lee unit volumes increased by 1.0% year over year due to innovative new products, successful trade spending and strategic pricing initiatives taken by the company during the quarter.
Revenues by Segment
The North American Retail segment sales were $745 million, flat year over year due to favorable sales mix into higher-margin products which was partially offset by the impact of trade spending and the exit from commodity and kosher meat businesses.
The North American Fresh Bakery segment sales decreased 7.5% to $499 million, primarily due to lower unit volumes, unfavorable sales mix into private label breads and price decreases following lower input costs and competitive pressures.
The North American Foodservice segment sales decreased 13.8% to $529 million, primarily due to the divestiture of the direct store delivery (DSD) foodservice coffee business in fiscal 2009, as well as lower unit volumes and lower pricing.
International Beverage sales increased 14.8% to $884 million, largely due to favorable foreign currency exchange rate gains and higher unit volumes.
The International Bakery segment sales increased 7.1% to $211 million, driven by favorable foreign currency exchange rate movements, partially offset by a 2.8% decline in unit volumes and lower prices.
Balance Sheet
Sara Lee’s operating income was $282 million, compared to an operating loss of $4 million in the prior-year period. The improvement in operating income was due to increase in total operating segment income for all continuing business segments, favorable mark-to-market variances on commodity derivatives and lower corporate costs.
Net cash from operating activities was $285 million in the second quarter, compared to $252 million in the comparable period last year, primarily driven by higher operating income.
Outlook
Full-year 2010 EPS is expected to be in the range of $1.00 to $1.05 per share, compared to $0.82 in fiscal 2009. This represents an increase of $0.09 to $0.10 per share compared to the last guidance provided by the company.
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