Sara Lee Corp.(SLE) on Thursday reported a 20 percent rise in fourth-quarter profit, driven by strong sales of its fresh breads, but said earnings in the current period would miss analysts' estimates due to higher commodity costs.

Sara Lee, the maker of Hills Bros coffee (search) and Jimmy Dean sausage (search), said it expected commodity costs to be up more than $250 million in fiscal 2005, cutting earnings for the year by 10 cents a share.

Increased spending on marketing and a higher tax rate will also hurt profits for the year, the company said, although it forecast increased operating income in three of its five business segments.

"There's a laundry list of items that we've been given here for the downward guidance," David Kolpak, analyst at Victory Capital Management, said. "I think this definitely comes as a surprise from the street." Victory owns about 5.8 million Sara Lee shares and Kolpak also owns the stock personally.

Profit for the fourth quarter ended July 3 rose to $354 million, or 44 cents a share, from $296 million, or 37 cents a share, a year earlier.

The benefit of the weak dollar, strong sales in businesses like meat and bakery goods, and an extra week in the quarter compared with a year earlier, all boosted results.

Rising prices for commodities like meat and coffee have hit Sara Lee and other packaged goods companies, though some costs have been passed on to consumers in the form of price increases.

In April, Chicago-based Sara Lee forecast earnings of 41 cents to 45 cents for the quarter.

Sales rose 11 percent to $5.1 billion, above the average analyst estimate of $4.93 billion projected by Reuters Estimates.

Meat sales rose 14.4 percent and operating income from the unit rose 2.6 percent, Sara Lee said. Bakery sales rose 8.8 percent and profit from the segment rose 65.5 percent.

Apparel sales rose 7.1 percent. but operating profit fell 4.5 percent as the company saw weakness in Europe. Sara Lee said it recently began a review of options for the European apparel business.

Sara Lee forecast first-quarter profit of 39 cents to 44 cents a share, up from 29 cents a share a year earlier and boosted by 15 cents a share for a contingency fee associated with the sale of a European cut tobacco business in fiscal 1999.

Excluding that gain, the forecast is 24 cents to 29 cents a share, below the average analyst estimate of 32 cents.

Sara Lee forecast full-year fiscal 2005 diluted earnings in a range of $1.61 to $1.71, compared with $1.59 in fiscal 2004. Operating income for Branded Apparel is expected to be flat and income for the Beverage segment is expected to decline, the company said. Operating income for its other three segments is forecast to rise.

Analysts, on average, have forecast full-year earnings of $1.68 a share, including the tobacco gain.

Sara Lee shares were down 26 cents, or 1.2 percent, at $21.14 on the New York Stock Exchange (search).