CHICAGO – Sara Lee Corp. (SLE) posted a quarterly loss on Thursday due to costs from divestitures, higher pork and beef costs, and weakness in Europe, and forecast sharply lower profit in the current quarter.
The maker of Sara Lee bread (search), Ball Park franks (search) and Hanes underwear (search) and dozens of other household products also said it plans to cut its debt by at least $1.5 billion over the next two years and spend about $2 billion on share repurchases.
Higher pork and beef costs and continued weakness in Europe also pressured quarterly profits for the company, which is in the middle of a restructuring that will see it shed business that account for about 40 percent of its sales.
In February, Sara Lee said it would spin off its U.S. apparel business and exit other lines to focus on U.S. meat, baked goods, household products and its Senseo coffee (search) operations.
"Sara Lee remains a restructuring play, and uncertainty continues to weigh heavily on the stock," Charles Georgas, analyst at Marquis Investments, said in a research note.
Analysts were waiting for details on how Sara Lee plans to spend the proceeds from divestitures.
The company on Thursday said it plans to maintain its annual dividend of 79 cents a share in fiscal 2006, which began July 3, regardless of the timing of any divestitures. It said it plans to maintain "an attractive" dividend yield compared with other food companies, which could result in a payout ratio higher than its target of 40 percent to 50 percent.
"Maintaining the dividend at 79 cents per share in fiscal year 2006 should appease the value investors," Gorgas said.
The company posted a net loss of $148 million, or 19 cents a share, for the fiscal fourth quarter ended July 2, compared with a profit of $354 million, or 44 cents a share, a year earlier.
Earnings in the quarter were 36 cents a share excluding one-time items like asset write-downs and severance costs related to the planned sale or spinoff of its U.S. and European apparel businesses and and other lines, as well as tax-related items. On that basis, analysts on average forecast 31 cents a share, according to Reuters Estimates.
Sales fell 5.3 percent to $4.75 billion due to divestitures and an extra week in the year-earlier quarter. Unit volume fell 5 percent.
The company forecast first-quarter earnings of 22 cents to 27 cents a share, well below the average forecast of 43 cents among analysts polled by Reuters Estimates. It earned 44 cents a share in the year-earlier first quarter.
Sara Lee forecast fiscal 2006 earnings of $1.24 to $1.34 a share, compared with an average Wall Street forecast of $1.51. It earned 90 cents a share in fiscal 2005, including 55 cents in charges.
The company said fiscal 2006 sales are expected to be unchanged to down slightly. The strengthening of the dollar against the euro is expected to cut into sales.
Forecasts for the first quarter and full year do not include costs related to the restructuring program, but do include expected cost savings of $48 million.
Sara Lee shares were down 80 cents at $19.55 on the New York Stock Exchange.
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