Sara Lee achieves strong 2Q earnings

Sara Lee Corp. announced net income was US$66 million in the second quarter for fiscal 2010, as compared to US$23 million a year-ago.

Diluted earnings per share (EPS) were US$0.53 per diluted share in the second quarter compared to a loss of US$0.02 in the year-ago period. Net sales were US$2.9 billion, unchanged compared to the year-ago period as favourable foreign currency exchange rates were offset by the impact of divestitures, slightly lower unit volumes and lower selling prices.

The North American Retail segment delivered another strong quarter, building on the past two years of business improvements, the company said. Operating segment income increased significantly in the first half of fiscal 2010 despite some unit volume softness at the start of the year.

Over the course of the second quarter, targeted consumer and customer spending led to attractive price points for high-quality products, which drove unit volume growth (excluding commodity and kosher meat exits).

In the second half of the year, volumes are likely to continue to improve, while operating segment income comparisons will be less robust due to strong year-over-year comparisons, increasing commodity costs and further reinvestment to fuel future growth. Operating margins reached a relatively high level in the second quarter of fiscal 2010 and are likely to contract in the short-term as the retail segment reinvests and laps very favourable commodity costs.

Operating segment income was US$122 million in the second quarter, compared to US$73 million in the year-ago period, an increase of 66.6%; adjusted operating segment income rose at a similar pace.

Unit volumes declined 2.7% in the second quarter due to significantly lower volumes for commodity meats, which the company is exiting, and the impact of the exit of the kosher meats business. Excluding these planned exits, unit volumes for the core retail business were up 3.3% in the second quarter.

Net sales of US$745 million were flat in the quarter on a reported and adjusted basis, as favorable sales mix into higher-margin products was offset by the impact of trade spending and the exits of commodity and kosher meats.