Milling & Baking News - August 17, 2004 - 11

F I N A N C I A L

R E S U L T S

Sara Lee Bakery income soars
behind strong branded growth

ever, there are several other factors
to consider. Regional brands continue
to decline as a result of weakness in
the white bread category and reduced
CHICAGO - Operating income of ucts, such as Sara Lee Signature Selec- promotional activity for this segment
Sara Lee Bakery Group in its ﬁscal tions Creme Pies and Sara Lee Cobbler as well as our elimination of certain
fourth quarter ended July 3 rose 66% Anytime, helped increase unit volumes brands and s.k.u.s as we seek to refrom last year, primarily driven by of U.S. frozen retail
duce complexity in our
strong growth for Sara Lee branded baked foods during the
business. As the white
products, additional cost savings re- quarter, the company
bread category has
sulting from restructuring actions and said.
weakened, we have
the impact of a 53rd week. Operating
In the full ﬁscal 2004,
been able to mitigate
proﬁt in the quarter reached $35 mil- Sara Lee Bakery operatand even out some of
lion, compared with $21 million last ing income rose 59% to
the decline by using
year. Sales increased 8.8% to $898 $156 million, up from
the Sara Lee brand to
million.
$98 million in ﬁscal
build our position in
"Strong sales for Sara Lee fresh 2003. Sales increased
growing
categories
breads in the United States, increased 4.2% to $3.42 billion.
like wheat bread, and
sales for Bimbo crustless bread in
In an Aug. 5 conference call, Aaron multi-grain products.
Spain, higher refrigerated dough sales Hoffman, executive director of in"We have also continued to segment
in Europe, favorable currency trends vestor relations, Sara Lee Corp., ad- our business based on proﬁtability. As
and the 53rd week more than offset dressed activity within the Sara Lee we uncover unproﬁtable or very low
volume softness in the U.S. regional Bakery Group.
return business, particularly private
fresh bread business and the compa"The business model for Sara Lee label and restaurant/institutional
ny's planned exit of some unprofitable Bakery is definitely changing as we segments, we are pricing more approprivate label and restaurant and insti- close plants, rationalize brands and priately to ensure an acceptable return
tutional business," Sara Lee said.
s.k.u.s (stock-keeping units) and re- or we are exiting the business. For
Sara Lee-brand bread sales grew duce our work flow," Mr. Hoffman instance, in the fourth quarter we anmore than 50% for the quarter com- said. "I'm pleased to announce that nounced the closure of several bakeries
pared with the same year-ago period, we enjoyed an incremental $6 mil- and the sale of one in Texas." (See Millto nearly $125 million, driven by the lion in savings in the quarter and an ing & Baking News of July 6, Page 12.)
success of Sara Lee fresh bakery bread, incremental $31 million in savings for
"As we look ahead, unit volume and
buns and rolls introduced
dollar sales should increase
during the past 20 months.
as we continue to exit unUnit volume change vs. 2003
In its fresh bakery bread
profitable and low-margin
(Period ended July 3)
Fourth quarter 2004 Fiscal year 2004
unit, Sara Lee said its 13 varibusiness," he said. "We are
Global unit volume
5%
-1%
ety line continued to grow at a
clearly focused on ensurWorldwide fresh baked goods
4%
-2%
healthy rate. "The most recenting that all segments of this
Worldwide refrigerated dough
9%
0%
ly launched Sara Lee bread
business are profitable and
Worldwide frozen baked goods
6%
4%
varieties,
health-oriented
we'll either price approprifresh breads such as Delightful Wheat, the full year from our restructuring ately or exit business to accomplish
Delightful White and Heart Healthy program. While commodity costs like this goal. Our recent actions in Texas
MultiGrain bread, continued their ad- fuel, soybean oil and gluten are at fair- are strong examples of putting this
vance during the fourth quarter," the ly high levels, we have seen price in- strategy to work. These actions will
company said. "Building on this suc- creases in our restaurant/institutional hurt non-branded, and, therefore,
cess, new bagel varieties were launched and private label businesses to some- total sales and volumes in fiscal 2005.
at the beginning of ﬁscal 2005."
what offset the higher costs."
The payoff of course, is a much better
While overall fresh bakery sales deMr. Hoffman added that the new sales mix, improving profitability in
clined in the second quarter, the growth products launched this year have pro- dollars and in returns.
of the Sara Lee brand "continues to en- vided "a substantial lift" to the Sara
"So for ﬁscal 2005, operating segment
hance the product mix of the U.S. fresh Lee brand by giving a larger in-store income should increase mid- to highbusiness," the company said.
facing and broader product offering single digits as we continue to make
Sara Lee noted that during the fourth while not cannibalizing the initial progress in changing our economic
quarter sales for regional and private Sara Lee fresh product launch.
model in U.S. fresh and continue the
label bread declined, especially white
"Results for Sara Lee fresh products momentum in our other businesses."
bread, as a result of planned business so far have been terrific, with sales inTotal net income of Sara Lee Corp.
exits and category weakness.
creasing more than 90% in the quarter in the fourth quarter equaled $354
During the fourth quarter, Sara and more than 80% for the full year - million, or 45c per share on the comLee Bakery media advertising spend- over $260 million," Mr. Hoffman said. mon stock, up 20% from $296 million,
ing declined 4% but was up 14% for "In fact, we are currently achieving an or 38c per share, in the fourth quarter
the year, primarily due to increased annualized run rate of over $300 mil- of fiscal 2003. Sales rose 11% to $5.14
spending on Sara Lee brand bread.
lion per year. In less than two years billion.
In refrigerated dough, a positive Sara Lee fresh products now represent
In the full fiscal 2004, Sara Lee's net
mix and incremental cost savings close to 15% of our U.S. fresh bread income was $1,272 million, or $1.61
more than offset weak category business and they're still growing.
per share, up 4.2% from $1,221 miltrends, Sara Lee said.
"Overall trends in our U.S. fresh lion, or $1.55 per share, in fiscal 2003.
The introduction of new dessert prod- business continue to improve. How- Sales rose 7% to $19.6 billion. MBN
12 / Milling & Baking News, August 17, 2004

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Milling & Baking News - August 17, 2004

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