By  on June 7, 1994

NEW YORK -- Sara Lee Corp. will take a $495 million after-tax restructuring charge in the fourth quarter ending July 2, mainly to cut production in its lagging U.S. and European hosiery and fleecewear businesses.

The action will cut 8,000 to 9,000 jobs worldwide, or about 6 percent of Sara Lee's work force.

Chairman and chief executive officer John H. Bryan said in a telephone interview from the company's Chicago headquarters that Sara Lee expects to achieve a low double-digit earnings growth rate in fiscal 1995, with redirection of its personal products businesses generating higher returns. In fiscal 1993, personal products sales -- which in addition to hosiery and fleecewear include intimate apparel, underwear and accessories -- were $6.1 billion. total Sara Lee sales were $14.6 billion. He said fleecewear capacity will be reduced by 15 percent, and new products will help combat a low-margin business sold through mass merchandise outlets.

"We need to alter the product to become less of a commodity item," Bryan said.

Hosiery capacity in the U.S. will be cut by 5 percent, and in Europe by 5 to 10 percent. Bryan also said the L'eggs pantyhose line will be restructured, with a redesign of the racks at retail to make the product easier to understand. The U.S. sheer hosiery business has seen market declines, he said.

Bryan denied market rumors that Sara Lee may relocate Champion's U.S. manufacturing operations to the Caribbean. He said the current restructuring involves scaling down to reduce capacity and does not include relocation. He noted that Sara Lee has been manufacturing in the Caribbean for 20 years and continues to grow there and in the U.S. Looking ahead, Bryan indicated there is a trend toward manufacturing in lower-cost countries.

Half of the manufacturing for the fleecewear and hosiery business is done in the U.S. now, Bryan said. Of the $495 million charge, about 50 percent is non-cash. Most of the cash will be for severance payments in the job cuts. While declining to comment on specific sites for job cuts, Bryan said a little over half of the people affected are in the U.S., and about 25 percent are in Europe.

Sara Lee expects to lower operating costs, saving about $250 million annually beginning in fiscal 1998. It plans to reinvest most of the anticipated savings to build business worldwide.Fourth-quarter results -- excluding the charge, which will come to about $1.03 a share -- are expected to be reported on Aug. 8, and figures for the year ending July 2 should be in line with current estimates of $1.45 to $1.47 per share. A year ago, earnings per share were $1.40. The news was welcomed in financial circles.

Merrill Lynch raised its rating to near-term above average from near-term neutral. Also, Moody's Investors Service confirmed Sara Lee's debt ratings, noting that while the charge is significant, the action will accelerate cost savings and improve its competitive position.

Sara Lee stock, traded on the New York Stock Exchange closed Monday at 23 3/8, up 5/8.

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