SARA LEE UNIT REPORTS 12.8% PROFIT HIKE IN SECOND QUARTER
Byline: Jennifer L. Brady
NEW YORK — Although sales gains were held back by the slow holiday season at retail, pretax operating profits at Sara Lee Corp.’s personal products division grew 12.8 percent to $225 million in the second quarter ended Dec. 30. A year ago, operating profits for the segment came to $199 million.
Sales at the personal products unit edged up 2.2 percent in the quarter to $1.96 billion from $1.91 billion. A focus on higher-margin products helped keep profits up, according to the company.
Breaking down sales by category, the firm noted that strong U.S. unit sales for Bali and Playtex products were offset by lower innerwear volumes in Europe, resulting in flat overall sales for intimate apparel. The company added that sales in both areas were up against tough comparisons from a year-ago. Last year, worldwide intimates units increased 14 percent.
Modest declines in the U.S. and greater weakness in Europe led to a 10 percent drop in unit sales of sheer hosiery. Sara Lee noted that the decrease reflects “continued emphasis on sales of higher margin products and reductions on hosiery sold on promotion in both the U.S. and European markets.” Total legwear unit in sales fell 8 percent, reflecting the 10 percent shortfall in hosiery and a 3 percent rise in sock sales. Knit products posted a 4 percent decline in unit sales. Higher unit sales were reported for women’s panties, Champion products and other activewear in the U.S., and Champion and Hanes activewear in Europe. However, these gains were offset by unit declines for men’s underwear and screenprint products in the U.S. and for underwear in Europe.
In the half, personal products profits advanced 12.5 percent to $384 million from $342 million. Sales were up 2.9 percent to $3.85 billion from $3.74 billion.
Intimates unit sales moved up 4 percent, but knit products volume slid 5 percent. Legwear unit sales were down 9 percent, with an 11 percent decrease in sheer hosiery volumes and a 3 percent dip in sock sales. Figures for the latest quarter and six months for various categories exclude acquisitions.
John McMillin, analyst at Prudential Securities, noted that given the difficult environment, Sara Lee reported a “satisfactory” quarter. He added that “volumes were not great, but profits were fine.” “Hosiery remains the weak link, as U.S. sales were down 4 percent in the quarter,” McMillin said. He added that intimates sales showed less growth than in the past. However, McMillin noted that the company continues to gain market share in underwear.
He also noted that the company seems to be benefiting from cost savings from its restructuring plan initiated in July 1994.
John H. Bryan, chairman and chief executive officer of Chicago-based Sara Lee, said that all four lines of business — personal products, household and personal care, meats and bakery, and coffee and grocery — posted higher profits and sales in the quarter. “Margins improved in many core businesses, including personal products operations, reflecting the corporation’s strategy to focus on developing and marketing higher-margin value-added products.”
The company noted that although second-quarter dollar and unit sales for consumer products were hurt by a slower-than-anticipated holiday retail season for basic apparel, “improved profitability at U.S. hosiery” contributed to the positive results. In the quarter, the total company’s net earnings available to common shareholders rose 12.6 percent to $276 million, or 57 cents a share, from $245 million, or 51 cents. Sales were up 5.4 percent to $4.89 billion from $4.65 billion.
In the half, earnings available to common shareholders moved ahead 12.6 percent to $455 million, or 94 cents a share, from $404 million, or 84 cents. Sales rose 6.9 percent to $9.56 billion from $8.94 billion.