NEW YORK — Sagging underwear sales contributed to a double-digit decline in Sara Lee Corp.’s bottom line in the second quarter.
This story first appeared in the January 26, 2004 issue of WWD. Subscribe Today.
For the three months ended Dec. 27, the Chicago-based consumable goods giant said net income fell 10.3 percent to $312 million, or 39 cents a diluted share, from $348 million, or 42 cents, a year ago. Earnings per share, however, were in line with Wall Street’s and the company’s own forecast.
Net sales for the period grew 5.1 percent to $5.02 billion from $4.78 billion last year, but lower sales of intimates and underwear partially offset increases in the firm’s other four business lines of meats, bakery, household products and beverages.
In the intimates and underwear segment, which also includes knits and legwear, operating income plunged 36.5 percent to $132 million from $209 million a year ago on a 2.2 percent dip in sales to $1.64 billion and a 4 percent decline in global unit volume.
“As expected, this was a challenging quarter for our intimates and underwear business, reflecting a warm fall and early winter in the U.S., which hurt fleece sales,” said chief financial officer Theo de Kool on a conference call with analysts. “From a sales standpoint, the biggest issue in the quarter was weak holiday apparel sales in the U.S. and the U.K.”
Tough year-ago comparisons and higher pension and cotton costs also contributed to the segment’s disappointing operating results, de Kool said.
Among product categories, U.S. men’s and boys’ underwear volume was flat, while women’s and girl’s dropped 2 percent. Knit products volume fell 4 percent, driven largely by a double-digit decline in Europe, caused by weak holiday sales in the U.K., and U.S. activewear volume fell 4 percent on lower fleece sales, due to unseasonably warm weather.
Overall, for the first half of the fiscal year, Sara Lee reported a 17.3 percent decrease in net earnings to $542 million, or 68 cents, from $656 million, or 80 cents, last year. Net sales advanced 4 percent to $9.68 billion from $9.31 billion a year ago. In the intimates and underwear business, operating income fell 38.6 percent to $259 million on a 3.7 percent slide in sales to $3.24 billion, and a 6 percent decrease in global unit volume.
In guidance, Sara Lee said third-quarter earnings are forecast at 41 cents to 45 cents a share.