Sara Lee Gives Fourth-Quarter Forecast That Trails Estimates; Stock Falls

Sara Lee Corp., the maker of Jimmy Dean foods, provided a fourth-quarter earnings forecast that trailed analysts’ estimates as it increases marketing spending and commodity costs rise.

Excluding some items, earnings will be 17 cents to 21 cents a share, Chief Financial Officer Marcel Smits said today on a conference call. Analysts projected 25 cents, the average of 11 estimates compiled by Bloomberg. The stock fell 3.8 percent, the most since August.

Marketing costs rose 17 percent in the third quarter. Chief Executive Officer Brenda Barnes said she will increase spending at a higher rate in the fourth to support new products such as lower-calorie varieties of Jimmy Dean breakfast foods and L’Or coffee pods in France. Costs for commodities such as meat and coffee will also rise, she said in a telephone interview today.

“We need to see more widespread sales momentum to garner further confidence in the company’s longer-term growth,” Christopher Growe, an analyst of Stifel Nicolaus in St. Louis, said in an e-mail. He recommends holding the shares.

Sara Lee fell 53 cents to $13.47 by 4 p.m. in New York Stock Exchange Composite trading. The stock has risen 11 percent this year.

Sales excluding the impact of foreign currency fluctuations and divestitures declined 2.5 percent in the third quarter ended March 27, the Downers Grove, Illinois-based company said in a statement.

Jimmy Dean Sausage

Sales growth of 4.1 percent in the North American retail unit was driven by increased sales of Jimmy Dean breakfast sausage and Hillshire Farm lunch meat. Operating profit in the segment will decline in the fourth quarter, due to rising meat prices and higher advertising investments, the company said.

Sara Lee has agreed to sell its body-care business to Unilever and its air-care business to Procter & Gamble Co. for a combined 1.59 billion euros ($2.02 billion), to focus on food and beverage products. The company said both transactions will close this year.

The maker of Ball Park hot dogs has said it’s “highly confident” it will sell the rest of the household and personal- care unit, which includes Kiwi shoe polish, and declined to give a timetable on the conference call today.

The Wall Street Journal reported April 23 that London’s SSL International Plc, the maker of Durex condoms, is bidding for the Kiwi unit, citing unidentified people familiar with the matter. Michael Cummins, a Sara Lee spokesman, declined to comment on the speculation.

To contact the reporter on this story: Matthew Boyle in New York at mboyle20@bloomberg.net

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