Sara Lee Flies Solo

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Food and beverage firm Sara Lee (NYSE: SLE) just reported its first quarterly results since spinning off apparel-related Hanesbrands (NYSE: HBI) to shareholders. So how do things look for the newly independent firm?

It's hard to make a definitive conclusion at this point, but things look promising as sales trends were as bright as they have been in quite some time. Sara Lee posted positive volume and sales gains in all of its six operating units. Highlights include 8% net sales growth in the North American retail bakery segment and 11% volume gains in international beverages. All in all, total sales advanced 5% while volumes grew 3% -- not stellar by any means, but new product introductions may finally be persuading consumers to open their pocketbooks for the company's brands.

It's still too early to tell the impact that improved sales are having on the bottom line. For the quarter, net income more than tripled but was mostly due to a tax benefit and gains from selling some discontinued businesses. Plus, advertising expenses looked a little light for the quarter. Management did raise full-year guidance to a range of $0.86-$0.92, but still includes gains and benefits from discontinued operations. It also put some of the $2.4 billion it received from Hanesbrands to good use by repurchasing nearly $250 million of stock during the quarter, with further buybacks scheduled.

The earnings press release didn't include any balance sheet or cash flow information, so it's hard to tell just how successful the quarter was from a cash-generating perspective. But judging by the company's past results, the problem hasn't been moola, as Sara Lee generates robust operating cash flow. Rather, the company has had difficulty growing its businesses, with a disappointing track record of new product development and wisely reinvesting capital back into operations.

First-quarter results were indeed encouraging as sales trends looked promising, but Sara Lee still has a long way to go in proving to investors that it can consistently boost the top line and translate that into steady, visible cash flow growth. In the meantime, investors will collect the 2.5% dividend yield while benefiting from share buybacks and may want to consider hanging onto their Hanes.

Spinoffs can perform well as newly invigorated and independent firms. Hanesbrands probably won't prove as lucrative as Coach (NYSE: COH), another past Sara Lee division, but it could still do well. Sara Lee itself may be seeing the early benefits of existence as an independent, more focused entity. For a future potential food spinoff, check out Kraft (NYSE: KFT), as Altria (NYSE: MO) mulls over setting it free from the corporate fold.

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Fool contributor Ryan Fuhrmann has no financial interest in any company mentioned. The Fool has an ironclad disclosure policy. Feel free to email him with feedback or to discuss any companies mentioned further.