At first glance, it's hard to even know what numbers to look at in Sara Lee's
For the quarter, the core business reported $0.24 in earnings per share, an 11% decline from last year and a penny shy of analysts' expectations. Sales from continuing operations also fell and were short of Wall Street's estimates.
While Sara Lee's quarter shared some similarities with other consumer goods companies that have reported earnings, like Procter & Gamble
When commodities attack
Of particular note in Sara Lee's quarter was the impact of commodity prices. We've heard mention of rising commodity costs from most of the consumer goods companies, but it appears to have been a much bigger problem for Sara Lee, which makes sense, because of the company's focus on food. Yesterday we also saw J.M. Smucker
There may be some relief ahead, as Sara Lee will continue to see the impact of price increases it pushed through in the first half of its fiscal year, and it's already planning further price increases. However, the company doesn't sound particularly confident that price increases will be enough to counteract the commodity increases, particularly when it comes to coffee.
$1 billion lost
But rising commodity costs may not be the prime issue for Sara Lee investors. The company is getting ready to split itself in two. One company will retain the Sara Lee name and take with it the North American food businesses -- which include brands like Sara Lee, Hillshire Farm, and Ball Park -- and the as-yet-unnamed second business will take the company's beverage portfolio and the struggling international bakery business.
A recent article from Bloomberg took Sara Lee to task for opting to split the company up rather than pursue any of a number of takeover attempts that included private equity suitors KKR
More generally, though, the article criticized the company for a decade full of action -- defined primarily as acquisitions and dispositions -- but little in the way of results for investors. The underwhelming track record has to make shareholders wonder whether the upcoming split will really be the key to unlocking the company's value or, as one analyst in the article put it, it's simply the company "[giving] up on its commitment to creating shareholder value in favor of just doing something."
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