Spanish slump pulls down Sara Lee bakery sales

By Guy Montague-Jones

- Last updated on GMT

Related tags Sara lee Marketing

Sara Lee has posted a sharp drop in international bakery sales for the fiscal year, a month after announcing the sale of three Spanish bakeries.

Citing a difficult economic situation in Spain, Sara Lee said in July that it was selling three bakery plants in the country to Grupo Siro. Without the plants, which employ 600 workers, Sara Lee is left with 8 factories, 55 distribution centres and 2,500 workers in the Spanish bakery business.

In financial results for the year, Sara Lee revealed the problems facing the Spanish business.

Bakery sales

International bakery sales were down 11.3 per cent to $790m for the full year and in the fourth quarter they dropped 22.8 per cent on 2008. Particularly low sales in Spain were cited as a cause of the poor performance.

“Unit volumes decreased 11.3 per cent in the fourth quarter, primarily resulting from significantly lower unit volumes in the Spanish fresh bakery business,”​ said the company in a statement.

Explaining the decrease, Sara Lee said the company lost business from a large customer and lower refrigerated dough exports. It said Spanish consumers are also switching to private label brands in the challenging economic environment.

The Spanish business also affected profits in the division. Impairment charges related to the bakery business in Spain cost the company $207m in the fourth quarter and left the company with an operating loss of $207m.

Meanwhile, North American fresh bakery sales fared better, increasing 1 per cent to $560m in the fourth quarter, helped up by a mixture of higher unit volumes and higher prices.

Business wide performance

Overall, the gains made in the domestic bakery business and the retail segments were not enough to offset the poor international bakery sales and the impact of exchange rate changes. Reported net sales for the quarter fell 9.8 per cent to $3.2bn in Q4, while yearly sales slid down 2.5 per cent to $12.9bn.

Despite the fall in sales, Sara Lee reported a narrower fourth quarter loss than last year. Net loss was $14m in the latest quarter, compared to a bigger loss of $672m year ago.

Operating results were also improved with operating profit for the fourth quarter at $56m, compared to an operating loss of $506m last year.

Looking to the year ahead, Sara Lee said it expects to earn between $1.03 and $1.09 per share, including 19 cents in gains from the sale of its tobacco business in 1999.

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