Kraft, Sara Lee cut 2009 forecasts
Food makers Kraft Foods Inc and Sara Lee Corp cut their profit forecasts for the current year on Wednesday as a stronger dollar hurts international sales and U.S. consumers seek lower-priced products.
Shares of Kraft fell more than 9 percent before the market opened, while Sara Lee had not begun trading.
Both Kraft, which makes Oreo cookies and Kraft cheese, and Sara Lee, which makes its namesake bread and Hillshire Farm lunch meat, have seen private-label manufacturers encroach on their sales as consumers look to save money in a recession.
Sara Lee lost market share to private label brands in four of five key categories in the most recent quarter, Morgan Stanley said in a research note earlier this week, while Kraft lost market share in 15 of its top 20 categories. Morgan Stanley cited research by Information Resources Inc in the report.
Kraft, the largest North American food maker, said fourth-quarter profit fell to $163 million, or 11 cents a share, from $585 million, or 38 cents a share, a year earlier.
Excluding one-time items, earnings were 43 cents a share. Analysts on average had forecast 44 cents, according to Reuters Estimates.
Kraft has spent the last several years cutting costs in some areas while spending more on marketing and product development to help jump-start sales payday loan cash advance. While that strategy had shown results in recent quarters, the weakening global economy has pushed consumers to search out lower-priced alternatives.
Kraft cut its 2009 net earnings forecast to $1.88 a share from a previous view of at least $2 due to higher-than-expected pension costs and a stronger dollar. It also expects sales to rise 3 percent before the effect of currency changes, acquisitions and divestitures, compared with its previous view of a 4 percent increase.
In premarket trading, Kraft shares were down 9.2 percent at $26.10 from Tuesday’s close of $28.74.
Sara Lee posted a loss of $17 million, or 2 cents a share, in the second quarter ended December 27, compared with a year-earlier profit of $182 million, or 25 cents a share.
Excluding one-time items, earnings were 21 cents a share, matching the analysts’ average estimate.
Sales fell to 2 percent to $3.34 billion.
Sara Lee also cut its 2009 earnings forecast to a range of 73 cents to 80 cents a share, excluding items, down 4 cents a share from its previous outlook.
(Editing by Lisa Von Ahn)
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