NEW YORK — Sara Lee Corp. reported a loss in the fourth quarter on lackluster sales, but the consumer products giant said it planned to remodel its fiscal house while pursuing a reorganization of its varied businesses.
In a bold move, the firm said Thursday it would buy back stock valued at $2 billion and work to reduce its debt load by $1.5 billion in the next two years. Sara Lee also said it would keep a 79 cents-per-share dividend for 2006. The company’s current debt load is about $3.7 billion.
Still, one ratings firm was wary of Sara Lee’s results and fiscal restructuring. Standard & Poor’s Rating Services issued a downgrade to the Sara Lee’s long-term corporate debt rating to “BBB-plus” from “A.” The ratings firm said in a report after Sara Lee’s results that the share repurchase and dividend payout “indicate a much more aggressive financial policy, which results in increasing the overall financial risk profile of Sara Lee.”
“In our view, there is a loss of financial flexibility at a time that we would expect a more measured approach in returning value to shareholders until there is some improvement in operating performance, completion of some of the planned business dispositions, and further progress under the transformation plan,” said S&P’s credit analyst, Jayne Ross.
For the fourth quarter ended July 2, Sara Lee posted a loss of $148 million, or 19 cents a diluted share, which compares with net income of $354 million, or 44 cents, in the same period last year. Sales fell 5.3 percent to $4.75 billion from $5.02 billion. Net income for the year-end period fell 43.5 percent to $719 million, or 92 cents, from $1.27 billion, or $1.55, in the previous year on sales that inched up 0.7 percent to $19.25 billion from $19.12 billion.
Both quarterly and year-end earnings per share were weighed down by a 55 cents-per-share charge because of costs related to the closing of certain businesses as the company goes through its planned restructuring.
Regarding its branded apparel business, net sales in the quarter fell 8 percent to $1.51 billion from $1.64 billion. For the year, sales in the segment declined 0.4 percent to $6.43 billion from $6.45 billion.
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