Sara Lee Corporation in 2011
What is your assessment of Sara Lee’s financial and operating performance in fiscal years 2007-2010, the period following the divestitures that were the core of Sara Lee’s retrenchment strategy?
Overall, the financial and operating performance following the divestitures performed well given the economic recession. * Net sales and operating income were declining rapidly prior to the divestiture. * While net sales remained relatively flat over the period following the divestiture, income increased from $258 million to $642 million, while the debt to asset ratio decreased from 37% to 31%. * Net cash flow from continuing operations also increased from $268 million to $631 million
What evidence and/or reasons support a conclusion that Sara Lee’s shareholders have not benefited from the company’s retrenchment strategy? * The book value of the common stock decreased from $3.61 to $2.25 * The market value of the common stock decreased from $17.4 to $13.9 * Dividends Declared decreased from $0.50 to $0.44
What actions do you recommend that Sara Lee management take in the remainder of fiscal year 2010 and in fiscal year 2011 to improve the company’s performance and boost shareholder value? * Sara Lee should look into divesting itself of its Internationally Bakery business or at a minimum closing capacity to increase its utilization from 59% to no less than 80% * Net Sales has decreased each year from $934 million to $785 million * Although the segment is showing improvement, it has operated at a net loss of $544 million over the past three years. * Sara Lee should utilize some of its cash and perform another stock buyback program
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