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New Sara Lee CEO Shuffles Deck

Consumer products: Incoming executive's moves include adding businesses and shedding Coach and Champion brands.


CHICAGO — Sara Lee Corp.'s new chief executive overhauled the company Tuesday before even officially taking over. The streamlining will keep established brands such as Sara Lee cheesecakes, Playtex bras and Jimmy Dean sausages but shed high-profile operations including Coach leather goods and Champion athletic wear.

More moves can be expected as Sara Lee reviews its more than 150 brands, which also include Hanes underwear and the recently acquired Chock Full o'Nuts coffee business, said Steve McMillan, president and chief operating officer, who will succeed retiring CEO John Bryan on July 1.

The Chicago-based company projects the sell-offs to net it about $2.5 billion, which could give Sara Lee the wherewithal to join in the wave of takeovers sweeping several industries, including foods.

McMillan, while acknowledging that the streamlining would give the company "significant capability" for acquisitions, said the moves were prompted by changing market conditions and the need to refocus the company's portfolio.

"These steps will make us more understandable to the financial community. I think it will also make the company easier to manage," he told reporters from New York, where he outlined the shake-up to securities analysts.

Wall Street responded cautiously. Sara Lee shares rose 31 cents to close at $18.88 on the New York Stock Exchange.

Analysts said the make-over bodes well for the future, but their enthusiasm was tempered by the company's warning that earnings growth over the coming year could be slowed by the dollar's strength against the euro, the single currency of 11 European nations. A strong dollar makes it tough for U.S. goods to compete in overseas markets. In addition, as the euro falls, revenue earned from sales in the euro region is worth fewer dollars.

"The bad news is more the currency hit short-term," said analyst John McMillin of Prudential Securities. "But I think Sara Lee's getting a haircut and trimming down, and that should make it a more beautiful company longer-term."

Among the changes:

* Coach, the country's largest leather handbag manufacturer, and PYA/Monarch, the fourth-biggest food service distributor, are targeted for initial sales of stock to the public, with the company selling its remaining stakes in both within 18 months afterward.

* Champion, the athletic apparel maker with $500 million in annual sales, and the International Fabrics division of Courtaulds Textiles, the British retailer that Sara Lee just bought, will be sold.

Three acquisitions also were announced, aimed at strengthening the Chicago-based company's global positions in undergarments, coffee and food.

Sara Lee said it has acquired:

* Uniao's coffee business, the largest coffee company in Brazil, giving it a No. 1 market position in that country.

* Sol y Oro, the leading intimate apparel and men's underwear company in Argentina.

* A minority investment in Johnsonville Sausage Co., the leading manufacturer of premium fresh sausage products in the United States.

McMillan, the future CEO, predicted that the net effect of the transactions will be an "overall one-time gain."

The changes, he said, will leave Sara Lee as both a food company and a consumer packaged goods company with three distinct areas: intimates and underwear, food and beverage, and household products.


Sara Lee's Stock Swoon

Shares of Sara Lee have crumbled in the last two years amid modest sales and earnings growth. Monthly closes and latest on the New York Stock Exchange:



up 31 cents

Source: Bloomberg News

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