Sara Lee Sees Profit Below Estimates for Fiscal 2002

CHICAGO —  Sara Lee Corp., the consumer goods giant whose products include Ball Park hot dogs and Hanes underwear as well as its namesake baked goods, said Wednesday it expects profit for fiscal 2002 to miss Wall Street estimates, as it spends more on marketing, restructures its U.S. meat business and seeks acquisitions.

The company said challenging retail market conditions, a strong dollar relative to the euro and investments in technology and reorganization, among other factors, also will hurt earnings.

Executives told investors at a conference in New York that Sara Lee expects earnings of $1.25 to $1.35 a share for the year that ends in June 2002, compared with the $1.48 that analysts expected.

Profit in the underwear segment is expected to fall in the double digits, and the household segment will see flat profit, offsetting growth in the mid-single digits in the food and beverage unit.

For the current fiscal year, the company reiterated its earnings forecast of $1.34 to $1.37 a share.

Sara Lee said it would combine its fragmented U.S. meat business into two units--retail and food service--a move expected to cost $40 million in fiscal 2002. The company also plans to consolidate its hosiery and sock businesses in the U.S. and its intimate apparel units in Europe.

Marketing expenditures will increase more than 5% for the year as the company focuses on boosting sales.

The company also said that after a period of divesting, it is considering making large acquisitions or sizable stock repurchases.

Armed with $3 billion from divestitures and annual free cash flow approaching $1 billion, the company can spend $4 billion without affecting its credit rating, company officials said.

“Given the size of Sara Lee, perhaps larger acquisitions than we’ve historically made may be more likely,” Chief Executive C. Steven McMillan said.

Shares of Chicago-based Sara Lee fell 79 cents to $18.51 on the New York Stock Exchange.