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Business Services Industry

Sara Lee's Strong Sales Growth Continues in Third Quarter of Fiscal 2008

Business Wire, May 6, 2008

Net sales up 10.5%, driven by higher unit volumes, price increases and the strong euro

Operating income up 61.2%, primarily due to lower transformation costs and favorable currency

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DOWNERS GROVE, Ill. -- Sara Lee Corp. (NYSE:SLE) today announced that net sales for the third quarter of fiscal 2008, ending March 29, 2008, were $3.2 billion, an increase of 10.5% compared to $2.9 billion in the prior year period. The strong overall net sales growth was driven by favorable foreign currency exchange rates, most notably the euro, price increases to cover higher input costs and a corporate unit volume increase of 2.4%. Net sales grew in five of the six business segments with particularly strong growth in international beverage (+22.6%), international bakery (+18.9%), household and body care (+12.9%) and North American retail bakery (+11.0%). The corporation's adjusted net sales1 - which exclude acquisitions/divestitures and present fiscal 2007 net sales at fiscal 2008 foreign currency exchange rates - increased 4.3% in the third quarter of fiscal 2008, driven by strong top-line growth in North American retail bakery (+11.0%) and international beverage (+7.2%). For the first nine months of fiscal 2008, Sara Lee reported net sales of $9.7 billion, up 9.6% over the comparable period last year, while adjusted net sales rose 4.3% year-to-date.

1 The term "adjusted net sales" and other "adjusted" financial measures are explained and reconciled to each item's most comparable U.S. generally accepted accounting principles measure at the end of this release.

"The third quarter marks the continuation of the strong sales trends that we have seen all year," said Brenda C. Barnes, chairman and chief executive officer of Sara Lee Corp. "I'm pleased to report that unit volumes were up in most of our business segments, helped by successful product innovations."

"A variety of external market pressures, including volatile commodity prices, continue to affect the industry. Positively, our business covered the incremental cost of commodities in total. We also continued to take actions designed to improve our profitability, namely the third quarter exit of our low-profit Mexican meats joint venture and the fourth quarter right-sizing of our North American workforce," Barnes added.

Sara Lee reported operating income of $242 million for the third quarter of fiscal 2008, compared to $150 million in the third quarter of fiscal 2007, an increase of 61.2%. Adjusted operating income - which excludes the impact of significant items and acquisitions/divestitures and presents fiscal 2007 results at fiscal 2008 foreign currency exchange rates - was $249 million in the third quarter of fiscal 2008, compared to $242 million in the prior year period. For the first nine months of fiscal 2008, operating income was $766 million, compared to $411 million in the first nine months of fiscal 2007. Adjusted operating income was $686 million in the first nine months of fiscal 2008, down slightly from $694 million in the prior year period.

Diluted EPS as reported were $.30 per share in the third quarter of fiscal 2008 versus $.16 per share for the year-ago period. In the first nine months of fiscal 2008, diluted EPS as reported were $.82 per share, compared to $.52 per share for the first nine months of fiscal 2007. Diluted EPS, excluding significant items, were $.22 per share in the third quarter of fiscal 2008, compared to $.13 per share for the third quarter of fiscal 2007. For the first nine months of fiscal 2008, diluted EPS, excluding significant items, were $.71 per share, compared to $.59 per share in the comparable period last year.

Other Highlights

* Sara Lee sold its stake in the Qualtia Alimentos meats business in Mexico to its joint venture partner Xignux in the third quarter of fiscal 2008. The Mexican meats business has been recognized as a discontinued operation in the third quarter of fiscal 2008.

* Media advertising and promotion (MAP) spending for continuing operations increased 7.2% in the third quarter of fiscal 2008, driven by higher MAP spending in North American retail meats and international beverage. For the first nine months of fiscal 2008, the corporation's MAP spending was up 15.0%.

* General corporate expenses were $66 million in the third quarter of fiscal 2008 compared to $83 million in the year-ago period, a decrease primarily due to lower transformation and employee pension costs. In the first nine months of fiscal 2008, corporate expenses were $195 million, compared to $270 million in the period last year, a decrease primarily due to lower costs associated with the business transformation, pension and other benefit plans and corporate hedging programs.

* Net cash from operating activities was approximately $238 million in the first nine months of fiscal 2008, compared to $98 million in the first nine months of fiscal 2007, which includes $10 million and $76 million of cash generated by discontinued operations, respectively. This year-over-year increase was primarily driven by an increase in earnings and a reduction in cash paid for taxes.

Business Services Industry

Sara Lee's Strong Sales Growth Continues in Third Quarter of Fiscal 2008

Business Wire, May 6, 2008

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