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The Sara Lee Corporation is perhaps best known for its baked goods products, which are sold in retailers throughout North America, but the company's other product lines include coffee and tea, body care, and detergent products that attract a wide variety of consumers (Standard & Poor's, 2009). In recent years, sales have been divided between baked goods, beverages, as well as body care and household products (Standard & Poor's, 2009). Most recently, the corporation has been approached by worldwide leader Unilever to purchase the Sara Lee business and its product lines, which would be worth approximately EUR 1.275 billion (Standard & Poor's, 2009). After careful consideration, this offer was accepted, and the transition is ongoing, which will provide a significant opportunity for the company to reclaim some of its prior glory in the business sector (Standard & Poor's, 2009). In other areas, Sara Lee remains in a strongly competitive position, with room for continuous growth and opportunity within its business segment. Based on my findings, I would recommend investing in Sara Lee Corp.
Introduction and Statement of Purpose
The Sara Lee Corporation is currently experiencing a number of critical changes in its financial business strategy in order to accommodate the needs of future trends within its designated sectors. It is important to note that the corporation continues to evolve and to consider new alternatives as a means of promoting effective outcomes, while also demonstrating a commitment to its shareholders to sustain its growth for the foreseeable future. Therefore, it is important to note that the challenges that Sara Lee faces are not unusual, yet they demonstrate a means of retaining shareholder interest and improved earnings per share. According to prior financial research regarding Sara Lee's current financial position, it is necessary to consider the following key points: “Net sales decreased by 2.5% to $12.9 billion, reflecting the negative impact of changes in foreign currency exchange rates and lower unit volumes partially offset by price increases to offset higher commodity costs…The company's total debt declined by $368 million due to the repayment of both short term and maturing long-term debt utilizing cash on hand and cash generated from operating activities” (Sara Lee, 2009). Based upon these financial statistics, it is evident that Sara Lee remains in a competitive position to perform at or above expectations over the coming year, which reflects an important opportunity for shareholders to retain their shares and to wait to determine what might happen when Unilever's acquisition efforts begin to materialize.
Based upon prior efforts to improve the business over the long term, it is evident that Sara Lee is in an improved competitive position, due in large part to its plan to consolidate business operations in order to reduce operational cost and to improve cash flow (Sara Lee, 2009). This process is of critical importance in order for the organization to sustain its operations in the coming years at a successful rate. In addition, although the business did not perform at the same levels as in prior years, much of the economy suffered tremendous losses in 2008 that led to its current state of affairs. It is important to consider how these objectives are likely to support the business in future years, as any financial losses that the business experienced were not substantial enough to create a long-term negative portfolio.
Overview of the Subject
Sara Lee is a global manufacturer of brand name products for different markets around the world. It has operations in over 40 countries and sells products in over 180 countries as well. Sara Lee was founded in 1939 by Nathan Cummings. Over the years, Cummings expanded his operations from small scale bakery products to canned goods and frozen packaged goods (Sara Lee). After Cummings reign, Sara Lee began to expand further, and is now not only a producer and distributor of food items, but is also a major player in the production of household goods, undergarments, and body care items. Sara Lee sells products under a number of well known brands such as; Hillshire Farm (acquired in 1971), Hanes Undergarments (acquired in 1797), Jimmy Dean Meats (acquired in 1984), Playtex (acquired in 1991), and several others (Zacks)s.
The Sara Lee Corporation continues to face numerous challenges in its efforts to overcome difficult economic conditions. It is important to consider how Sara Lee has created some stability in its stock price in recent months, as noted in the following:
Key Ratios and Statistics
Reuters: SLE.N Bloomberg: SLE US
Food & Food Service / United States of America
Price target $11.50
Shr price, close (Nov 4, 2009) $11.40
Mkt cap, curr (mm) $7,968
52-Week Range $11.90-6.80
Source: Morgan Stanley, 2009
These statistics are relevant because there is a complex myriad of factors at work at Sara Lee that have been favorable, despite weaker sales and economic conditions in a difficult position. It is inevitable that as the organization continues to change, there will be additional items for consideration that will enable the organization's sales figures to bounce back from weaker periods. Based upon these figures and an assessment that was conducted by Standard & Poor's, it is believed that Sara Lee is a low risk organization with sufficient capital to overcome the challenges of its current state. In this context, the company's core strengths are likely to make the business a good bet for existing shareholders to retain their earnings, while new shareholders should consider the business as a sound investment for the foreseeable future (Standard & Poor's, 2009).
Analysis of Relevant Information
Based upon the financial information provided in the different sources, it is important to consider Sara Lee's potential for the future in terms of its existing performance. Based upon Unilever's offer, the following observations are made: “For SLE, we were pleased by Unilever's offer price for roughly half of SLE's international household and body care business. Longer term, we look for a multi-year improvement program called Project Accelerate to incur costs, but also to lead to substantial expense savings between now and the end of FY 12” (Standard & Poor's, 2009). Therefore, it is strongly evident that in order for the organization to take full advantage of its product offerings, there must be considerable emphasis placed upon efforts made to streamline operations, which reflect an important series of opportunities to promote growth and change, while also supporting improved financial outcomes through long-term growth opportunities, including the sale of its body care division to Unilever. It is believed that with this step in place, the organization will experience a loss of sales over the short term, but will also reduce its operating costs, thereby leading to a higher operating profit that supports long-term sustainability. In a general context, “The food and consumer products businesses are highly competitive. In many product categories, we compete not only with widely advertised branded products, but also with private label products that are generally sold at lower prices. As a result, from time to time, we may need to reduce the prices for some of our products to respond to competitive pressures. In addition, the turmoil in the financial markets has led to general economic weakness, which has negatively impacted our business. The continued economic uncertainty may also result in increased pressure to reduce the prices for some of our products, limit our ability to increase or maintain prices or lead to a continued shift toward private label products” (Sara Lee, 2009). Therefore, it is evident that the organization must continue to evolve its financial operations through consolidation, potential divesture, and potential expansion in other areas. These alternatives are of critical importance in order to achieve financial growth and longevity within competitive markets. It is the expectation of the Sara Lee Corporation that in the coming years, there will be considerable opportunities for growth and development within specific business units that will reflect a clearer understanding of the business' overall strategic direction, and will also demonstrate the type of need that is essential for the business to expand its presence in the world marketplace.
The information provided in this analysis is of critical importance in order to determine the best possible alternatives regarding the financial growth and stability of the Sara Lee Corporation. Key leaders have made many formidable decisions regarding the business over the past several years, and these decisions have led to new and interesting outcomes that have led the organization to new opportunities. Therefore, it is recommended that the business continue down this path, and to adapt to economic change, whether good or bad, by developing new strategies for growth and development that enable the business to retain its brand image and customer loyalty in popular markets. It is important for these alternatives to be presented as a means of promoting the best possible outcomes for all key stakeholders. It is also recommended that shareholders retain their shares in the corporation for the time being, as there are likely to be improvements within the organization that will lead to greater degrees of success within the business as a whole. There are a number of challenging outcomes that Sara Lee strives to dedicate itself to in the coming years, including divestiture of its body care division. This is likely to provide the organization with a greater opportunity to attract new sales through competitive pricing strategies, and to reflect upon the nature of its operations by consolidating processes whenever necessary in order to achieve the desired outcomes. In this context, the business is poised for continuous growth, but it is also anticipated that additional resources will be required to promote this level of growth. For example, product innovations are a likely contributor to future sales growth, particularly if these products are competitive, and also represent a series of opportunities for the business to attract new customers and potential market segments. It is necessary for the organization to consider these alternatives as a means of projecting future sales growth, and to also demonstrate the challenges that are involved in supporting different strategic objectives in the coming years. These options are of critical importance in order to demonstrate to shareholders that the company is stable and is poised for continuous growth, rather than decline. With these concepts in mind, the organization must expand its scope of products, but must also demonstrate that this process is fully aligned with any and all efforts that are designed to promote sustainable organizational operations over the long term. With these perspectives in mind, it is likely that the organization will continue down a path of success that should eventually lead to successful outcomes for the business and its operations. Concluding sentence: something like “While Sara Lee has faced some hardships, this household name is not going anywhere. Sara Lee's adaptability, strong management, and innovation will guarantee that it is a leader in the food and beverage industry for years to come.