US food and household goods company Sara Lee on Tuesday raised its first-quarter earnings outlook, citing lower costs, improved sales of higher-margin items and more favourable currency rates.
Sara Lee said it expects earnings of at least 35 cents a share in the quarter ended 28 September, compared with 26 cents a share a year earlier.
The forecast, which comes a day ahead of Sara Lee's scheduled presentation to analysts in New York, is about 21 per cent higher than the top end of its prior guidance.
"I was hoping for some good earnings news, but I never thought the quarterly news would be this good," Prudential Securities analyst John McMillin said. "Clearly they've been helped by some short-term factors like currency and interest rates, but fundamentals also appear better, particularly in apparel."
The company also raised its full-year earnings outlook to $1.54 (€1.57) to $1.60 (€1.63) a share, compared with $1.36 a share in fiscal 2002.
Sara Lee in August forecast earnings per share in the first quarter to fall within a range of 27 cents to 29 cents. It said it expected full-year earnings in a range of $1.44 to $1.50 a share.
"The higher projections are a result of benefits from the company's reshaping programme, including increased sales of higher-margin products and reduced operating costs," the company said in a statement issued late on Tuesday. "Favourable foreign currency exchange rates, lower interest expense and fewer shares outstanding also contributed to the above-expectation results."
Also helping profit in the first quarter are share repurchases. The company said it bought back 6.7 million shares of common stock in the quarter at an average cost of $18.28 a share. About 12 million shares remain available for future purchase under the current share repurchase programme.
Sara Lee has been working to take costs of its operations, with moves such as the consolidation of 10 disparate meat businesses into one Cincinnati-based operation. A similar programme is under way in its apparel business, which include products such as Playtex bras and L'eggs hosiery.
The company sees quarterly operating profit growing more than 20 per cent in the first quarter and rising more than 15 per cent in the full year.
Analysts had expected Chicago-based Sara Lee to earn 27 cents to 30 cents a share in its fiscal first quarter, with an average estimate at 28 cents, according to Thomson First Call. The company in the full 2003 fiscal year was expected to earn $1.45 to $1.50 a share, with an average estimate at $1.47.
Stock in Sara Lee closed up 47 cents, or 2.4 per cent, to $19.90 in Tuesday New York Stock Exchange trade before the release of the news. They rose to $21.30 in after-hours Instinet trading after the revised outlook.