Financial Analysis - Sara Lee Corp Essay

Words: 4164
Pages: 17

Sara Lee Corp

Sara Lee operates as a global manufacturer and marketer of brand-name packaged foods and household products. Their products are distributed in grocery stores, drug stores, and food-service outlets. In February 2005, the firm embarked on mission to centralize and streamline its organization. Several less profitable business segments and brands were divested. Although Sara Lee owns well-known brands such as Sara Lee, Hillshire Farms, and Jimmy Dean, its products are segmented, making it difficult to achieve pricing power. Sara Lee is also feeling the pressure of rising commodity costs and changes in consumer trends. Many industry analysts are skeptical as to whether the restructuring initiative and strategy shift will
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It is speculated that the buyback will increase by $500 million in fiscal 2008, but management will not comment. This increased buyback would send a positive signal to the market and raise the stock price, further supporting the commitment of a 12% gain in operating margins under the new transformation plan. Recently, the company's operating margin has been running at half that rate.
K. Other cash flows from financing activities? This amount would also require audit explanation. These large amounts of unexplained cash flows should be a red flag to auditors and investors!
L. Total Cash Flows from Financing: The total amount is an outflow which highlights the reduction of equity financing due to stock buyback and dividend payouts. SLE is trying to keep investors happy by maintaining dividend payments and raising EPS.

Financial Notes of Mention:
M. Effect of exchange rate changes: a large portion of Sara Lee’s business and profits are from global sales, the company is benefiting from revenue collections in foreign currency, which is worth more than the dollar. The large amount of global revenue needs to be closely monitored; a negative change in the currency rate could cause this amount to go negative quickly, further hurting SLE’s earnings.
N. Goodwill: this is a large amount of goodwill that did not decline at the same rate as operating cash flows; I would have expected the business line