UPDATE 2-So long Sara Lee, Hello Hillshire!
* Hillshire Brands to trade under "HSH" on NYSE
* Plans $100 mln in savings by 2015; sales and volume growth
* Sara Lee shares up slightly
By Martinne Geller
June 5 (Reuters) - Sara Lee Corp will change its name to Hillshire Brands Co later this month to reflect its focus as a North American meat company after it spins off its coffee and tea unit.
Sara Lee revealed the company's name and its financial and strategic goals in a meeting on Tuesday with investors in New York.
Hillshire, with $4 billion in revenue and brands including Jimmy Dean sausages, Ball Park hot dogs and Hillshire Farm lunch meat, will trade on the New York Stock Exchange under the ticker symbol "HSH."
As a stand-alone entity, Hillshire Brands plans to improve its existing performance by cutting costs, turning around its weaker brands, launching more innovative products and increasing and improving its advertising.
The company is targeting revenue growth of 4 percent to 5 percent by the end of 2015 and volume growth of 2 percent to 3 percent, according to Sean Connolly, who will be the company's chief executive officer.
Hillshire Brands expects to continue at the same rate of revenue growth beyond 2015 and sees profit growth growing faster than that.
The company is also aiming for an operating margin of 10 percent and a near-term dividend payout ratio of 30 percent to 35 percent.
One part of the business that needs improvement, Connolly said, is the company's flagship Sara Lee brand, which sells lunch meat as well as pies and other baked goods. He said the brand is working on developing deli products that can set it apart from competitors.
The original Sara Lee was the daughter of Charlie Lubin, a bakery owner, who named a new line of cheesecake for her when she was 8 years old. Lubin sold his company in 1956 to Consolidated Foods, which changed its name to Sara Lee Corp in 1985, according to the Sara Lee Corp website.
Hillshire Brands will also increase its budget for marketing, advertising and promotions to 5 percent of revenue, from 3.6 percent now. It also plans to increase the percentage of revenue coming from new products, said Connolly, who now heads up Sara Lee's North American Retail and Foodservice unit.
The company said it was working on new products, including Jimmy Dean sandwiches made with french toast and pancakes, Ball Park hamburgers and BBQ chicken sliders and Whole Grain State Fair corn dogs.
Hillshire Brands, which will emerge as a standalone company on June 28, also expects $100 million in additional cost savings by the end of 2015.
ACQUISITIONS ARE SECOND PRIORITY
Sara Lee announced a plan to separate into two companies after takeover offers for the whole company were not satisfactory.
Some on Wall Street still see the company as a potential takeover target once the spin-off is complete, according to an executive at Smithfield Foods Inc, who said in March that he was fielding many calls from investment bankers on the topic.
Hillshire Brands executives declined to comment on the prospect of a takeout, although Connelly said the company would be interested in bolt-on acquisitions after it shores up weak spots in its existing portfolio.
Hillshire Chief Financial Officer Maria Henry said the company could finance acquisitions with debt or stock, but noted that if Hillshire's stock has a takeover premium baked in, the company would not use it as currency in a deal.
The company's strategic goals include targeting additional consumer segments, including Hispanics and younger consumers, and expanding into different types of stores such as warehouse clubs and dollar stores.
The business being spun off by Sara Lee is an international coffee and tea business to be called D.E. Master Blenders 1753.
Sara Lee shares closed up 0.4 percent at $20.53 on the New York Stock Exchange.
- Tweet this
- Share this
- Digg this