Sara Lee's profit plummets on rising costs Food giant Sara Lee said weak sales in North America affected the company's performance in its latest fiscal quarter, sending earnings tumbling 44 percent.

The Wall Street Journal reports the Illinois-based food giant raised food prices last year in an effort to offset a jump in commodity prices. However, the move backfired as the company said American consumers pulled back as a result, reining in spending and foregoing purchases.

The company's operating margin declined to 4.9 percent from 9 percent, according to the company, while its profit also dropped to $469 million. In the year-ago quarter, the company posted a profit of $833 million, underscoring how volatile commodity prices are continuing to affect performance amid a tepid economic climate and a downturn in consumer spending.

Food manufacturers have been significantly impacted by rising food prices. Many businesses have implemented cost reduction programs and raised prices to offset the jump in commodities, but experts said they face a consumer backlash if they continue to hike the prices of everyday food items.

On a positive note, Sara Lee said its European beverage business experienced torrid growth in the quarter.



 
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