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As a result, net sales increased 1% in the second quarter, on a reported and adjusted basis, to $754 million. Volume declined by 4.9% while sales mix added 2.9%, driven by strength in the key strategic brands Jimmy Dean, Hillshire Farm and Ball Park.
Despite taking pricing actions, the segment grew share in six of 12 core categories. Jimmy Dean increased its leading market share in the frozen protein breakfast category by 3.0 points versus last year to 59.8%, while Hillshire Farm smoked sausage increased market share by 0.5 points to 29.6% (IRI share data, 12 week ending Dec. 12, 2010).
This quarter compares to a very strong year-ago period, during which adjusted operating segment income increased significantly with the benefit of lower commodity costs. In the quarter, the segment reported an adjusted operating margin of 11.6% versus 16.4% last year, which was well above the segment’s trend line of gradual improvement. Operating segment income declined 28% in the second quarter, on a reported and adjusted basis, to $88 million.
Despite a favorable sales mix shift into higher margin products, operating segment income declined versus a favorable prior-year period driven by higher commodity costs net of pricing, volume declines, increases in MAP spending behind core brands along with continued investment in infrastructure and systems, particularly the new Kansas City sliced meat plant, which will become operational in the third quarter of fiscal 2011.
On Jan. 28, Sara Lee announced its board of directors agreed in principle to divide the company into two separate, publicly-traded companies. The separation is expected to be completed in early calendar year 2012. The North American Retail and North American Foodservice businesses (excluding the North American beverage business) are planned to be spun off, tax-free, into a new public company that will assume the “Sara Lee” name. The yet-to-be-named other company will consist of Sara Lee’s current International Beverage and Bakery businesses, as well as the North American beverage business. Each company will have leading consumer brands and compelling growth prospects.
“We are excited to move forward with the implementation of our strategic initiative to create two pure-play companies,” said Sara Lee Corp. CEO Marcel Smits. “We are confident that this plan offers the best opportunity to deliver long-term value to our shareholders.”
