Hillshire's sales fall short of expectations

Hillshire's sales fall short of Wall Street expectations amid lunch meat transition

Associated Press

CHICAGO (AP) -- Hillshire Brands on Thursday reported quarterly sales that fell short of Wall Street expectations as it ran into some hiccups switching to a new packaging for its lunch meats.

The company, which his based in Chicago, is the former North American business of Sara Lee Corp. and makes brands including Jimmy Dean sausages and Ball Park hot dogs.

To boost sales of its namesake lunch meats, Hillshire recently revamped the formulas to improve taste, and introduced more see-through packaging. Executives say the new look, which appears almost like Tupperware, helps boost perceptions about freshness and quality, traits that have grown increasingly important among shoppers.

As the packaging began rolling out in the quarter, Hillshire said it intentionally kept promotional activity and demand in check so that it wouldn't stress the manufacturing process. But toward the end of the quarter, CEO Sean Connolly said the company noticed that some of the packages were "not up to our standards."

He said the company wanted a specific look in how the meat was layered, for example, and that the presentation should be consistent from store to store. Connolly said the company is making adjustments to fix the problems.

The declines in lunch meat during the period were offset by gains for Jimmy Dean, Ball Park, Aidells and Gallo. Frozen bakery sales were down as the company pruned some less profitable products and raised prices on others. Overall, sales for the retail division were flat.

Sales for foodservice and other products fell 5 percent. Higher volumes were offset by lower pricing and a shift toward less profitable products.

For the quarter ended March 30, Hillshire said it earned $93 million, or 75 cents per share. That's compared with a loss of $3 million, or 2 cents per share, a year ago.

The recent quarter's results included $51 million in earnings from discontinued operations, while the year-ago quarter included a $30 million loss. Excluding one-time items, Hillshire said it posted an adjusted profit of 35 cents per share in the recent quarter, above the 33 cents per share Wall Street expected.

Revenue fell about 1 percent to $935 million, below the $952.6 million analysts expected, according to FactSet.

For all of 2013 the company expects adjusted profit to come in at the high end of its previous guidance of $1.60 to $1.70 per share. Analysts expect $1.74 per share.

Shares of Hillshire Brands Co. fell $1.50, or 4.2 percent, to $34.07.

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