Sara Lee Corporation has reported a fall in second quarter sales.

Net sales were US$4.45 billion compared to $4.51 billion in the prior year’s second quarter, a decrease of 1%. However diluted earnings per share for the second quarter were $0.57, helped by a gain on the disposition of the direct selling business, compared to $.41 for the year-ago period.

A gain on the divestiture of the direct selling business and a related tax benefit increased fiscal 2006 second quarter diluted EPS by $0.28 and $0.07 per share, respectively. However, charges related to the implementation of the company’s transformation plan and business exit activities reduced second quarter diluted EPS by $0.08 per share.

“In the second quarter, we delivered results that were consistent with our forecasts. Earnings per share were influenced by several significant items, but our underlying results actually exceeded our guidance for the period,” said Brenda C. Barnes, chairman and chief executive officer of Sara Lee Corporation.

“We believe our transformation initiatives are beginning to have an impact, particularly for the Sara Lee Food & Beverage and Sara Lee Foodservice businesses, which delivered substantially better results in the second quarter than in the first. I am encouraged that these businesses are showing an upward trend. We have been especially pleased with the success of the Sara Lee fresh bread brand, which became the US market leader in the fresh bakery category during the quarter,” added Barnes.

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“Overall, the transformation is proceeding as we anticipated and we are now beginning to see the benefits of the multitude of changes that we have made over the past year,” he concluded.

The consolidated unit volumes for the corporation increased 1% during the second quarter of fiscal 2006, driven by unit volume growth in four out of eight business segments, specifically North American retail meats, North American retail bakery, Sara Lee Foodservice and international beverage.

For the first six months of fiscal 2006, ending Dec. 31, 2005, Sara Lee reported net sales of $8.64 billion, down 1% over the same period a year ago. Diluted EPS for the first half of fiscal 2006 were $0.65, compared to $0.85 for the year-ago period. Net cash flow from operating activities was approximately $850m for the first six months of fiscal 2006, compared to approximately $800m in the comparable period last year. Total MAP spending decreased 2% compared to the first half of fiscal 2005 and corporate unit volumes decreased 1% in the six month period year over year

A statement from the company said Sara Lee’s management currently expects diluted EPS for the third quarter of fiscal 2006 to fall within a range of $0.21 to $0.26, compared to $0.24 in the year-ago period.

Full-year fiscal 2006 diluted EPS for the corporation are expected to be in a range of $1.17 to $1.27, compared to $0.90 in fiscal 2005, which was negatively impacted by $0.55 per share in net charges related to significant items.