For the fourth quarter of fiscal 2006, Sara Lee’s soon-to-be-spun-off Branded Apparel division reported net sales of $1.13 billion, down 2% from last year. The decline was attributed to lower shipments to the mass channel, consolidation in the department store channel, and planned discontinuations of selected low-margin product lines, which was partially offset by double-digit sales growth for the Champion and barely there brands.
Operating segment income increased 57% in the fourth quarter to $98 million, compared to $62 million for the fourth quarter of fiscal 2005, with the increase primarily resulting from $52 million in charges for a workforce reduction and accelerated depreciation in the fourth quarter of 2005. The remaining operating segment income decline of $16 million was driven by a 47% increase in MAP spending, primarily behind the Hanes and Playtex brands. Underlying profitability continues to benefit from better inventory management and favorable cotton costs.
In fiscal 2006, Branded Apparel net sales decreased 4% to $4.49 billion from $4.68 billion in fiscal 2005, primarily due to planned exits of certain low-margin fleece and sleepwear programs, weakness in the hosiery category and an unfavorable sales mix. Operating segment income for fiscal 2006 was $501 million, an increase of 12% compared to $448 million in fiscal 2005.
