Instead of truncating U.S. ad budgets for hosiery-one problem area in the company's $6 billion personal products unit that led to a recently announced restructuring-Sara Lee will boost spending big time (AA, June 20).
"We will have a 200% increase in media spending this year in legwear, including sheers, socks, opaques and tights," said Donald J. Franceschini, exec VP. He is in charge of the division, which also markets intimate apparel, fleecewear and underwear includ-ing the Hanes men's brand. Hanes breaks a spot with Michael Jordan this summer from Long Haymes Carr Lintas, Winston-Salem, N.C.
For Sara Lee's L'eggs and Hanes, that translates to an estimated $42 million in additional spending for fiscal 1995 starting in July.
Hanes budgets had been scaled back dramatically from $20.3 million in 1991 to $7 million in 1993; L'eggs fell from $29 million in 1992 to $6 million in 1993 after seesawing for several years, according to Competitive Media Reporting.
At the same time, Mr. Franceschini said, promotional spending-focused on giveaways such as twofers-will be reduced.
He denied rumored plans to move both brands out of Saatchi & Saatchi Advertising, New York.
"We have no plans to change our agency, but we do plan to change our message in terms of the strategy behind our hosiery brands," he said. "We will have a very noticeable shift in our ad message. We'll talk more to benefits and improvements we make in our products as well as making it more of a lifestyle choice."
Romance, for instance, will be de-emphasized for the Hanes brand, Mr. Franceschini said. "But we'll make it more than just something you put on your legs and more a part of who you want to be that particular day."
L'eggs will see upgraded packaging and more new products.
"We will try to take advantage of some successes we're having with the Hanes brand, like Smooth Illusions body contouring hosiery, and take that into L'eggs," Mr. Franceschini said of the fall launch of L'eggs Profiles.
Changing fashion trends and fewer women entering the work force depressed worldwide hosiery sales about 6% last year. Sara Lee leads the $2.4 billion U.S. hosiery market with a 44% share.
While category sales have been down an estimated 7.6% in the U.S., Sara Lee has managed to boost share. In the mass market, for instance, L'eggs share is up to 47.9% year to date from 46% in the same period last year.
But Sara Lee isn't worried about share. Personal products contribute an estimated 42% of its $14.5 billion in sales and 46% of profits.
Sara Lee's corporate return-on-equity goal is 20%; divisions are expected to perform even higher. Too much plant capacity, too little demand and a resultant drop in return on equity brought the job cuts.
"They're [now] addressing the cost structure of the hosiery business, where they're competing in a high-return but clearly slow-growth market," said Timothy Ramey, an analyst with C.J. Lawrence, New York.
Prudential Securities analyst John M. McMillin suspects Sara Lee will tighten its focus. "Isotoner [gloves] will get less support," he said, "and they may even actually look to sell parts of the personal products business."
Mr. Franceschini responded: "I expect businesses to earn a reasonable return on investment, and if they don't, we'll find a way to get that return. If that's an impossible task, we won't live with that situation."
But the only business he singled out as a problem is the Hanes mass-market fleecewear line. "The bottom end of Hanes fleecewear needs to enhance return," he said, "and if we cannot reach that conclusion, we will get out of it."
Retailers said they expect to be virtually unaffected by Sara Lee's move. "We've done business with them for a long time, and we consider them a viable vendor," said an executive at Kmart Corp.
Caity Olson contributed to this story.