Dear Mr. Berko:     I buy a lot of Sara Lee products and I think I would like to buy 75 shares of the stock. Do you think this is a good company and do you think I should buy the stock?

B.W., Bethlehem, Pa.

Dear B.W.:

If you’ve purchased Douwe Egberts Coffee Systems; Jimmy Dean sausages; Bimbo frozen dough; Hillshire Farm; Superior Coffees; Ballpark packaged meats; Earth Grains fresh or frozen cakes, breads and doughs; Aoste luncheon meats; Sinai 48 products; Rudy’s Farm brands; Gallo Salame; Kahn’s meats; Mr. Turkey; thaen you are a devoted Sara Lee (SLE-$19.67) food customer.

If you purchase Kiwi, Meltonian or Tana shoe care products, Aqua Velva, Brylcreem, Eskinol, Matey, Radox, Ambi, Eva, Williams or Sanex then you use SLE body care products.

If you use Ty-D-Bol, Prodent, White King, Wool-mix or any items from the House of Fuller, then you appreciate SLE-branded products. And if you find apparel from Bali, Abanderado, Barely There, Fila, Hanes, L’eggs, Omero, Tensor, Outer Banks, Wonderbra, Pretty Polly, Kendall, Lovable and Playtex in your home, they also came from Sara Lee.

Up until late 1998 when its shares traded (post-split) at $32, SLE was riding on a thoroughbred. Revenues and earnings were robust and the share price enjoyed excellent growth. Since then management seems to have fallen off and mounted a Kentucky mule.

I can’t help but wonder why this $18 billion-revenue company, with 141,000 employees, that sells affordable, high-quality products with trusted brand names to millions of consumers in more than 200 countries can’t get off its mule. Management hasn’t been able to give shareholders a positive stock return in five years.

In early 1998, SLE shares traded in the low $30s and it’s been downhill since. According to Standard & Poor’s, earnings diddled from $1.26 in 1998 to $1.23 in 2001 to an expected $1.56 in 2002. SLE has a fine product portfolio but, it seems, one of the worst management teams in corporate America.

Proof of pudding is manifold. Its valuation ratios compared to the industry are embarrassing. Its growth rates are half the industry average. The company’s financial strength is 50 percent below the industry average, profitability ratios are 30 percent less than the industry average and company efficiency is 30 percent of the industry average.

The blame belongs to Chairman, Chief Executive Officer and President Steve McMillan, who has been in charge since 1998. In addition to his part-time position with SLE, Steve is also a director of Monsanto Corp., Pharmacia Corp. and Bank of America. Those are important positions, too.

Steve is active on the advisory boards of Stedman Nutrition Center, Duke University Medical School and the Kellogg Graduate School of Management at Northwestern University. Certainly these positions require enormous time and energies.

Steve is chairman of the world-renowned Joffrey Ballet, an active trustee of the Chicago Symphony Orchestra and an important contributing board member of the powerful Grocery Manufacturers of America. Those positions are just a few of Steve’s non-Sara Lee responsibilities that certainly detract from his responsibilities to SLE shareholders. That’s probably one big reason SLE’s stock performance has been so anemic.

Sara Lee has great product but part-time leadership. SLE shares may continue to flounder in a narrow range unless a number of changes are made. Management at Chicago headquarters must either resign or focus its energies on improving the company’s performance. Sara Lee’s board of directors, some of who have been there since the early 1980, must be replaced with members not content to sit on their mules and accept SLE perks and stipends.

Management must personally review its financials, repair its extremely high debt-to-capital ratio and clean up its balance sheet. To boost earnings, management must improve its marketing and increase advertising behind its stronger brands.

Management must address employee efficiency, which is among the lowest in the business, and improve its net profit margins, which are also among the lowest in the industry. I can continue for another page but I think you get the idea.

Sara Lee is a great name and if Sara were alive today and recognized how slovenly her company is managed, she would hire an attorney to force management to bring back her good name. I don’t think the stock performance can get any worse than it is. So, go ahead and buy 75 shares. But don’t expect price excitement until management gets off its mule.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or visit his Web site at www.berkoradio.com.