Sara Lee said on Tuesday it would be raising prices again on its food and beverages, which could continue to affect sales, as it struggles with soaring commodity costs.

Sara Lee executives also shared new details regarding its planned separation into two companies, helping to send its shares up 2 percent.

The maker of Jimmy Dean sausages, Ball Park hot dogs and Senseo coffee also reported a weaker-than-expected profit for the latest quarter.

Sara Lee competes in categories such as packaged meats and baked goods, where consumers often consider price before brand, and Morningstar analyst Erin Lash said sales could continue to feel the pinch.

They are going to continue to battle rising commodity costs, which ate away at their profitability, Lash said. These are pressures we don't think will abate.

Stifel Nicolaus analyst Christopher Growe said the stock was trading at a fair multiple considering its pending breakup.

We see limited upside for the shares from this level given the overall soft fundamentals and the lingering questions around the tax rate appropriate for its new coffee company, Growe said in a research note.

Sara Lee said last month that it plans to spin off its North American meats business into a new publicly traded company that will retain the Sara Lee name after takeover bids proved to be unsatisfactory. The remaining company will be an international beverage business whose name has yet to be determined.

But Sara Lee said it could still be acquired before then.

Analysts had complained that Sara Lee's tax structure was inefficient, since the coffee business generates most of its cash abroad and then repatriates it back to the United States, where Sara Lee is based. The company said moving the coffee business' legal domicile was an option under consideration.

PRICES UP, VOLUMES DOWN

The company reported net income of $880 million, or $1.37 per share, for the quarter that ended on January 1, up from $371 million, or 53 cents per share, a year earlier.

Excluding a gain on the sale of discontinued operations, a tax benefit and other items, earnings from continuing operations were 24 cents per share, a penny short of the analysts' average estimate, according to Thomson Reuters I/B/E/S.

Net sales slipped 0.4 percent to $2.35 billion, as lower volumes and a weaker euro offset price increases and a larger proportion of higher-priced goods. Analysts on average were expecting $2.52 billion.

In the company's North American meats business, which also includes Hillshire Farm lunch meat, sales rose 1 percent despite a 4.9 percent decline in volume, as the company raised prices to offset the rising commodity costs.

In the international beverage business, which includes Douwe Egberts and L'Or, net sales rose 2 percent, despite a 2 percent decline in volume.

Sara Lee's shares were up 2 percent, or 34 cents, at $17.26 on the New York Stock Exchange.

(Reporting by Martinne Geller; Editing by Lisa Von Ahn and Maureen Bavdek)

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