Sara Lee Corp Chief Executive Brenda Barnes will step down permanently as CEO and chairman after suffering a stroke, and the company has begun a search for her successor.

Barnes, 56, has been on medical leave from the food maker since May 14. She became CEO in 2005 and led a major restructuring at the company, which sells Sara Lee baked goods and Hillshire Farm lunch meat.

Like most packaged food makers, Sara Lee has been grappling with weak consumer spending and heavy promotions at the grocery store. Its bread business has been hit hard by lower-cost rivals, including store brands.

Sara Lee said on Monday that Chief Financial Officer Marcel Smits will remain as interim CEO and Mark Garvey will continue as interim CFO. The company is considering both internal and external candidates to replace Barnes. Top contenders from within the company include Smits and Christopher J. (CJ) Fraleigh, head of retail and foodservice in North America.

James Crown, an independent director, will remain chairman of the board, a role he assumed when Barnes went on leave. Crown will continue to lead the Office of the Chairman, which also includes Smits and Fraleigh.

Barnes has also resigned from Sara Lee's board and will not stand for reelection at the annual meeting in October.

Sara Lee closed 0.13 percent lower at $14.82 on the New York Stock Exchange. Through Friday, the shares had gained 1 percent since Barnes' leave of absence was announced.


Since taking the reins at Sara Lee, Barnes has overseen a massive overhaul of the company, spinning off or divesting businesses such as apparel maker Hanesbrands Inc , parts of its Ambi Pur air freshener business and agreeing to sell its European personal care products business for $1.87 billion.

Ken Harris, chief executive of industry consultancy Kantar Retail Americas, said Sara Lee's transition to a world-class food company is not done.

There are still some innings left to play in the game, Harris said. If you asked her, she would tell you she's not done, because the company still has some companies that they're thinking about divesting and they're probably right to do it.

For example, Sara Lee is quietly seeking buyers for its bread unit but has not launched a formal auction, sources familiar with the matter said last month. The company declined to comment at the time.

Smits joined Sara Lee as CFO in October from Dutch telecommunications leader KPN . He also has a food and personal care products background, having worked for 13 years at Unilever Plc earlier in his career.

Fraleigh, who is also an executive vice president of Sara Lee Corp, joined the company in January 2005 as CEO of its food and beverage business. He was named COO of North America in 2007 and to his current position in 2009.

Fraleigh had previously worked at General Motors Co and PepsiCo Inc

, where Barnes had also worked for more than two decades.

Barnes was president and CEO of Pepsi-Cola North America when she stepped down in 1997 to spend more time with her family, including her three school-aged children. The move, by one of the highest-ranking women in corporate America at the time, grabbed headlines and shined a spotlight on the difficulties of balancing a family with a demanding career.

Nearly seven years later, once her children were older, she returned to work as president and chief operating officer of Sara Lee, whose portfolio at the time ranged from Earth Grains bread and Jimmy Dean sausage to Playtex bras and Sanex shower gel. She became CEO the following year.

Harris said Barnes was a courageous leader.

She made some very tough decisions when taking over Sara Lee, in terms of the companies she divested, said Harris. He added that she was inclusive and an excellent manager.

(Additional reporting by Phil Wahba in New York and Shobhana Chadha in Bangalore; Editing by Aradhana Aravindan, Dave Zimmerman, John Wallace, Phil Berlowitz and Richard Chang)