Sara Lee has big plans to strip off underwear and focus on the cheesecake. The Chicago-based company said it would spin off its $4.5 billion U.S. apparel portfolio, which includes Champion sportswear and L'eggs hosiery, into a new public company. That plan does not include its $1.8 billion European apparel unit, which the company is in the process of auctioning off.

The $8.2 billion in planned divestitures, most of which are expected over the next three years, represent about 40% of the company's total sales.

The plan will organize Sara Lee into three new divisions: North American retail, which will include its bakery, meats and Senseo coffee brand; North American foodservice, which serves restaurants and food distributors; and international, which will include food, beverage and household products such as Kiwi shoe polish and Sanex shower gels.

"We have a very clear vision of what Sara Lee will look like," McMillan said on a conference call with analysts. "These (product) categories all have tremendous potential in our portfolio."

Officials said the plan would cost about $1 billion in charges and cash expenditures over five years but eventually could generate annual savings of between $575 million and $800 million. Money from the asset sales will be used to pay down debt and position the company for future acquisitions, Barnes said on the conference call.

Investors applauded the company's plans, sending its shares up 4% on the on the New York Stock Exchange.

The company signaled last month that it would shake up its product lines after cutting its fiscal 2005 earnings outlook by 10%, citing higher raw material costs and a difficult European retail environment.

However, analysts said they were surprised by the scope of the announced plan. Some said jettisoning the apparel business -- with vastly different retail customers and distribution channels than its food and beverage lines -- was overdue. "The actions are much bolder than we anticipated," said John McMillin, an analyst at Prudential Equity Group, in a note to investors. "What is left is a more manageable and higher margin company."

Executing such a broad reorganization, however, poses some risks, said Wesley E. Moultrie, an analyst at Fitch Ratings.

"They have their work cut out, because what will be left is a large food company and a somewhat small household products company, both of which would need some reinvigoration," Moultrie said. "At least it will be a substantially smaller company with the cash to invest without being distracted with other businesses."

The company also said it will sell a $1.1 billion meats business in Europe, a $450 million division that sells cosmetics and household products worldwide, and its retail coffee business, which includes the Chock full o' Nuts and Hills Bros. brands.

Corporate staff from Sara Lee's bakery headquarters in St. Louis and its meat division, based in Cincinnati, will be centralized in Chicago, the company said. Fewer than 300 employees work at the company's downtown Chicago headquarters, spokeswoman Julie Ketay said.

Company officials say that, by 2010, Sara Lee will have roughly the same operational profits it does now despite 40% smaller revenue.

"They took a brand with pedigree and stretched it until it had no meaning at all," says Pam Murtaugh, a brand consultant. "But if Sara Lee wanted to, they could reignite the whole food marketplace."

How? By marketing food, she says, under its Sara Lee, Jimmy Dean and Ball Park brands as something more than a commodity -- at its simplest: by making the food special.

Several experts suggest that Sara Lee could become an industry leader in "better-for-you" food.

"If each brand had a salient and distinctive health message," says Nick Hahn, managing director at Vivaldi Partners, a marketing strategy specialist, "they could be pretty powerful."

"We are taking bold actions," Barnes says, that "will transform the entire enterprise." She says Sara Lee will reorganize its business, refocus its brand portfolio and fund future growth by cutting costs.

Experts say the change could not come soon enough.

"This is the answer for Sara Lee," says Steven Addis, founder of Addis Brand Strategy & Design, who has consulted for Sara Lee. "It's been a long time coming."

As a food company, Sara Lee has rarely been a leader. "They are in the No. 2, or lower, position in most categories in which they compete," Hahn says.

The trick will be to boost the image of Sara Lee foods without messing up the brand, Addis adds.

While Sara Lee needs to innovate healthful options, he says, "you don't want to turn cheesecake into hospital food."

The restructuring will not affect Sara Lee's fiscal 2005 earnings, before any gains or charges that may occur in the next four months. The company also affirmed its second- and third-quarter profit forecasts.