TUPPERWARE BRANDS CORP. $92 (New York symbol TUP; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 50.7 million; Market cap: $4.7 billion; Price-to-sales ratio: 1.9; Dividend yield: 2.7%; TSINetwork Rating: Above Average; www.tupperwarebrands.com) gets about 70% of its sales by making high-quality products for the home, mainly plastic food and beverage containers. The remaining 30% comes from its beauty-products division, which makes a wide range of cosmetics, bath oils and fragrances. This division also makes related products like jewellery and bed linens.
The company’s main brands include Tupperware, Armand Dupree, Avroy Shlain, BeautiControl, Fuller, NaturCare, Nutrimetics and Nuvo. International markets supply 90% of its sales.
Direct sales model is a huge asset
Tupperware prefers to sell its goods through independent dealers instead of stores. This helps keep its distribution and marketing costs down. As well, the company pays its dealers commissions instead of salaries, so they have a greater incentive to promote its goods. That means Tupperware rarely needs to spur its sales with costly discounts.
The company has 2.8 million dealers in over 100 countries. These salespeople hold “Tupperware parties” in homes, offices and other locations to demonstrate products and take orders.
In 2012, Tupperware’s dealers held 22 million parties worldwide— or over 60 a day. In addition to selling goods, Tupperware parties provide opportunities to recruit new dealers.
This approach also makes it easier to increase sales in less-developed countries with few stores or distribution networks. These markets, including Asia and South America, now supply 60% of its sales.
Besides parties, Tupperware sells its products through the Internet, catalogues and television shopping programs. That helps it reach customers who are unable to attend Tupperware parties.
Currency rates have an outsized effect
Tupperware’s sales dipped from $2.2 billion in 2008 to $2.1 billion in 2009, mainly because the high U.S. dollar lowered the value of the company’s overseas sales. However, sales rebounded to $2.3 billion in 2010 and reached $2.6 billion in 2011. Sales then fell slightly, to $2.58 billion, in 2012. But, on a constant-currency basis, sales rose 5% in 2012.
Earnings rose 39.8%, from $161.4 million in 2008 to $225.6 million in 2010. Per-share earnings rose at a slower rate of 37.9%, from $2.56 to $3.53, on more shares outstanding. Without unusual items, it would have earned $273.3 million, or $4.45 a share, in 2011.
In 2012, the company closed some of its European cosmetics plants. Disregarding severance and other costs, earnings rose 3.0%, to $281.4 million, or $4.99 a share. The company uses plastic resins made from oil to make its food containers, and higher crude prices added $16 million to its 2012 costs.
In the three months ended September 28, 2013, Tupperware’s earnings fell 1.3%, to $52.5 million from $53.2 million a year earlier. Due to fewer shares outstanding, earnings per share rose 5.3%, to $1.00 from $0.95.
Sales gained 1.5%, to $603.2 million from $594.4 million. Without the negative impact of currency rates, sales gained 6%. Sales in emerging markets increased 13%, which helped offset an 8% drop in established areas like North America and Europe.
Big opportunities in emerging markets
Rising prosperity in developing countries is spurring demand for Tupperware’s containers, because more people can afford to buy food in bulk and refrigerate leftovers. Emerging market consumers are also spending more on beauty products. Tupperware should continue to benefit from these trends.
The company’s balance sheet is sound. Its long-term debt of $619.0 million is a low 13% of its market cap. It holds cash of $126.0 million, or $2.47 a share.
Tupperware also continues to use its strong cash flow to boost shareholder value. In the first nine months of 2013, it spent $303.7 million on share buybacks. It still has $872.3 million on its current repurchase authorization, which expires February 1, 2017.
As well, Tupperware recently announced that it will pay out 50% of the previous year’s earnings, before unusual items, as dividends. It sets its dividend payment in the first quarter of each year. In 2013, it increased the quarterly rate by 72.2%, to $0.62 a share from $0.36. The new annual rate of $2.48 yields 2.7%.
The company will probably earn $5.49 a share in 2013, and the stock trades at 16.8 times that figure. However, earnings could rise to $6.13 a share in 2013, which would give the stock a more reasonable p/e ratio of 15.0.
Tupperware is a buy.
