Tupperware's Q2 earnings down about 8% to US$33.1M as a stronger U.S. dollar pushed sales down by 10%; Q3 sales expected to increase 4%-6% in local currency, but fall the same amount in U.S. dollars
July 22, 2009
– Tupperware Brands Corporation (NYSE: TUP - News) today reported second quarter 2009 sales and profit. Second quarter 2009 sales increased in local currency by 4% versus 2008, before a negative impact from foreign exchange rates of 14%. This resulted in a GAAP sales decrease of 10% compared with 2008.
Chairman and CEO, Rick Goings commented, "We are pleased to report another quarter of local currency sales growth in spite of the macro economic environment we are operating in. We delivered top line growth in local currency in all three of our Tupperware segments and Beauty Other. Our emerging markets, which comprised 51% of total sales in the quarter, were up 10% in local currency, and included a significant number of markets with double digit increases, including Tupperware South Africa, India, Indonesia, Malaysia, Mexico, Venezuela and Brazil. The established markets, while down 1% in local currency, showed significant improvement in trend versus the first quarter. We achieved increases in a number of these markets including Tupperware France, Italy, Austria, Japan and the United States."
"Our management teams around the world continue to drive sales growth through various programs and incentives that support our sales force and the earnings opportunity we provide them. We were able to achieve 56% local currency profit growth excluding items, which was significantly higher than our local currency sales growth, through improving our gross margin and managing expenses while continuing to support our current business and investing in our future growth and success. In addition we generated more than $100 million in cash flow from operating activities net of investing activities in the quarter, enabling us to pay down all of our revolver borrowings and $20 million of term loans," said Rick Goings.
Diluted GAAP earnings per share of 52 cents for the second quarter of 2009, down 4 cents versus last year, included net negative 34 cents from items impacting comparability. This included non-cash impairment charges related to purchase accounting intangibles of $28.1 million pretax (41 cents per share) partially offset by gains from an insurance recovery of $10.1 million pretax (10 cents per share).
Adjusted diluted earnings per share of 86 cents was 24 cents better than the high end of the guidance range given in April. This was also up 11 cents, or 15% versus the prior year, overcoming a negative 20 cent impact on the comparison from foreign exchange. The increase versus last year came primarily from an improved sales mix, lower promotional spend, the benefit of expense saving action plans and lower costs of procured items.
Tupperware Brands will conduct a conference call tomorrow, Thursday July 23, 2009 at 10:00 am Eastern time. The conference call will be webcast and archived along with a copy of this news release on www.tupperwarebrands.com.
Second Quarter Segment Highlights*
In Europe, second quarter sales were up 2% versus prior year in local currency (down 13% reported). Established markets were even with last year in local currency (down 13% reported) and included double digit increases in France and Austria, as well as a high single digit increase in Italy. The German business while down mid single digit, improved sequentially versus the first quarter. The emerging markets were up 6% in local currency (down 15% reported). Growth came primarily from Tupperware South Africa and Turkey. Despite a difficult start to the quarter, there was a low single digit increase in Russia. For Europe overall, profit was up 25% versus prior year in local currency (up 2% reported). Total sales force in the segment was up 13% at the end of the second quarter and the average active sales force was up 5% in the second quarter.
Asia Pacific sales were up 15% in local currency (up 7% reported) in the quarter with emerging markets up 32% in local currency (up 21% reported). The growth continued to be led by Indonesia, Malaysia and Singapore, India and Korea, which were all up strongly versus the prior year, partially offset by a decrease in China that was lower than in the first quarter. The established markets were even with last year in local currency (down 6% reported) and included a mid single digit increase in the Tupperware Japan business offset by Tupperware Australia. Profit was up 19% in local currency (up 2% reported). Total sales force was up 18% at the end of the second quarter and the active sales force was up 28% in the quarter.
Tupperware North America sales were up 6% in local currency (down 5% reported) versus prior year, and included a low double digit increase in Mexico and a mid single digit increase in the United States and Canada where positive trends continued in spite of the negative external environment. Profit for the segment was up 64% in local currency (up 39% reported). The total sales force size at the end of June was up 9%, and the active sales force for the quarter was up 4%.
Beauty North America sales were down 8% in local currency (down 23% reported) reflecting a double digit decrease by BeautiControl and a low single digit decrease by Fuller Mexico. BeautiControl is focused on strengthening the business by re-emphasizing selling through the party and recruiting sales force members under the earnings opportunity. Fuller Mexico achieved a better sales comparison than in the first quarter through better productivity, although the sales force size was down slightly at the end of the quarter. The segment's profit in the quarter increased 14% in local currency (down 13% reported). Total and active sales force for the segment was down 4% versus prior year.
Beauty Other sales were up 12% in local currency (down 3% reported), with most of the increase coming from Tupperware Brazil and Venezuela and Fuller Argentina. Profit of $7.4 million, improved from about break even in the prior year, primarily from the contribution margin associated with the higher local currency sales, along with value chain improvements in Venezuela and Brazil. In the first quarter, the Company began selling beauty products in Brazil through its Tupperware sales force rather than through the separate beauty business it had been operating. This contributed to the profit improvement. The total sales force advantage for the segment was 3%, and active sellers were down 10% from the prior year.
Year to Date Results
Sales for the first half of 2009 were up 2% in local currency (down 12% reported). The Tupperware brand segments grew 4% in local currency (down 10% reported) and the Beauty brand segments were down 1% in local currency (down 17% reported). Businesses operating in emerging markets, comprising 50% of total company sales grew 10% in local currency (down 12% reported) and the rest of the businesses that operate in established markets were down 4% in local currency (down 13% reported). The total sales force was up 6% at the end of June and active sellers were down 1% for the year-to-date period. Profit from the operating segments rose 29% in local currency (4% reported), driven by double digit improvements in all segments except Beauty North America which was up mid single digit. There were significant improvements in the emerging markets of Tupperware South Africa, Brazil and Indonesia and the established markets of Germany and France. Diluted earnings per share was $0.93, up 34% in local currency (down 13% reported). Excluding certain adjustment items for the first half of 2009, diluted earnings per share was $1.31, up 40% in local currency (equal to last year reported despite a negative 38 cent impact on the comparison from foreign exchange rates).
Third Quarter 2009 Outlook
The third quarter sales outlook is for an increase of 4 to 6% in local currency. Factoring in a negative impact from foreign exchange rates of 10%, sales in dollars are expected to decrease by 4 to 6%. GAAP diluted earnings per share is expected to be 29 to 34 cents, with a net negative impact of 4 cents from items impacting comparability. Excluding these items, diluted earnings per share is forecast to be 33 to 38 cents. This compares with GAAP diluted earnings per share of 43 cents last year and 47 cents excluding certain items.** The guidance reflects a negative impact on the comparison of 13 cents from weaker foreign currencies, indicating a double digit percentage local currency increase at the high end of the range.
Full Year 2009 Outlook
Full year 2009 sales are expected to increase in local currency versus 2008 by 3 to 5%. Based on current foreign exchange rates there is a 10 percentage point negative impact on the comparison, resulting in a reported sales decrease of 5 to 7%. The local currency sales increase includes a high single to low double digit increase from businesses in the emerging markets and sales down slightly versus last year in the established market businesses. Earnings per share on a GAAP basis is expected to be $2.25 to $2.30., with a net negative impact of 34 cents from items impacting comparability. Excluding these items, diluted earnings per share is forecast to be $2.59 to $2.64 (see detail in the Non-GAAP Financial Measures Outlook Reconciliation schedule). This compares with GAAP diluted earnings per share of $2.55 last year and $2.68 excluding certain items.** This includes a negative 44 cents impact versus 2008 from foreign currency rates. Excluding the impact of foreign exchange on the comparison, this represents an increase over the prior year of 16 to 18% and compares with the April 2009 guidance range of $2.16 to $2.26, which represented a 3 to 8% increase in local currency. This outlook includes foreign exchange rates as of July 17, 2009, for the third and fourth quarters of 2009.
Rick Goings Chairman and CEO, commented, "Being a global portfolio of direct selling companies has helped us to provide consistent top and bottom line growth even in a challenging macro economic environment. As we go into the second half of the year we will continue to utilize the levers within our control to help mitigate the impact of these negative externals. We are focused on the key business metrics that will sustain our continued growth and profitability. This includes not only continued growth in the size of our sales force, but more focused training of our new recruits in order to get them active in the business more rapidly. Together these will continue to drive our top line sales growth. At the same time our management teams will continue to diligently monitor and control expenses while investing appropriately in our business."
"One of our key strengths and differentiators is the direct selling expertise of our management teams around the world. Each business is run locally and management is empowered to make changes when necessary in order to react to changing market conditions. And, while not immune to the environment in which we operate, because of this management strength we are well equipped to navigate through it."
* See Non-GAAP Financial Measures Reconciliation Schedule. Amounts discussed in Segment Highlights are on a GAAP basis and include purchase accounting amortization.
**2008 Basic and Diluted earnings per share has been recast to conform with FASB Staff Position EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities. This guidance was adopted in the first quarter of 2009 and reduced 2008 third quarter and full year diluted earnings per share by $0.01 versus the originally reported amount.
Tupperware Brands Corporation is a portfolio of global direct selling companies, selling premium innovative products across multiple brands and categories through an independent sales force of 2.4 million. Product brands and categories include design-centric preparation, storage and serving solutions for the kitchen and home through the Tupperware brand and beauty and personal care products for consumers through the Armand Dupree, Avroy Shlain, BeautiControl, Fuller Cosmetics, NaturCare, Nutrimetics, Nuvo and Swissgarde brands.
The Company's stock is listed on the New York Stock Exchange (NYSE: TUP - News). Statements contained in this release, which are not historical fact and use predictive words such as "outlook", "expects" or "target" are forward-looking statements. These statements involve risks and uncertainties which include recruiting and activity of the Company's independent sales forces, the success of new product introductions and promotional programs, the governmental approvals for use in food containers of materials such as polycarbonate, the success of buyers in obtaining financing or attracting tenants for commercial and residential developments, the effects of economic and political conditions generally and foreign exchange risk in particular and other risks detailed in the Company's most recent periodic report as filed in accordance with the Securities Exchange Act of 1934. The Company does not intend to update forward-looking information other than through its quarterly earnings releases unless it expects diluted earnings per share for the current quarter, excluding adjustment items, to be significantly below its previous guidance.
IndustryIntel Editor’s Note: In an omitted table, the company reported Q2 net sales of US$524.7 million, earnings of US$33.1 million and diluted earnings per share of US$0.52. For the same period a year ago, the company reported net sales of US$583.6 million, earnings of US$36 million and diluted earnings per share of US$0.56.
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