Tupperware stock hole after company warned debt burden could force it to go out of business
Shares of Tupperware Brands Corp. fell 41% on Wednesday, after the food storage products maker missed third-quarter earnings expectations, warned it could go out of business and acknowledged that some of the problems were its own. do.
CEO Miguel Fernandez told analysts on the company’s earnings call, according to a FactSet transcript.
Sales have slowed in Asia Pacific and North America, and weak in Europe, where Russia’s war with Ukraine is raging, he said. China was a disappointment, as COVID-related lockdowns continued to hurt sales. Those trends were partially offset by growth in South America, but a strong dollar offset some of that positive and is expected to remain negative going forward.
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Fernandez said. These include “pricing decisions” to protect margins in North America and information technology (IT) upgrades that created service issues that hurt sales. The company has increased prices by an average of 11% to combat inflation, he said.
“Rest assured that we remain highly focused on the right size of our business and find the investments needed to support future growth,” he told analysts.
From the repository: You won’t believe what Tupperware says is a significant challenge
One key move was to start sales at 1,900 Target Corp.
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stores in the US began operating at the beginning of the current quarter. It’s part of a strategy to reduce the company’s reliance on direct sales, which trade groups note represents only a small fraction of overall retail sales.
“This is an important step in re-engaging with today’s shoppers, especially GenZ, and the younger generation, more affluent consumers who may have never been,” Fernandez said. a Tupperware party. “We think it’s important to reach out to younger and affluent consumers and bring them into our ecosystem.”
Some of the questions from analysts on the call focused on the company’s debt and the company’s effort to squeeze concessions from bank lenders so the company could comply with its financial covenants. main.
The company had $704 million in total debt at the end of the quarter, up from $684.8 million a year ago. Operating cash outflow is $65.8 million year-to-date, due to higher working capital and lower earnings.
A recent credit agreement amendment requires Tupperware to reduce its maximum leverage ratio from 4.50 times in the third quarter to 4.25 times in the next two quarters, and Chief Financial Officer Mariela Matute acknowledges that. unlikely. The company said in its earnings release that the matter “raises significant doubt” about its ability to continue operating as a regular concern.
During the analyst call, Matute sought to reassure investors that the company would manage the matter.
“We are taking a proactive approach and have begun discussions with banks to create more flexibility as we continue to scale our business in line with our current revenue trends. ,” she said.
Tupperware “has been here before,” she added, introducing analysts to the 2020 period when the company must cut more than $150 million in costs.
“And now, we plan to set aside over $100 million in fixed costs over the next three years and expect every investor to come back,” she said.
Before the opening bell on Wednesday, the company said it move to third quarter net income was $16.8 million, or 38 cents a share, from a loss of $86.1 million, or $1.63 a share, in the same period a year earlier. When counting only continuing operations, the company posted a net loss of $3.8 million from earnings of $60.4 million.
According to FactSet, excluding unused items, adjusted earnings per share fell to 14 cents from $1.19 a year ago and ignores the two analysts’ median EPS estimate of 42 coin.
FactSet said revenue fell 20% to $303.8 million, well below analysts’ average estimate of $316.1 million.
So far, Tupperware stock is down 70% for the year, while the S&P 500
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fell 19%.
