Is the Party Over? Tupperware’s Stock Drops 19%
Tupperware Corp.’s stock plunged 19% on Tuesday after the famed maker of plastic food containers said its once-rapid worldwide growth has suddenly gone stale and that its profit for the three months ending March 31 will unexpectedly drop.
Tupperware has run into several problems in various parts of the world: drooping productivity from its sales forces in Asia and Latin America, stiff competition and a falloff in its number of salespeople in the U.S. market, and sluggish consumer spending in regions such as Japan.
The U.S. dollar’s strength against other major currencies is further hampering the Orlando, Fla.-based company’s effort to keep growing, because its foreign sales are being converted into fewer dollars compared with a year ago.
Indeed, although Tupperware and its use of direct-sale parties hosted by sales agents are an American institution, the United States is now a minor part of Tupperware’s business. The company last year derived 87% of its $1.4 billion in sales--and 96% of its $268 million in operating profit--from foreign markets.
“Strong performance in Europe, our most important market, doesn’t appear to be enough to offset the sluggishness in other geographic areas,” Chairman Warren Batts said in a statement late Monday. The result is that Tupperware’s overall first-quarter profit “is expected to decrease slightly” from a year earlier, with sales rising only modestly, he said.
Batts said conditions should improve in the second half of the year, and some analysts agreed, noting that Asia and Latin America remain ripe for further expansion and that direct selling of consumer goods in general still has excellent growth prospects.
Nonetheless, the announcement jolted Wall Street, and Tupperware’s stock tumbled $8.25 a share to close at $35.875 in New York Stock Exchange composite trading Tuesday, with an extremely heavy 5.8 million shares changing hands.
The setback comes less than a year after Tupperware was spun off into a separate company by Premark International Inc., a diversified maker of food equipment and other consumer goods.
Tupperware, started in the late 1930s by New Hampshire inventor and former DuPont Co. employee Earl Tupper, does not sell its food containers in stores but rather has roughly 800,000 independent salespeople peddling them in 100 countries. The company likes to note that a Tupperware party begins every 2 1/2 seconds somewhere in the world.
Despite its current problems, the company has no plans to start selling its containers through grocery stores and other retail outlets, where major rivals include Rubbermaid Inc., Tupperware spokeswoman Christine Hanneman said.
“Our product line requires demonstration,” she said. “If it was to sit on a store shelf, no one would be able to tell the difference” between Tupperware and its competitors, she said.
Tupperware also tries to sell “systems,” or sets of different-size containers for various kitchen uses, and that would be much harder in a retail setting devoid of a Tupperware sales agent, she said.
Hanneman also noted that other direct-sale firms, such as Avon Products Inc. and Mary Kay Corp., are growing nicely, “so it’s more a matter of us getting our programs correct and our systems right than it is an issue of the [sales] channel” Tupperware uses.
For instance, in Latin America “we’ve grown tremendously” in recent years and heavily recruited new salespeople, but “now we need to spend more time with them . . . to get them active and more productive,” Hanneman said.
Likewise in the Philippines, “our sales force is not being active enough,” she said.
In the United States, meanwhile, Tupperware has been losing a significant number of salespeople, which is being blamed mostly on the company’s decision last year to raise the minimum sales the agents needed to qualify for a free minivan.
The higher hurdle damaged morale and prompted more than 15% of Tupperware’s sales force to leave, analysts said. Tupperware said it’s working to fix the problem by recruiting agents with a new program that offers both cars and vans for certain levels of sales.
Regardless, Tupperware’s U.S. group “needs new investment to shore up the sales organization,” because the division will “post flat sales and a 40% to 50% decline in profits in 1997,” Morgan Stanley & Co. analyst Ajay Mehra wrote in a bulletin issued Tuesday.
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Feeling a Chill
Tupperware Corp.’s stock fell 19% on a forecast of lower first-quarter profits and disappointing sales.
Tuesday’s close: $35.875
Source: Bloomberg News
