Tupperware stock craters after company warns its debt burden could

Tupperware stock craters after company warns its debt burden could force it out of business

Tupperware Brands Corp.’s stock tumbled 41% on Wednesday after the food-storage products maker missed third-quarter profit expectations, warned it could go out of business and acknowledged some of its problems are homegrown.

“The global macro environment remains challenging and we are not operating at a level or consistency internally that we believe we should be,” Chief Executive Miguel Fernandez told analysts when announcing the earnings results, according to a FactSet transcript company.

Sales slowed in Asia-Pacific and North America and were weak in Europe, where Russia’s war with Ukraine is playing out, he said. China was a disappointment thanks to COVID-related lockdowns that continue to hurt sales. These trends were partially offset by growth in South America, but the strong dollar partially offset this positive development and is expected to remain negative going forward.

Tupperware TUP, -41.66%, was also hurt by actions it is taking as part of a turnaround plan, Fernandez said. These included “pricing decisions” to protect margins in North America and information technology (IT) upgrades that resulted in service issues that hurt sales. The company raised prices by an average of 11% to fight inflation, he said.

“Rest assured that we remain very focused on properly sizing our business and finding the necessary investment funds to support future growth,” he told analysts.

From the archive: You won’t believe what Tupperware calls the key challenge

A key move is the launch of Target Corp. sales at 1,900 stores. TGT, -2.67% in the US, which started 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 say only accounts for a tiny portion of total retail sales.

“This is an important step in reconnecting with today’s shoppers, particularly GenZs and Millennials, who are more affluent consumers who have likely never been to a Tupperware party,” said Fernandez. “We think it’s crucial to reach younger and more affluent consumers and bring them into our ecosystem.”

Several analyst questions on the conference call focused on the company’s debt and its efforts to extort concessions from its bank lenders so it can meet financial agreements.

The company had total debt of $704 million at the end of the quarter, up from $684.8 million a year earlier. Cash flow from operations was a $65.8 million year-to-date outflow due to higher working capital and lower earnings.

A recent amendment to the loan agreement would see Tupperware reduce its maximum leverage ratio from 4.50 times in the third quarter to 4.25 times in the following two quarters, and Chief Financial Officer Mariela Matute conceded that this was unlikely is. The company said in its earnings announcement that the issue casts “significant doubts” on its ability to continue as a business.

At the analyst call, Matute tried to reassure investors that the company will manage the issue.

“We are taking a proactive approach and have started discussions with the banks to provide additional flexibility as we continue to right-size the business based on our current revenue trends,” she said.

Tupperware “has been here before,” she added, directing analysts to the timeframe in 2020 when the company had to cut more than $150 million in costs.

“And currently we have plans to save more than $100 million in fixed costs over the next three years and expect every investor to come back,” she said.

Ahead of Wednesday’s opening bell, the company said it posted third-quarter net income of $16.8 million, or 38 cents a share, after posting a loss of $86.1 million in the same period a year ago. dollars, or $1.63 per share. Adding just continuing operations, the company reported a net loss of $3.8 million on income of $60.4 million.

Excluding one-time items, adjusted earnings per share fell to 14 cents from $1.19 a year ago and missed two analysts’ average EPS estimate of 42 cents, according to FactSet.

Revenue fell 20% to $303.8 million, below the median analyst estimate of $316.1 million, according to FactSet.

Tupperware stock is down 70% year to date, while the S&P 500 SPX is down 19% at -2.50%.