Tupperware Sales Down In 2nd Quarter
Tupperware Brands Corporation today announced second quarter 2014 operating results.
Rick Goings, Chairman and CEO, commented, While sales results slowed this quarter, we were still able to achieve adjusted E.P.S. in our guidance range. Overall, the business continued to grow, with several markets achieving 20%+ local currency sales increases including Brazil, China, Italy and Turkey.
Both businesses in our North America beauty segment also showed significant sequential sales improvement. Having said this, the quarter was challenging in several aspects. We were up against strong comparisons from prior year when we had our strongest quarterly local currency sales growth at 8%, as well as some external and internal challenges, particularly in Germany. However, our 2.9 million sales force members continue to operate their businesses and earn income to help support their families.
Goings continued, The four pillars of our business model enable us to succeed. By focusing and delivering on these pillars: innovative premium quality products; an entertaining selling situation, or party; compelling sales force compensation; and leveraging of direct-to-consumer fundamentals, I am confident that through the strength of our management teams around the world we will see better future sales and profit growth in spite of the challenges we'll inevitably encounter.
Second Quarter Executive Summary
Second quarter 2014 net sales were $674 million. Emerging markets**, accounting for 66% of sales, achieved a 10% increase in local currency. Established markets were down 7% in local currency, largely driven by poor results in Germany.
GAAP net income of $47.6 million includes $22.2 million for the impact from currency devaluations in Venezuela, including translating net monetary assets on the June 28 balance sheet at the SICAD II rate of 50 Venezuelan bolivars/dollar versus the previous rate of 10.8 bolivars/dollar.
Net income down 38% versus prior year GAAP net income of $76.3 million. Excluding foreign currency, net income was down 31% versus prior year. Adjusted diluted E.P.S. of $1.47 included 14 cents negative impact versus 2013 from changes in foreign exchange rates, which was 1 cent worse than included in April's guidance.
Second quarter cash flow from operating and investing activities was $45 million, versus $49 million in prior year, primarily reflecting planned higher capital spending.
In the second quarter, the Company returned $47 million to shareholders through a dividend payout of $33 million and the repurchase of 171 thousand shares for $14 million. Since 2007, 20 million shares have been repurchased for $1.2 billion, with $0.8 billion left under an authorization that runs until February 2017.
Total sales force of 2.9 million was up 5% versus prior year at the end of the quarter, with continued advantages in most markets.
Second Quarter Business Highlights
Europe: Strong double digit increases in Turkey, Italy and Avroy Shlain in South Africa, offset by impact of lower activity in several markets including; Germany, CIS and Tupperware South Africa.
Segment sales, down 5% versus last year in reported and local currency.
Emerging markets were up 1% in local currency. Primarily driven by Turkey, up 28%, and Avroy Shlain in South Africa, up 27%, largely offset by CIS, down 38% primarily due to a much less active sales force, reflecting a difficult comparison.
Established markets were down 8% in local currency. Germany with a slight sales force advantage at the end of the quarter, but significantly lower sales force activity, was down 29%. France's local currency sales were even with prior year, after having been down in the first quarter, and the unit ended the quarter with an 11% sales force advantage. Italy, up 32%, also ended the quarter with a double digit sales force size advantage.
Asia Pacific: Indonesia and China sales up double digits
Sales for the segment were down 1% reported and up 6% in local currency, driven by the emerging markets up 9% in local currency, led by China, up 28%, Indonesia, the largest business unit in the world, up 16% and Malaysia/Singapore up 8%, partially due to shift in promotional timing. India, while down 9%, had a 5 point sequential improvement in its comparison. There is a continuing focus on mitigating macroeconomic factors in India, as well as focusing top end sales force leaders on recruiting, training and activating sales force members.
Established markets, comprising 20% of the sales in the segment, were down 4% in local currency.
Active sales force down 3%. The 9 percentage point difference between the sales and active seller comparisons was primarily related to a mix shift toward China and Indonesia that have much higher average order sizes than the segment overall and away from India and the Philippines.
Tupperware North America: Sales down, but better value chain management drove 20% increase in local currency operating income
Segment sales, down 6% reported and down 5% in local currency. Tupperware Mexico sales down 3%, reflected less B2B sales versus prior year, which had a 5 percentage point negative impact on the sales comparison for the unit, and 2 percentage points on the whole segment.
Tupperware United States and Canada sales were down 6% in local currency, compared with a more aggressive prior year promotional approach. The focus continued on building and strengthening the sales force structure and leadership levels. Sales force size closed 2% above prior year.
Beauty North America: Fuller Mexico and BeautiControl show meaningful sequential sales improvement
Sales for the segment were down 5% reported and 3% in local currency versus prior year, from the closing of the Armand Dupree business in the U.S.
Fuller Mexico local currency sales were even with prior year, reflecting a 9 percentage point improvement versus prior quarter. Continued focus on stabilizing and growing the number of sales managers and total sales force size.
BeautiControl sales were up 8%, after being down 17% in the first quarter, primarily driven by increased sales force activity. Continued focus on executing on the programs in place.
South America: Leveraging 14% sales force increase along with inflation driven price increases
Sales up 9% reported and 33% in local currency, driven by Brazil and Venezuela. Brazil was up 22% in local currency primarily by leveraging a larger sales force size. Venezuela was up 90%, with sales of $23.7 million and profit of $9.5 million reflecting inflation driven price increases through much of the quarter. Last 2 weeks of quarter reflect government mandated price reductions, which will significantly impact future results. Year to date Venezuela sales and profit are $56.6 million and $18.7 million, respectively.
Active sales force up 6%. The 27 point difference between the sales and active seller comparisons primarily reflected the ongoing strategies to increase average order size in Argentina, and inflation related price increases throughout the segment.
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