Tupperware Brands(US:TUP)2022-08-03 15:50Financial Data and Key Metrics Changes - Net sales for Q2 2022 were $340 million, a decrease of 14% compared to the previous year, primarily due to weaknesses in Europe and lockdowns in China, partially offset by strength in South America [40][41][56] - Gross profit was $221 million, representing a decrease of 19% year-over-year, with a gross margin of 64.9%, approximately 400 basis points lower than last year [48][56] - Adjusted earnings per share were $0.41 in Q2, compared to $0.90 last year, driven by various factors including unfavorable currency translation [52][56] Business Line Data and Key Metrics Changes - In the U.S. and Canada, net sales declined by 24%, but operating profit improved by 200 basis points due to necessary business model changes and a 10% price increase [15][45] - Mexico saw a 1% increase in sales, while Brazil's net sales increased by 1% driven by higher retention and service improvements [17][47] - South America experienced a 12% increase in net sales, primarily due to successful campaigns and price increases averaging 17% [47] Market Data and Key Metrics Changes - Asia's net sales declined by 16%, with China down 32% due to ongoing lockdowns, while excluding China, the Asia Pacific business was down 8% [41][20] - European net sales declined by 30%, driven by low consumer sentiment and timing of retail loyalty programs [43] - North America saw a 14% decline in net sales, primarily due to lower sales force engagement and productivity [45] Company Strategy and Development Direction - The company is focused on a turnaround plan initiated in early 2020, which includes divesting non-core businesses and improving capital structure [9][10] - Investments are being made to open new channels and distribution, upgrade systems, and attract new talent to enhance brand accessibility [11][12] - The omnichannel expansion plan remains on track, with early successes in markets like Korea and ongoing tests in retail channels [22][24] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenges posed by global events, inflation, and currency headwinds but remains confident in the turnaround plan's success [12][35] - The timeline for recovery has been extended by approximately 9 to 12 months due to external factors, but growth is expected as conditions improve [63] - Management anticipates sequential improvement in profitability and sales as the company navigates through current challenges [56][80] Other Important Information - The company completed a $75 million accelerated share repurchase during the quarter, which contributed $0.09 to adjusted EPS [54] - A new VP of Supply Chain and SVP of U.S. and Canada Omnichannel Expansion were hired to support business expansion goals [33] - The company is committed to ESG targets and has pledged to promote a circular economy [32] Q&A Session Summary Question: What are the big mile markers needed to transition from stabilization to expansion? - Management indicated that the turnaround plan is divided into fixing the core business and meeting consumers where they shop, with a timeline potentially delayed by 9 to 12 months due to external factors [60][63] Question: Can you discuss the demand elasticity in response to price increases? - Price increases varied from 3% to 56% across markets, with some sales force groups buying ahead of increases, while others did not [65] Question: Have there been meaningful changes to costs since the end of Q2? - Resin costs increased between 9% and 13%, with similar increases in freight and distribution costs expected to continue [69] Question: How should cash flows and leverage ratios be viewed for the back half of the year? - The company negotiated amendments to create more flexibility for investments in turnaround initiatives while managing debt levels [70] Question: Is the executive team satisfied for the journey into new sales channels? - Management feels confident in the current team but may consider additional hires in the EMEA region [71] Question: What is the outlook for the tax rate in the back half of the year? - The tax rate is expected to remain high in the short term due to a mix of earnings from various countries [73] Question: How much investment in technology is anticipated for the remainder of the turnaround? - IT investment is expected to be approximately 50% to double the current spending as part of a multiyear modernization plan [79] Question: Will profitability improve sequentially in the second half? - Management expects improvements across all metrics, including top line and bottom line, despite ongoing challenges [80] Question: What is the stance on share repurchases going forward? - The company does not anticipate additional share repurchases for the remainder of the year, focusing instead on managing working capital and debt [91]