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Text: Actual results may differ materially from such statements.
Please note that any reference to net sales today is being made on a constant-currency basis, which reflects the application of the current period foreign exchange rates to any prior period results enabling comparisons, excluding the impact of foreign exchange rate fluctuations.
This is our sixth quarter of consistent successful execution against our three-year turnaround plan.
We're now at the midway point and are building a solid foundation for sustained growth and expansion.
Let me summarize our strategy for those of you who are new to the Tupperware turnaround story.
Our strategy includes fixing our core direct selling business while building an omnichannel consumer product company.
We're doing that by creating sub-brands that will enable us to strategically merchandise and price our products to minimize channel content.
The idea is to increase consumer access to our iconic products wherever they choose to buy.
2020 was a year of stabilization.
This year, 2021 is the foundation year where we continue to fix our core business and build the foundation to invest in the omnichannel opportunity.
We'll talk more about this opportunity today.
Next year, 2022, will be the year of expansion where we really begin to enter new channels and product categories.
And in 2023 and beyond, we will accelerate those efforts for long-term sustained growth.
During the quarter, we executed on several high-priority strategic initiatives that will improve our capital structure and position us well for the future.
We will get into more detail on each of these later in the call, but at a high level, include, progressing on divesting our noncore assets, including our beauty businesses and excess property holdings, enabling us to focus more time and resources on growing our core Tupperware brands and utilizing the recently authorized share repurchase facility to buy back 1 million shares during the third quarter, accelerating returns to shareholders.
These actions support our turnaround plan and are important components that will enable us to grow, expand and ultimately achieve our long-term strategic goals.
As a result, our net sales of $377 million reflects our core Tupperware business, which declined 13%, primarily reflecting difficult comparisons from 2020, along with COVID-related market closures in 2021 and disruption in our US and Canada business due to the implementation of a new technology platform.
From an earnings standpoint, our adjusted earnings per share of $1.19 reflects our improved cost structure and new tax strategy that Sandra will describe later on the call.
And during the quarter, we knew we were up against tough year-over-year comps.
Remember, we grew 21% in Q3 of 2020, yet our team executed well.
The prior year period benefited from an increase in demand from shift in consumer behavior as most of us were under lockdown and adjusting to working, learning, and eating from home.
Now that several markets have begun to open up mostly the US and Europe, we've seen a reversal of that trend as consumers are excited to get out and go places again and shopping at more traditional retail channels.
And we believe this trend will continue.
While some of the markets have begun to open up, others have gone into strict or mandatory lockdown in response to COVID resurgence in many regions, especially in Asia Pacific and Latin America.
This has had a significant impact on recurring efforts and overall productivity given the restrictions of personal gatherings and opportunities to directly connect with the brand.
That said, we believe these headwinds are transitory in nature and will begin to normalize in the near to medium term.
As I will talk about later, we are working to reconnect with our sales force and give them tools and support they need to be successful in any market environment.
And because these headwinds had the most impact on our direct selling business in the third quarter, we believe that our strategy to diversify into multiple channels as we roll our business is being directly validated.
We believe that our turnaround will not produce linear results as evidenced by the third quarter but that over time, both top and bottom line will improve as we implement our growth plans.
Now that we are six quarters into our third year turnaround plan, this midway point feels like an appropriate time to summarize the progress we have made over the last 18 months.
In short, the company was in a very different place in April of 2020.
Quite frankly, the business was not doing well, and we needed to make major changes to keep this iconic brand afloat.
The solution was to execute a full turnaround of entire business.
We did this by rightsizing our cost structure, delivering $192 million in savings in 2020.
We've created a global business services group to generate operational efficiencies, centralizing and optimizing many of our back-office functions with a mandate to improve service and reduce costs, refinancing our debt and improving liquidity.
In fact, our leverage ratio is a third of previous levels.
On capital structure, we made significant progress.
After selling our Avroy Shlain Beauty business earlier this year, we're working diligently to sell our remaining beauty business and excess land on holdings.
Lastly, we repurchased shares of our common stock.
And I should mention that this was the first time we bought back shares since 2018, reflecting our belief in a positive outlook of our share appreciation as we execute our turnaround plan, and restructuring the company from systems and processes to strategy and personnel.
We've made detailed investments to improve sales force productivity.
We implemented a new sales force system in the US during the second quarter.
Given that the legacy system was customized to the needs of our sales force for the last 20 years, the new technology solution caused disruption to our sales force in the past few months.
We've begun working closely with our sales force over the past several weeks and believe once fixed, the technology will be enabler for our sales force to grow their business.
We've increased our use of data to make better and smarter business decisions.
We've begun using more data-driven approach designed to identify best practices, improve our marketing communication, upgrade our business intelligence to make better decisions and ensure competitive service and costs.
We're also using data-driven approach to segment how we look at our sales force and customers to personalize the experience they have with Tupperware.
That means providing differentiated support, service and incentives to all of our sales force, our customers, ensuring we are adding value as a result, improving retention.
To that end, we've introduced preferred customer loyalty programs in some of our biggest markets such as Mexico and plan to roll out additional markets including the US soon.
We've continued to innovate and expand product lines, soon-be, sub-brands, and product categories beyond the kitchen.
This strategy will enable us not only to compete on price more effectively, but also to segregate which products are sold through which channels, helping us minimize channel conflict.
One of our first sub-brands is called Tupperware Essentials.
And we've recently begun testing consumers' response in Europe through selected retailers.
We're also continuing the work of expanding our product line beyond the kitchen.
Finally, we recently received a recognition from fast company for our product innovation and specifically for our Echo-plus to go coffee cup, which is made of our revolutionary Ecoplasmaterial and our solution for eliminating single-use coffee cups.
We're also working to improve our service level.
Service means serving both our sales force and the end consumer better, giving our sales force the tools they need to be successful and ensuring the end customer has a good experience.
So service is much more than just delivery of customer service.
It is the entire customer and sales force journey.
This effort is a true cultural shift for our company, but one that is necessary to compete in an omnichannel business.
In hindsight, that's a lot.
We're not even close to the same company that we were 18 months ago, and we're proud of the progress we've made.
Lastly, we have to recognize that the pandemic induced an inability to gather people and connecting person has been less than ideal.
For six quarters, the entire time, the new leadership team has been in place, we have not been able to meet face to face with our sales leaders around the world.
And we think that that has a cumulative effect.
Now with vaccination rates increasing in many regions, the executive team finally has the opportunity to get back to meeting sales leaders in person.
We also intend to resume incentive trips and events that were put on hold in the past 18 months due to travel restrictions.
This was a portion of our total cost savings we said we anticipate coming back when we return to more normal activity.
Next on business expansion, which is essentially channel expansion and includes B2B loyalty programs selling to retailers and studios and selling through an important move.
We continue to make good progress.
For the year-to-date period through September, business expansion represented 21% of total sales, which is an increase compared to where we were in Quarter 2.
Also, last quarter, we mentioned that we were looking to enter into the UK.
So I'm excited to announce that we just signed an agreement with a large UK distributor who distributes products of international brands in many of the major retailers in the UK.
The UK market is sizable and represents a large opportunity for us.
And we think this approach will enable us to gain faster traction in this key market.
Expanding into new channels is a key component of our strategic plan that will enable us to meaningfully increase the consumer aspect of Tupperware product.
It also reduces the reliance of single channel and therefore, is expected to minimize the volatility of our performance during any given period.
Next on our ESG efforts.
During the fourth quarter, we launched a power project with TerraCycle Loop in Canada where we will be providing sandwich keepers for five Tim Hortons locations.
A customer can opt to pay a small premium basically a deposit for the sandwich keeper.
And if they return it to Tim Hortons when they're done, they will receive their deposit back.
Loop then cleans and returns it to the restaurant for future use.
We were recognized in the Fast Company's first annual list of brands that matter, which honors spreads to do more than just selling products or provide services.
Brands achieving relevance through cultural impact, social engagement, and authentic communication of their mission and ideas.
It is especially gratifying to be recognized for our purpose and it is indicative of the progress we're making to chart a new path for this iconic brand.
Lastly, we will soon be publishing our new sustainability report, which include clear ESG goals and targets intended to further demonstrate and realize our commitment to our purpose.
Looking ahead, it is our goal to be a very different and even stronger company 18 months from now.
Our near-term priorities continue to be strengthening our direct selling business through structural service improvement, detail and property investment, use of data to optimize practices and expanding into new channels and product categories.
We're running a long-term strategic plan.
Our path won't necessarily be linear.
And therefore, investors should naturally expect near term ebbs and inflows.
But longer term, we're confident we will achieve our goals given the power of our brand, coupled with our improved liquidity and capital structure.
I will now turn the time over to Sandra, our CFO and COO, to provide a full report on the quarter.
It was indeed a significant quarter for the company and continuing to establish the foundation while investing in the business to prepare for the next six quarters of our turnaround plan.
Before I begin the detailed financial discussion for the quarter, I want to address a reporting change that will be evident in the release of our 10-Q.
Because we've either sold or are actively working to sell several of our beauty brands, the necessary criteria have been met to classify these businesses as held-for-sale assets and discontinued operations as of the third quarter of 2021 and have also been restated as such in the prior-year period.
We believe this is also very aligned with our strategy to focus on the performance of our core business.
Details of the results from discontinued operations will be presented separately in our financial statement footnotes found in our Form 10-Q.
I will note that we did record an approximate $148 million noncash loss within discontinued operations, primarily driven by accumulated currency translations, which is standard GAAP accounting practice.
Now I will discuss the results of continuing operations in the quarter.
Net sales of $377 million in the quarter represents a decrease of 13% compared to last year.
The year-over-year decline was driven by lockdowns caused by the persisting pandemic, disruptions caused by the implementation of a new independent sales force solution in the US and lower productivity caused by higher levels of vacationing, especially in Europe.
We believe many of these headwinds are transitory in nature.
But nevertheless, we have reprioritized certain initiatives to ensure we're providing full support to our sales force across the globe.
In the quarter, total business expansion or nondirect selling business, which includes B2B, importers, EU markets, and other business expansion efforts represented 24% of total sales.
For the year-to-date period, total business expansion was 21% of total sales, up 100 basis points compared to the same year-to-date period through June.
B2B partnership sales in the quarter were $16 million or 4% of total sales.
Historically, our annual B2B sales have been between $30 million to $35 million.
And for this fiscal year, our goal is to reach $50 million.
Year-to-date through September, we've already achieved $35 million.
Our B2B relationship with portfolio of new programs of major retailers, while at the same time, increasing our brand awareness.
I'll reiterate that expanding into new channels represents a significant growth opportunity for Tupperware.
Turning now to sales performance by regions.
In Asia Pacific, sales decreased by 15%.
The slowdown in China was driven by COVID lockdowns related to resurgence challenges, ineffective and low vaccination rates as well as by studio closings and a slower pace of new openings.
I should note that we recently made an important leadership change in this market.
We believe China continues to hold significant potential for the Tupperware brand long term.
Other areas within the region were down 12% in the quarter, severely impacted by COVID, including by mandatory or strict lockdowns in Malaysia, Indonesia, and the Philippines, which significantly impacted sales efforts, particularly as digital adoption is low in many of these regions.
We think there is a significant opportunity to improve performance within the region as we focus on increasing digital adoption.
In Europe, sales decreased by 20%.
Excluding B2B, sales decreased by 17%, mainly due to the timing of a B2B deal in Italy in the prior year that was not repeated this year.
European developed markets were significantly impacted by elevated levels of summer vacationing, which is customary in Europe and likely exasperated this year, given a full year of travel restrictions.
We also eliminated certain unprofitable promotions this year to continue to improve the profitability of the region.
European emerging markets were impacted by COVID lockdown and civil unrest, resulting in lower productivity and recruitment, which are a natural side effect of such challenging conditions.
In North America, sales decreased by 15% in the quarter, while US and Canada decreased by 20%.
The decrease in the US and Canada were driven primarily by disruption caused by the implementation of our new sales force solutions.
We are taking actions to address change management challenges related to the salesforce system including talking with the vendor and working to migrate personal sales force ordering sites to a more consumer-friendly solution.
As Miguel previously mentioned, we've also begun to take action to reconnect with our sales leaders face to face to understand how to serve them and our end customers better.
Those efforts are yielding valuable insight that will help us to improve.
Sales in Mexico decreased by 6%, driven by a significant sales force reduction stemming from service issues during the second quarter as well as lower-than-expected recruitment due to primarily COVID restrictions.
We already have a campaign underway to recruit and reengage the sales force in this region.
In South America, sales increased by 9%.
Sales in Brazil were flat, which we view as positive given its cumulative recruitment issues due to COVID.
We attribute the relative strength to significant recruiting efforts and the simplification of our onboarding and training processes.
Argentina was a bright spot this quarter, which we attribute to the rollout of digital training platforms and expansion of e-commerce on a national level.
Overall, we are pleased with our sales performance despite challenging market conditions and of our ability to continue executing against our strategic initiatives and delivering tangible results.
Moving now to profit.
Gross profit in the third quarter was $248 million or 65.8% of net sales, a decrease of approximately 300 basis points compared to last year.
This was driven primarily by 240 basis points related to higher resin and manufacturing costs and 60 basis points related to country mix.
As we mentioned last quarter, we had anticipated higher resin costs, but we're optimistic that the favorability in manufacturing would continue to help offset it.
However, this was not the case in the third quarter due to lower volumes and higher inventory.
As we look forward to 2022, we will look for opportunities to reduce cost, increase efficiencies and opportunistically raise prices where appropriate.
I should also note that we intentionally built up inventory levels during the first half of 2021 in order to improve service and meet increasing demand.
However, with the higher inventory levels and lower demand in the quarter, we will be focused on sell-through of inventory and taking downtime where needed in the future.
We do believe that our ability to manufacture locally continues to be an advantage during the pandemic.
SG&A as a percentage of sales in the third quarter was 50.6% versus 48.5% last year, an increase of 210 basis points, primarily reflecting higher logistics costs and the investments we plan to make in the second half of the year.
In regard to logistics costs, we have been working to minimize the impact through efforts to improve contract pricing and sourcing, optimize container utilization, and strategically planned shipments.
I'll note that carrier costs remained elevated, FedEx surcharges are still in effect and we're seeing a shift in our business model in the US where we're increasingly shipping direct to the end consumer versus using the sales force for fulfillment and distribution.
We do recoup a majority of this cost as we charge for shipping, which is reflected in revenue.
As we continue to shift to a more omnichannel approach, we expect this trend to continue.
Therefore, we're working to improve efficiencies in fulfillment, packaging and shipping.
Adjusted operating profit in the third quarter was $52 million, and as a percentage of sales, it was 14%.
Despite softer-than-expected sales, our operating margin remained in the mid-teens, reflecting the renewed focus on tighter cost controls and a more disciplined approach to investments.
Now to adjusted EBITDA, which is an important metric and an indicator of progress toward rightsizing our cost structure and evolving our capital structure.
Adjusted EBITDA for the third quarter was $69 million versus $100 million in the prior year.
Trailing 12-month adjusted EBITDA through September was $328 million.
Our operating tax rate was a negative 20.4% versus the same quarter in 2020 of 28.3%.
This quarter's tax rate benefited from an election we made when filing the 2020 tax return in October to change our capitalization policy, which allows us to utilize previously valued tax credits in the third quarter that would have otherwise expired and which resulted in the release of valuation allowances.
While nonrecurring in nature, this valuation allowance release is part of our strategic tax initiative that we were executing as part of our turnaround plan to help us effectively utilize our existing tax assets and achieve our overall tax rate of below 30%.
Now to earnings per share.
Adjusted earnings per share of $1.19 for Q3 versus $1.12 last year is better by $0.07 per share.
The favorable tax item just discussed contributed $0.52 of the variance and was offset by $0.41 due to lower volumes, higher resin costs and incremental investments, and $0.05 of higher inventory reserves.
We also bought back shares in the quarter, which Miguel mentioned, and I will discuss more in a minute, that contributed $0.01 per share.
Year to date, operating cash flow net of investing was a negative $7 million, compared to $108 million last year.
As we've mentioned before, higher cash flow last year was driven by aggressive cost-saving actions, including COVID-specific actions like furloughs and significant lower spending on inventory and higher payables in order to preserve cash.
This year, we've invested in inventory in order to improve service levels given the current landscape of the global supply chain issues while also reverting to a more normalized level of capital spending.
As I mentioned earlier, the investment in inventory was to improve service while mitigating global supply chain conditions.
I should note that our full year free cash flow target may be less than $200 million and is largely dependent on the timing of cash proceeds from the sale of our noncore assets.
Moving on to the balance sheet.
We ended the quarter with a healthy cash balance of $124 million, which compares to $134 million last year.
And we ended the quarter with a total debt balance of $678 million.
Our debt to adjusted EBITDA ratio for debt covenant purposes was $2.28 million versus 3.72% last year and well below the required covenant of 3.75%.
We will look to favorable market conditions to present opportunities to further improve our capital structure.
As Miguel and I also mentioned, we utilized our newly approved share repurchase facility.
Of the $250 million that was recently authorized by our board, we repurchased 1 million shares of common stock during the third quarter at an acquisition cost of $25 million.
This was the maximum we could do within our credit facility covenants.
With each quarter of the turnaround behind us, our optimism increases regarding our future growth trajectory.
And going forward, we'll continue to be opportunistic regarding repurchasing shares, seeking to deploy capital as effectively and efficiently as possible.
Although we focused on the continuing operations for the third quarter, net sales from discontinued operations were $45 million or 11% of total net sales and adjusted earnings per share, excluding the cumulative translation adjustments from discontinued operations was $0.03 or 3% of our total adjusted earnings per share.
For the year-to-date period through September, net sales from discontinued operations were $140 million or 10% of total net sales and adjusted earnings per share, excluding the CTA from discontinued operations was $0.11 or 4% of total adjusted earnings per share.
As we continue to make progress and get further along in our turnaround plan, we want to be sure to share some of our strategies and early successes that are driving our long-term plan.
To that end, we are planning to host an Investor Day during the first half of 2022, during which we will provide a more comprehensive view into the business, strategy, and tangible examples of the progress against our strategic initiatives and turnaround efforts as well as provide a longer-term framework and outlook.
Look for more details in the coming months.
We continue to make progress on stabilizing our core business while increasing investments in our business expansion efforts and executing on several strategic initiatives that strengthened our capital structure and have positioned us well for future growth.
All components of our turnaround plan and indicative of progress.
Looking ahead to the remainder of 2021, we'll continue to build on our foundation and invest in initiatives that will improve the business and drive penetration into new channels.
We believe our consistent execution will result in a stronger more resilient, competitive, and durable company long term.
With that, let's take some questions.

user
compname reports q3 adjusted non-gaap earnings per share $1.19.
q3 adjusted non-gaap earnings per share $1.19.
tupperware brands qtrly net sales down 11% to $376.9 mln.
tupperware brands corp - qtrly net sales were $376.9 million, a decrease of 11% year over year.
tupperware brands corp - qtrly adjusted diluted earnings per share (non-gaap) was $1.19.
tupperware brands corp - qtrly net sales in asia pacific were $112.9 million, a decrease of 13%.

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