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Text: We will begin with our safe harbor statement.
You should listen to today's call in the context of that information.
We will also discuss some of our results for the quarter on a non-GAAP basis.
Any reference to sales in the discussion today is referring to local currency sales, which compares results between periods as if current period foreign exchange rates had been the exchange rates in the prior period.
Just 13 months ago, along with a new leadership team, we began the process of turning around this iconic company.
We've committed to right size the cost structure, to fix the core business, increase the use of digital tools and strengthen the balance sheet.
But more about a quarter on our performance in just a minute.
Let me first reiterate key elements of our strategic growth plan that are well under way.
We want to pivot from a distributor push to consumer pull and distributor push model.
Update a brand architecture to allow us to segment branding, products, channels and pricing to appeal to a broader consumer base; expand into new product categories and push consumer permission of our iconic brand; align product development efforts to address needs of all consumer social subsegment; expand distribution and access points to meet consumers where they shop.
And most importantly, fix the core direct selling business with proven methods.
Today, in our 75th year, the brand is very strong, widely known and accepted.
And we intend to leverage this important asset.
We also believe we're on trend with a worldwide focus on ESG by producing and selling environmentally friendly reusable products.
You've seen our increased efforts in this area with the sponsorship of National Park and our use of new, more environmentally friendly materials.
Due to the strength and awareness of our brand, we made the strategic decisions to be a branded house, not a house of brands, as we develop our new brand architecture.
As such, we expect to divest all the non-Tupperware businesses this year and use the proceeds to continue to pay down our debt and continue to invest in the business.
We believe the execution of this new brand architecture will enable us to penetrate new channels of distribution, new product categories and new pricing structures, all of which have the potential to accelerate our growth, while minimizing any potential conflict with our current direct selling channel.
In the first quarter, we reorganized our leadership team around channels, with Patricio Cuesta leading our direct selling business.
Hector Lezama now leads our nondirect selling business, which include key markets, like China and Korea, along with all the important markets, and most importantly, our efforts to penetrate new channels of distribution.
Improving our abilities and expanding our capabilities in product innovation will be a key objective for our executive team over the next two years.
We believe they are highly innovative manufacturers around the world that we can strategically partner with to accelerate our efforts to broaden our current product offerings, extend our brand into new categories and appeal to consumer in different social subsegments.
Also, we believe there is an exciting R&D journey ahead to use no raw materials to accelerate our efforts to continually improve the planet.
Our Eco+ line is an example of this.
This product line is a revolutionary product portfolio made with sustainable materials.
We are adding two new products, Launch-It Container and sandwich keepers with a new material partner Tritan Renew from Eastman.
Tritan Renew uniquely offers Tupperware's ability to design clear or transparent products with 50% certified recycled content, without compromising on quality or clarity.
These products with this new material will be launched in Europe in the second half of this year.
Our efforts to fix the core business are evident in our recent financial results.
In each of the past three quarters, we have reported 20-plus percent year-over-year growth.
While we are up against easy comps, this growth reflects increases activity, higher engagement and rapid adoption of detailed tools and techniques by our sales force.
As we mentioned on our last earnings call, a key strategic shift for us in 2020 was that our sales force realized that geography was no longer a hindering factor to growing their business.
By utilizing social media platforms and digital tools, they have been able to reach beyond their physical neighborhood and leverage the expansive reach of their online social network.
While it is still early in their transition to embrace in detailed selling tools and methods, we're confident we can build upon the success gain in 2020 and accelerate widespread adoption in 2021.
We believe a more digitally equipped sales force will enable ongoing engagement and increase productivity as we move forward with all our other growth initiatives.
Our overall digital strategy is making great progress, with the expansion of sales force enablement tools, social commerce and web sources.
Our top-tier markets now have these important tools in order to create a more seamless interaction between consumers and our sales force and increase the options for consumers to access our products.
Speaking of more ways to access consumers, let me take a few minutes to discuss some new business opportunities.
Historically, we have done 30 to 35 million per year in business-to-business partnerships.
In these partnerships, we sold products to well-known retailers, who then use the product in their loyalty programs.
Tupperware products are then exchange for points based on consumer buying activity with a major retailer.
We believe there are opportunities to expand these partnerships.
Currently, we're working with major brands in Mexico, Brazil and Europe and are evaluating more opportunities for the remainder of the year to accelerate our growth in this channel.
Additionally, here in the U.S., we will be testing new channels of distribution.
This past weekend, Tupperware ran a future segment using limited products with a major home shopping channel, who has access to more than 92 million homes across the U.S. through various media channels.
This new product and brand exposure allow us to deepen engagement around our brand and provides potential leads for our sales force.
Additionally, this is an opportunity to reach an expanded audience through the power of storytelling and discovery driven shopping experience.
Just a few months ago, Tupperware became the first reusable plastic container brand to partner with TerraCycle's circular reuse platform, Loop.
Loop works with leading brands to create zero waste, durable and returnable packaging.
As part of this agreement, Tupperware has recently partnered with one of Loop's prominent brand partners, and we're currently designing a one of a kind reusable package option for this brand, and it will be available later this year.
Another example of our efforts to reduce the use of single-use plastic is our partnership with a National Park Foundation.
This summer, Tupperware will be releasing a limited edition, especially designed national theme park line of sandwich keepers and on the go carts, which will be sold through a national park service retail partner, available at select parts around the country, as well as through Tupperware direct selling and e-commerce channels.
Also, our donation will help expand access to clean drinking water through new refilling stations.
Turning to first-quarter results, let me highlight a few of our large markets before Sandra discusses our overall financials.
In the U.S. and Canada market, sales increased 83%, and sales force activity was up 92%.
It is important to note that this level of growth is not sustainable going forward.
As the first quarter of 2021 had the ECS year-over-year comparisons.
Additionally, we're shifting to more profitable sales in this market, and we will reduce some of the highly promotional programs and improved distribution costs.
As we become more consumer-centric in the U.S. and Canada, our customer profile is changing.
Virtual selling leads to more people purchasing smaller units, reflecting our consumer pull strategy.
This changing order profile has increased our distribution cost.
And while we accept the higher cost in the near term, we're evaluating ways to embrace the shift into more efficient ways.
This is an important market to Tupperware, and we will be working intensely internally with our sales force to continue to increase the profitability in this market.
Tupperware Mexico had an 18% sales growth in the first quarter on a 6% growth in average active sales force.
This market also had an easy comparison in the first quarter of 2021 that need to be considered going forward.
While we're experiencing sales growth in Mexico, we're not meeting what we believe to be our potential in this market.
As a result, we recently made a leadership change to make sure that we leverage the opportunity of our products, brand and sales force going forward.
The new leader of this market worked with me over the last 10 years, and I'm confident he will be able to work with the local sales force to increase sales and profitability.
In Brazil, sales increased 46% on an easy first-quarter comparison and was achieved through an increase in sales force activity of 40%.
As you know, the second wave of COVID has hit Brazil very hard.
While this second wave has not yet significantly impacted sales, our recruiting efforts have been affected.
So we will remain cautious in this market until the trend stabilizes and COVID rate subside.
And lastly, a key market in our loan-term growth plan in China, which declined 14% as active studios were down 7% versus last year.
Our new leader in China is focused on improving product innovation, exploring bigger opportunities in e-commerce and fixing the core entrepreneur led retail business.
The turnaround in this market will take time, but we're confident that our brand is accepted and recognized by Chinese consumers.
Looking forward, our key priorities in 2021 to strengthen our direct selling business are the following: detail and product investment, segmentation of our sales force, introducing preferred customer loyalty programs around the world, use of data to identify best practices, use of data to upsell and cross-sell to our preferred customers and ensure competitive service and costs.
And our key priorities in the business expansion are: to explore new channels of distribution, avoiding a potential conflict with our current direct omnichannel.
In tradition, Tupperware sub-brands and penetrating into different product categories where we know the consumers give us permission to enter.
We believe the execution of these priorities is creating competitively strong foundation that will create meaningful value for our shareholders for years to come.
The strong revenue momentum from the second half of 2020 carried over to the first quarter of 2021, reaffirming the firm financial foundation we are establishing as part of our turnaround plan.
Our first-quarter sales were 460 million, which was an increase of 20% compared with last year in local currency and up 22% on a reported basis.
and Canada, Mexico and Brazil contributed 74% of the dollar increase.
Additionally, reflecting the breadth of our efforts to fix our core business, the majority of our markets posted improved sales in the quarter as well.
On a regional basis, North America increased 43%, South America increased 53%, Europe increased 12% and Asia was up 6%, excluding the negative impact from China's decline that you heard Miguel say.
These higher sales, coupled with our turnaround land cost savings led to a gross margin of 70.3%, 480 basis points higher than a year ago.
Of the improvement, 330 basis points was attributable to lower manufacturing costs.
The balance of the improvement reflects favorable changes in country and product mix.
Like other companies you may follow, we are experiencing higher resin cost.
But so far, we've been able to offset this negative impact through additional cost savings throughout our operations.
Moving on to SG&A.
We also experienced tremendous year-over-year improvement.
Adjusted SG&A as a percentage of sales was 53.9% and reflected an 820 basis point improvement from last year.
Rightsizing efforts contributed 560 basis points and 310 basis points improvements are from lower promotional costs.
These improvements were partially offset by 50 basis points of higher distribution costs.
Looking forward over the next few quarters.
To support our strategy to grow in new channels, we are accelerating investments in IT infrastructure to increase our capabilities and enhance our cybersecurity, data privacy and strengthen our controls.
We plan to also make incremental investments in the supply chain to improve the service levels required by consumers in these new channels.
We estimate this incremental investment to be in the range of 30 to 35 million for the balance of 2021.
Additionally, through approximately 10 million of additional investments in our tax strategy, we believe we have the ability and opportunity to more quickly achieve a tax rate in the low 30 for the full year of 2021.
We expect these 2021 additional investments will result in SG&A in the mid-50% range in the near term.
Longer term, we will continue to pursue SG&A at sub-50% of sales through ongoing centralization efforts, creating centers of excellence to leverage our size, simplifying our compensation plans, and through sales growth in our omnichannel initiatives.
For the first quarter, the improvements in gross margin and SG&A that I just discussed, combined with our contribution margin on the 20% sales growth resulted in an adjusted operating income of 75.3 million or 16.4% of sales, which reflects a significant improvement of 1,290 basis points versus prior year.
We made a huge commitment toward cost savings in 2020, and it's gratifying to see it now reflected in our P&L.
Now let me turn to a non-GAAP metric, EBITDA.
In addition to the higher operating income I just mentioned, Q1 EBITDA was favorably impacted by a one-time gain on sale of assets of $9 million, a $3 million benefit related to a grant from the China government normally received in the fourth quarter and a bad debt reversal in Germany of 2 million.
Adjusted for these items, and the incremental investments that I just discussed, future quarter EBITDA will be slightly lower than the first quarter, but still above 2020.
The improvements in the operations, higher sales and higher margins led to a GAAP diluted earnings per share in the first quarter of $0.85.
This is a dramatic turnaround from the loss of $0.16 in the first quarter of 2020.
And adjusted earnings per share of $0.82 also improved significantly compared to just $0.09 last year.
The $0.73 of improvement in adjusted earnings per share includes $0.69 of turnaround plan savings profits associated with the growth in sales and less COVID-19 impact.
$0.07 related to the China grant and the reversal of the bad debt reserves.
Offset by $0.03 of acceleration of interest related to the debt repayment, which I'll discuss in a minute.
In the first quarter, our total balance of debt was 695 million, reflecting a reduction of nearly 300 million from the 991 million in the first quarter of last year.
In addition to the proactive actions we took in 2020 to reduce and restructure our debt, in the first quarter, we used the proceeds of approximately 34 million from the sale of noncore assets to pay down our term loan debt.
The debt reduction, together with strong improvement in EBITDA, resulted in a debt to adjusted EBITDA ratio for debt covenant purposes of 2.36 versus 5.36 last year and well below our required covenant of four.
The debt reduction also triggers a favorable 50 basis point reduction in our new term loan interest rate effective during the second quarter.
We expect the rate to decline from 9.75% to 9.25% on 240 million of term loan debt.
Achieving double-digit growth for the third consecutive quarter, delivering profits that continue to reflect our rightsizing efforts and lowering our debt through the proceeds of noncore asset sales, resulting in a leverage ratio of 2.36 are continued evidence that our turnaround plan is working.
As we discuss today, and as we look forward to the rest of the year, we are shifting our focus to support efforts contained in our growth strategy.
And therefore, we plan to make incremental investments that we believe will drive penetration and growth into new channels.
We are also committed to finalizing the divestiture of noncore asset sales to focus our resources on growing our branded health.
As a result, we believe these actions and our strategic plans will create a stronger, more competitive company for the future.

user
q1 gaap earnings per share $0.85.
qtrly net sales of $460.3 million increased 22% versus.
2020, up 20% in local currency.
qtrly adjusted diluted earnings per share were $0.82.

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