Is Tupperware Stock A Buy?

Tupperware Brands Corporation (NYSE:TUP) is a multi-level marketing company best known for its signature plastic containers. It’s so iconic that its name is often used to describe any plastic food storage container. However, times have changed, and storing food in plastic has become controversial due to health concerns.

Can Tupperware withstand the test of changing times or is TUP stock a buy now on the dip?

The company grew organically on the back of parties, where products were sold through local distributors. When governments recommended social distancing, large gatherings were limited, and Tupperware’s sales tumbled. The fall in top line sales wasn’t small. TUP revenues fell in the most recent quarter by double digits in Asia, North America, and Europe.

The company’s only geography where it experienced growth was in South America, where sales grew by six percent. In spite of this blip higher, the overall sales decline is a red flag for investors who fear it may never recover to its former glory.

Some new deals have provided balance sheet support, though. The company sold its House of Fuller and Avroy Shlain beauty brands in 2021 to focus on the core business. But will they be enough?

How Tupperware Started & Pioneered A Sales Channel

Tupperware was founded in Grafton, Massachusetts by Earl Silas Tupper in 1946, with a Wonder Bowl featuring a patented “burping seal”.

It was one of the earliest consumer plastic products, although it wasn’t immediately successful in stores. People weren’t accustomed to it until entrepreneur Brownie Wise started her own business selling Tupperware to housewives in Orlando, Florida, where it’s now headquartered.

Soon, Wise was hired as the vice president of marketing, and Tupperware parties were born in the post-war era. The company leveraged an independent workforce of salespeople who acted as regional distributors.

People are generally split on whether the company empowers women by giving them an opportunity to work from home. Some believe the Tupperware Party is a throwback to a different era when women were expected to be homemakers and not enter the workforce. Still, it set a standard that continues to be followed.

Today, the sales tactic is more commonly associated with companies like Herbalife Nutrition (NYSE:HLF). Tupperware is more commonly found on shelves of stores like Walmart Inc (NYSE:WMT).

Tupperware Sales On The Decline

TUP faces stiff competition from rivals like Rubbermaid and Ziploc, both of whom have squeezed some of the revenue pie away from the original industry innovator.

It’s no longer the major brand it once was, but Tupperware is still generating decent revenue. Net sales in the third quarter of $376.9 million represents an 11 percent year-over-year decrease. This includes a 19 percent decrease in European sales, 13 percent decrease in Asia, and 11 percent decrease in North America.

Gross profit also declined from 68.7 percent to 65.8 percent to total $247.9 million for the quarter.

The company still gained over the first nine months of the year, with $1.207 billion in sales versus $1.109 billion in the same period of the prior year.

On the balance sheet, cash is down from $134.1 million to $123.8 million, while debt sits at $512.4 million.

Despite lower revenues, diluted earnings per share of $2.87 for the first 9 months of the year are up from $1.96 during the same period in the prior year. This is in part due to Tupperware falling into a lower tax bracket, and aided by liquidity increases from divesting its noncore businesses.

On the whole, high debt-to-cash ratio and declining sales have investors bearish on whether the stock can recover fully to reclaim its industry leadership mantle.

At Home Cooking A Boon For Tupperware Sales

Tupperware reached its all-time high valuation in the 2010s. At its recent lows in share price, it hovered close to $1 per share, marking a near catastrophic decline in fortunes. 

While its share price tumbled, demand for Tupperware remained relatively strong. The boom in working from home meant people stored and prepared more food at home than ever before. Seven out of 10 consumers in the U.S. started cooking at home when lockdowns were enacted, according to a recent survey.

In England, that number climbed to 91 percent, and there’s speculation this trend will continue long after the initial restrictions have subsided.

None of this guarantees success for the Tupperware brand. It no longer has the brand recognition it once did in the 20^th century. 

Tupperware Valuation Low, But Multiples Are High

Tupperware is a volatile, small-cap stock with a valuation under $1 billion. TUP market cap is down 70 percent from levels it enjoyed five years ago. That’s despite trading at a pricey 63x times earnings, which has investors understandably skeptical of the upside potential.

Insiders own a relatively small portion of the company’s shares, holding $49 million of its $900 million in stock. The company’s regional distributors remain independent contractors, saving the company on employment costs while providing little in the way of healthcare, 401k, and other workers benefits.

Investors who jumped in at the lows have been on a remarkable ride, enjoying an outstanding 13x return in less than a year. However, it’s unlikely that success will be replicated for investors buying in now. The company’s financials have been deflating and it’s not readily apparent what management can do to turnaround the ominous sales decline.

Is Tupperware Stock A Buy: The Bottom Line

Tupperware is an iconic 20^th century brand that started in the U.S. and spread globally. The brand name is widely used to describe plastic food storage containers, of which there are plenty of brands competing.

One major headwind now is the shift in consumer preferences away from plastic. Another is the slowdown in Tupperware parties – they aren’t as ubiquitous as they once were. Stay-at-home moms have more work options than ever. Microwave cooking is also becoming less fashionable as new appliances like air friers and sous vide gain popularity.

The MLM business model isn’t a rarity anymore either, it’s been adopted by a plethora of companies selling all sorts of products, each of which competes for the attention of prospective Tupperware distributors. This dilutes the competitive advantage the brand has and caused a decline in sales.

Investors should be wary when investing in this volatile stock. But for optimists the cash flow forecasts paint a rosier picture. Applying a discounted cash flow forecast analysis to Tupperware, the upside potential is as high as $32.75.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.