Tupperware Brands' CEO Discusses Q4 2012 Results - Earnings Call Transcript
January 29, 2013 6:40 PM ET
Tupperware Brands Corp. (TUP)
Q4 2012 Earnings Call
January 29, 2013 8:30 am ET
Rick Goings - Chairman & CEO
Teresa Burchfield - Head, IR
Mike Poteshman - CFO
Georges Jaggy - President, German Operations
Olivia Tong - Bank of America-Merrill Lynch
Dara Mohsenian - Morgan Stanley
Jason Gere - RBC Capital
Michael Swartz - SunTrust
Sofya Tsinis - JP Morgan
Frank Camma - Sidoti
Linda Bolton Weiser - B. Riley Caris
Bill Leach - Crest
Gregg Hillman - First Wilshire Securities
Ian Gordon - S&P Capital
Good morning. My name is Felicia and I will be your conference operator today. At this time, I would like to welcome everyone to the Tupperware Brands Corporation Fourth Quarter 2012 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions).
Thank you. Mr. Goings, you may begin your conference.
Thank you very much and good morning everyone. I am speaking to you this morning from Frankfurt, Germany. I'm with Teresa Burchfield, our Head of Investor Relations, and in line with our goal to increase our international shareholder base, we've just finished the meetings over here in Europe and we will have some additional meetings with investors in Frankfurt tomorrow.
Frankly, our approach is to get more of our investor base over here. Most of the investor base over here the kind we like tend to hold fewer names and hold them longer, and this leaves senior management time to work on the business rather than Investor Relation. So, you're going to hear more from us here and from in Asia.
I'm also going to take this opportunity to let you here today from Georges Jaggy, who is with me. He is the President of our German business, which many of you know is our largest in Europe. We've been doing a review of that business this morning. And also Mike Poteshman, our CFO, and the team that's there in Orlando, and I would just kind of alert that if we have any kind of problems with the telephone, Mike will pick it up here and we will do our best to reconnect. Also, you all know the drill on this discussion will include some forward-looking outlook, so refer to our company's position on this.
Before I get into the kind of prepared core comments that I have, I would like to kind of informally draw out three takeaways that it's my hope you will get from our not only our release that you already have, but also the time we spend together this morning not only our text but also the Q&A.
Firstly, Tupperware Brands is very much an and story, and by that I mean we're a business that is both very profitable and has an exciting future in emerging and established markets. That's what will fuel our profits. And it's interesting to note that I was just going over the last four quarters, where we did earnings releases, and I have yet to be in the U.S. for one. Today, I'm in Frankfurt, last quarter Chennai, India, a quarter before that São Paulo, Brazil, and before that Jo'burg, South Africa. So, this really does suggest our business isn't reliant on just one part of the world.
And I say this too because the old traditional question what keeps you up at night in 1996, 60% of our business profits came out of Germany. And I am pleased to say now we've just added Malaysia, Singapore, as our eighth market producing north of $100 million in sales, and what's nice to see is we've got a queue of other countries strong on their way. And this means we don't need to hit on all cylinders to meet our 5% to 7% top line growth targets near-term. So first, we are an and story.
Second, we do have confidence in our future and our ability to reach our sales and profits targets or we wouldn't have raised both our, the leverage level that we're comfortable with, our share repurchase authorization, and this 70% increase in our dividend payoff. So, we have confidence.
And thirdly, the Tupperware Brands business model, and this is perhaps the most important takeaway, the Tupperware Brands business model is a cash generating machine that provides not only enough for us to provide significant levels of cash to our shareholders, but it still provides us enough fuel to power the future growth in sales and profits. So, as Mike and I were just talking very strongly, we are a growth company and will continue to be one.
Now, speaking to our business model getting into my comments, there are four really components that fuel this business model. No matter if I'm talking about Germany or Japan, number one its innovative products. 25% of our sales come from new product innovations, and we basically call that new products if they were introduced in the last two years. And more of our products these days are to attract younger and working women as the world becomes more urbanized, and I'm sitting here looking at just three examples of timesaving products that are recently introduced.
One is an incredible microwave method of making omelets, and it's basically you put whatever vegetables you want into it. You put in two eggs. In about two minutes it's ready. Ditto, I'm looking at one we made for pasta maker and also a rice maker. So there's been a litany of products that have been really designed to for today's younger women who really doesn't have enough time and is looking for convenience.
Importantly too, when even in emerging markets of the world like India, they have established markets components in places like New Delhi, where there is a growing middle class. She is looking for these same kind of products. So I'm looking to countries like Germany to help fuel the new product program for the middleclass or even the emerging markets of the world.
The second element of our business model is entertaining and informative selling systems, and we adapt that based on the kind of market and based on the culture in that market. So, in Germany, it's traditionally a party where a group of six to eight women, two varieties of parties, one is for the woman we say here they're the kleinen, the hausfraus in kleinen Städten that housewives in small towns, it tends to be in the day or on a weekend. And then, we have for the busy working woman who lives on the fringes of Frankfurt or Berlin, and for her it happens to be much more social interaction. And by the way, because her mother probably worked, she doesn't really know her way much around the kitchen, but she still loves to entertain; time is of the essence. But we had to come up with a party selling situation that she would enjoy.
To a China that now the average apartment there is about 30 square meters and often one and a half families living in that space, not enough room to do a party. So, we now have 3700 little storefronts that she basically has and she can own up to 15 of these and she covers the rent. So, it's a neighborhood place for them meet very much like a sorority house.
Third piece of our model is a compelling earning opportunity, and here I just reviewed what Germany has done. We've really been pleased to see that the core of our opportunity has to be for the consultant, if she can make real living, and it is usually is a supplemental income for her at that level. But as she moves into a unit manager role or into a team leader, it's a replacement income, and it's serious money. And because of some of the moves we've made on enhancing this earning opportunity with these management levels, we're seeing that we're able to have fewer but bigger distributorships in many of our markets. As a matter of fact, we have a number of distributorships in the world that are north of $20 million in annual sales. And when you consider their profits are about 7% to 8%, it's a very serious business opportunity.
Copyright 2013 Seeking Alpha
Copyright © 2013 Microsoft. All rights reserved.
Quotes are real-time for NASDAQ, NYSE and AMEX. See delay times for other exchanges.
Fundamental company data and historical chart data provided by Thomson Reuters (click for restrictions). Real-time quotes provided by BATS Exchange. Real-time index quotes and delayed quotes supplied by Interactive Data Real-Time Services. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by SIX Financial Information.