Tupperware CEO: We'll Be a Cash Machine

The Street wanted to know whether investors should expect Tupperware's consensus-beating earnings trend to continue, and spoke with Tupperware CEO Rick Goings for a fuller picture.
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NEW YORK (TheStreet) -- Tupperware (TUP) - Get Report has consistently exceeded Wall Street's average earnings targets, but should investors should expect this trend to continue, especially given sluggish population growth in some of the company's regional markets? We spoke with Tupperware CEO Rick Goings to get the inside story:

TheStreet: Which regional markets will continue to be key drivers in Tupperware's growth?

Rick Goings: The future is really going to be dominated by the Pacific Rim. You have three countries here -- China, India, Indonesia -- that if you blend them together, it's 47% of the world's population. And there's real pent-up demand for opportunities, particularly for women, in two of those markets. China's done a better job; Indonesia and India haven't done a good job -- there's high unemployment and underemployment with women, so we're capitalizing on these markets.

And just because you see 54% growth in emerging markets, it doesn't mean the established markets aren't doing well. They just don't have enough people.

Tupperware's CEO Rick Goings.

TheStreet: Sales-growth might be slowing in the second quarter and for the year. Why?

Goings: All I can tell you is in 2009, we had easy comps in the first quarter; we got stronger in the second quarter; got even stronger in the third quarter; and by the fourth quarter we were double digits. So the comps get more difficult through the year. So if you put that against the comps from this last year, it looks like we're slowing, quarter by quarter; but we're not. We're maintaining this constant growth rate, but the comps are distorted. So the run-rate's about the same.

And we'll get some benefit in the second quarter from foreign exchange; not from the euro, but other big currency baskets.

TheStreet: Tupperware Japan and BeautiControl had sales declines in the first quarter. What drove this and how are you rectifying the situation?

Goings: The fix for Japan and BeautiControl are about the same. And it is getting back to standards with more opportunity recruiting. Rather than letting people come in and buy products at a discount -- it is more innovative, new products.

If I was saying right now the areas of the world we really have to fix, I would say it's Japan and our BeautiControl business -- and we've got to get our Australia and New Zealand business cooking again. Because those three were the drags on the quarter. But we've got good people in place in all three markets; so I think you will see improvement in BeautiControl and Australia as the year goes on.

I wouldn't count on improvement in Japan because it's a longer-term issue.

TheStreet: Your sales guidance for Beauty North America was lowered for the full year to roughly the same level as last year. Why?

Goings: That is almost entirely our BeautiControl business, which we have been in the process of fixing. That sales organization recruited too many customer representatives and they were less productive. So we made a decision this last year: "let's get this thing back on track." We don't want a sales force that is more a wholesale buying club.

We said, "let's put a better pick, better training, better standards and a new compensation program;" and we implemented all of that in January of this year. I'll be disappointed if we don't have the sales inquiries in Beauty North America in the second-half of the year.

TheStreet: During the first quarter, there was a 2% sales force decline in Europe and a 7% sales force decline for Beauty North America. Can you provide more color on that?

Goings: That was the average active sales force. But the overall sales force in Europe was really up 18% in the quarter. And it's a mixture between what's going on in these emerging markets and a lot of noise between that. The biggest thing I would say to look to -- as a corporation -- is the sales force for the corporation was up 7% versus the first quarter last year. However, sales were up 11%. How it plays out for us is, oh, a better quality, more productive sales force. As a matter of fact, we generally worry if you see a sales force up 11% and sales only up 7%; we'd say, "uh oh, we dumbed-down the sales force and they're less productive."

TheStreet: So, does Tupperware have any intentions for acquisitions?

Goings: We're always looking, but it's hard to get a chase on that. There isn't anything out there that we're really interested in, and we've got enough opportunity and beach-heads for organic growth. The dominant number of new, direct-selling companies over the last decade have been these network marketing, multi-level marketing companies, and we have no interest in those. That would dumb-down our sales organizations; you know, that's the Amway kind of business. We're just going to focus on our core business; got a lot of cash that we think we can grow ... we'll be a cash machine.

We think what investors are going to be looking for are companies that can pay a very safe, attractive and secure dividend, and at the same time, get some appreciation; we haven't missed a number in eleven quarters. We're a real safe, balanced kind of portfolio.

On Apr. 20, Tupperware reported record first quarter 2010 sales and profit, with first quarter sales up 11% in local currency, versus its February guidance of up 8% to 10%; and up 20% over last year. First quarter earnings was 73 cents a share, up 78% over last year. Excluding one-off items, earnings was 76 cents a share, versus the February guidance range of 55 to 60 cents a share, and up 69% over last year; beating the consensus estimate by 14 cents. The stock is up 9.7% year-to-date.

-- Reported by Andrea Tse in New York

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