Unscrambling Monday's Egg

Look Over There... It's Tupperware!

Running Tupperware through the Chicks' Dozen
by Chick Karin

Today I had to run to the mall to pick up my daughter a jean jacket that she had been begging for from the Gap. As I ran through the mall, I noticed a brightly colored kiosk smack dab in front of my beloved denim retailer. It was a Tupperware island! Uh-huh, Tupperware; as in mixing bowls, storage containers, and plastic tumblers. I was expecting some Internet Service Provider, a pen engraver or a collection of Beanie Babies, but nope, it was Tupperware. I had to stop and browse because it was so unusual. Then my cell phone rang. It was Chick Jana. Did I have today's Chicks Dozen article done? What? Me? I was supposed to write today? OHMYGAWD... now what?

Well, if you know me, then you also know I forget what I'm supposed to do as often as I start my car. So when I got the call from Chick Jana, I looked at what was right in front of me, and said, "Oh, no problem, I've got it covered. Literally." But, the point of being a Chick is to look in front of you. What interests you, what you are using, and what is the latest product? Chicks research what is in front of us to find out if it is worth our investment dollars. Today, I'm going to look at Tupperware (NYSE: TUP)

1. Buy What You Know  We all know Tupperware. We received it as a wedding gift and if you didn't, you must be single. I have to admit, I love Tupperware. But, I hate to admit, I can't stand Tupperware parties. I can't sit for more than 30 minutes, and I only want to look at what interests me. I'm NEVER going to bake, so don't show me the measuring cups. I never make Jello, so don't show me the newest mold, and I have no need for the kids toys anymore. I want the latest "Eat On The Go" containers, organizational Martha Stewart kitchen keepers, and stackable colanders. We all associate Tupperware with the home parties and the great containers in today's designer colors. This afternoon I couldn't walk away from the booth without picking up three soup mugs and four sandwich keeper/salad containers. I was having a heck of a time finding containers that will keep the kids' salads fresh and crispy, but also is able to keep the dressing separate from the lettuce. Voila! There it was, in blue and red. Excuse me, sapphire blue and cranberry red. And as far as the soup, (this is all my kids eat for lunch, soup and salad, everyday), I needed a microwave-able bowl that was easy for them to use that they could nuke, yet keep covered. I got it in Ocean Blue with the Island Green Seal. Okay, I confess, I also bought six of those little 2-ounce midget containers so I could throw some sunflower nuts in one, Parmesan cheese in another and shredded carrots in another. (My middle daughter hates for anything to be mixed before she eats it.)

2. K.I.S.S. (Keep It Simple Sister)  Plastic Containers. Simple enough. But, recently, Tupperware expanded their business into the direct selling of beauty products. These were not on the kiosk, but I found out by checking out their website at www.tupperware.com You really should browse through the site at your leisure, check out all the new products, and then look for a mall location near you. Or you could always call the rep in your area. I'm sure she'd be glad to throw a party for you.

3. Industry  Packaging and Containers. With this criteria, we want a company that we feel is in an industry that will grow faster than others. I don't see plastic containers growing any faster than internet storage facilities, but if this mall kiosk thing catches on, it has possibilities.

4. Leader in its Field  Tupperware Corporation, a $1.1 billion multinational company, is one of the world's leading direct sellers, supplying premium food storage, preparation and serving items, to consumers in more than 100 countries through its Tupperware brand. What differentiates Tupperware from the other companies is that they market directly to the consumer. When looking at how this company fares compared to other companies in its industry, we can scroll down on this page to see that their five year average Gross Margins is respectably above the industry, their Net Margins are also above the industry, but the five year sales growth rate isn't. Matter of fact their sales growth is in the negative. Looks like they've sprung a leak and they need to tighten the sapphire seal. The largest company in this industry would be Sealed Air Corp (SEE), but they run such a different type of business, catering more to corporations than to the individual.

5. Repeat Profitability  I can't begin to tell you how many Tupperware containers I've gone through. They either get lost, stained, or just plain get old. As long as they keep making newer ones, I'm there.

For the next five steps I used Tupperware's Annual Income Statement and Tupperware's Annual Balance Sheet. All numbers are in millions.

6. Gross Margins  (Sales - Cost of Goods Sold) / Sales

1073.1 -714.7 / 1073.1

358.4 / 1073.1 = .3337

.3337 x 100 = 33% (need to multiply by 100 to get it to a percentage)

Gross Margins = 33%

We'd like Gross Margins of 50%, but 33% is very respectable in the container industry.

7. Net Margins  Net Income / Sales

74.9 / 1073.1 = .0698

.0698 x 100 = 6.98% or 7%

We'd like Net Margins at 8% or greater, but 7% passes my personal "net freshness" test.

8. Cash to Long Term Debt  Cash / Long Term Debt

32.6 / 358.1 = .091

We would like a number 1.0 or over, but .091 is less than 1.0 so the lid doesn't meet the seal here.

9. Flow Ratio  (Current Assets - Cash) / (Current Liabilities - Short Term Debt)

(372.4 - 32.6) / 275.8

339.8 / 275.8 = 1.23

Flow Ratio = 1.23 which is lower than our 1.5 requirement!! Their cup definitely is not running over with too many lids. They are maintaining a nice balance between consumer demand and product supply.

10. Increasing Growth  From 1999-2000 TUP increased their sales growth by 1%. Not stellar. From 1998 to 1999, they decreased in sales growth by 3%. This Dozen step could be better, but again, I'm dying to see what the kiosks do to their business.

11. Strong Management and History  Before being introduced to the consumer, Earl Tupper's Plastics were used mainly for the war, but 1946, they began selling it to the public on store shelves. Their main objective was to simulate the inversed rim of paint cans to get an airtight seal. (Don'tcha just love finding out where original ideas come from?) In 1948, Tupperware began selling directly to the consumer through home parties. Women were eager to get out of the home, get a job, yet there were few career opportunities available to them when their men returned home from the war. These early women started the plastics revolution (among others), and the whole rage of a two-income family began. Due to the success of these Tupperware Pioneers, the plastics were taken off store shelves and sold only through the independent reps. Since then, Tupperware has gone through a ton of changes, from the early macaroni salad container to the latest microwave-able and oven proof cooking dishes. Tupperware is always rolling with the pin into the new generation. Which brings me to those little mall kiosks. Someone at TUP was thinking. They're perfect for the busy woman who wants to own Tupperware, but doesn't want to have or sit through a party, or host her own. You just want to browse quickly, tell the clerk what you need, buy it and get home. And that I did.

Tupperware's current CEO is Rick Goings. Before joining the container maker, Rick was Senior Vice President of the Sara Lee Corporation where he was responsible for their worldwide direct selling and household product brands. He also worked at a number of jobs over at Avon. Rick's middle name is direct selling. He transformed Avon's traditional door-to door selling to a hipper catalog approach. Maybe Rick is responsible for the brilliant kiosk of an idea. How long before Avon follows suit? Currently, Goings serves on the Board of Directors for Tupperware Corporation and the Board of Governors for the Boys and Girls Clubs of America where he is also chairman emeritus*.

12. Buy on Sale  This criterion is only used if we have two companies that are tied in the stock purchasing voting process. To break the tie, we look at which one is on sale. Is Tupperware on sale this week? I mean is TUP on sale this week. Their 52-week high was 26.00 and their 52-week low was 15.50. Anything below their median price would be on sale. Median price is 20.75. Today, their stock closed at 19.61. Ding ding.

I have now washed up my new containers. I can hardly wait to pick the kids up at school to see the excitement in their eyes. Something tells me the Gap jacket is going to be a bigger hit. What do they know? Just wait until they're parents.

*This is for Chick Jana's sake... Emeritus: holding after retirement an honorary title corresponding to that held last during active service.