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Tupperware Brands Corporation  (NYSE:TUP)
Q3 2018 Earnings Conference Call
Oct. 24, 2018, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to today's Tupperware Brands Corporation Third Quarter 2018 Earnings Conference Call. All lines are currently muted to prevent any background noise. After the speakers' remarks, we will have a question-and-answer session. (Operator Instructions)

Now, please welcome Ms. Tricia Stitzel, President and CEO. Miss, the floor is yours.

Patricia A. Stitzel -- President and Chief Executive Officer

Thank you very much, Grace, and good morning, everyone. I am here in Orlando with Mike Poteshman, our CFO, and James Hunt, our Head of HR -- IR. And along with our prepared remarks, we've provided the usual slides including the standard message on forward-looking statements.

In my comments today, I'm going to provide a high level overview of our third quarter financial performance, and an update on progress we're making in executing our global growth strategy. And then, I'll share my views on some of the key markets in our portfolio, before turning the call over to Mike to cover our financials in greater detail.

To begin, I am very pleased to report a return to growth in local currency sales, after adjusting for the closure of Beauticontrol and the combining of our beauty -- of our businesses in Japan. This was a two-point sequential improvement over the second quarter, following a two-point improvement from the first quarter. We achieved this level of sales growth, due to the power of our brand, and of course, the work of our sales force, despite some external headwinds in several of our markets, most significantly in Brazil, China, Indonesia, Mexico and the Philippines.

We also benefited from a significant business-to-business sales arrangement in Germany, which boosted our sales volume, while elevating the profile of the Tupperware Brand on behalf of our sales force. Based on the success of this arrangement, we will continue to look at similar opportunities in the future.

The third quarter adjusted EPS came in at $0.91, which was above our guidance range for the quarter, mainly due to lower corporate costs and lower income tax rate. There was also a $0.02 benefit from fewer shares, following an additional $50 million in share repurchases in the quarter that we did not include in the guidance. We've now repurchased $100 million of shares under our repurchase program in 2018. We did take a $0.01 hit in foreign exchange versus our July guidance, and Mike will provide further details on the profitability elements, including our lower corporate costs and income tax rate, along with the investments that we've made in the quarter to turn the trends in the key markets and items impacting our value chain.

We're also benefiting from the cost savings initiatives under the revitalization program that we had in Europe and Asia. And this will provide increased flexibilities, and they are positive against the margin pressure we had in Q4. And also benefits that will -- are still to come far 2019.

In the emerging market economy unit, which accounted for 72% of our total sales, we were up 2% in local currency, and this was an improvement over Q2. In addition, we experienced the second straight quarter of sequential improvement in established markets. Sales were down 4%, but this was before the 8 point drag from Beauticontrol and the impact of combining our units in Japan at the beginning of the year, compared with a decline of 16% in Q1 and 8% in Q2.

Our total sales force count grew sequentially from the second quarter. We were up 1% year-over-year, adjusting for the change in approach in how we measure the comparison. And I'll let Mike break that down further. This progress is the result of our global movement to celebrate our purpose of changing lives by promoting up new sales force managers, which we call, Extend a hand.

Progress on our global growth strategy continues and we've seen several key accomplishments to-date. So, let me just highlight a few of these for you. As of the end of the third quarter, we -- our experience studio count now exceeds 200, and we expect to have about 1,000 of these studios by the end of 2022. Keep in mind, that these are different than the retail outlets that we have in our unique China model.

Now, on the digital side, we have rolled out an enhanced mobile application for the sales force that allows both offline and online ordering. The application does not require a connection to the internet all the time, which is useful for countries that have limited data plans like Mexico. So, when she is outselling, she can enter her order even if she doesn't have a connection, and think about later, which improves her efficiency in the field. The application includes online catalogs, which can be shared through social media like Facebook and WhatsApp. And we've deployed this application in six markets to-date and more will follow.

We have also redesigned and upgraded our website for each of our business units globally, which are mobile-enabled, and in some markets, it's also integrated with digital and interactive catalogs, including e-commerce in the US and Canada. In the interactive catalog, when you click on the product, you will see content about a product ranging from just a picture or a video with product demonstration. And while it's not yet e-commerce enabled in most of the markets, it does represent the start of our enhanced digital presence, which will appear to more customers and drive increased sales.

Now in the third quarter, we had our first e-commerce launch for Europe and Germany. We've provided the sales force with their own personal websites with e-commerce functionality, so they can reach more customers and grow their business. This is a significant upgrade from the previous static website, and we're getting great feedback from our sales force and consumers, who are able to learn more about and buy Tupperware products online.

We've driven over 7,000 leads from the site back to our sales force, which is up quite a bit from the previous design. We are encouraged by the progress we're making in implementing our global growth strategy, and we are continuing to execute with a strong sense of urgency to achieve our goals and generate stakeholder value. We are in a tremendous transformational period and we formed a dedicated transformation team focused on implementation and driving change. We also realized that there is no tomorrow without today. So, we are focused on improving the fundamentals of our business as well.

With the leadership changes that we announced in July, we are establishing a new mindset in many of our markets. A key part of this mindset is focused on changing how we execute on the day-to-day business to give us more wins across the portfolio, as we look to build momentum in Q4 and into 2019.

So, let me do a run through of the portfolio, and I will start in Europe, Africa and the Middle East. Our new group leader there, Stein Ove Fenne, has just completed his 90 days, and he has taken a deep dive into each of these markets leading from the front. The timing was really good. He was able to be there on time to be on stage at each of the jubilees in Continental Europe. And this really helped us, because it's providing one voice, one message to really amplify our purpose and align our focus on the changes needed to drive profitable revenue growth in Europe.

He's working directly with and building confidence in our management teams there, who will deliver and execute on this turnaround road map to stabilize and grow Europe. And really there's four key elements there. First of all, priority is to establish the rhythm of a business, and this is so important to engaging the sales force. Second, we want to refocus the management team on the core fundamentals and standards, such as separate programs for onboarding new sales force and consultants and managers, and programs that reward focused on demonstration selling and success formulas that are really a template for what every sales force members should be doing every week in their business to maximize their success. And third, to leverage our purpose and strengthen the earnings opportunity; and finally of course, enhancing digital communications, which amplify our message through social media.

And this is what Stein Ove did so well in the US and Canada. So, this approach is particularly impactful in our established markets, which draw many parallels to the turnaround story that we had in the US, and Stein Ove has a great plan on how to engage and activate career sellers and rebuild confidence of our distributors.

We've seen some early wins. For example, in Germany and France, our distributors had not been adequately leveraging the power of social media. So, we have enhanced the training and the use of these tools and techniques. And we've also increased the frequency of the broadcast through Tupperware TV streaming platform, which is so useful in providing a consistent and timely message. So, in short, we've created an omni-channel approach to contact an engagement.

Stein Ove has also brought recruiting energy throughout the continent, bringing in much better additions to the sales force. We've seen some positive results from these early actions, but the early wins are really just a few bricks and establishing a strong foundation. But I'm very pleased with the initial progress in such a short time.

I'm also pleased to see the positive momentum continue in the emerging markets in Europe, where there has been a much better rhythm of the business over recent years, as they were able to build in direct selling fundamentals through the use of our systematic approach. The emerging markets represent 44% of the segment sales in the third quarter, and it's noteworthy that in total these markets have grown double digits in each quarter in 2018.

Southern Africa grew 22%. They continue to break records through sales force engagement programs that are inspirational and emotional along with solid merchandising of core products. South Africa was also one of the first markets to launch a manager onboarding program under our global growth strategy, creating a pipeline to the team leader opportunity, which is an inspirational emphasis in that business. They are also implementing mobile ordering application that will connect distributors to the sales force, and then sales force to consumers. And this business is built on solid fundamentals and it's evolving well under the global growth strategy.

Russia also had a great quarter. They grew 20%. And they have also developed a nice rhythm to their business through a focus on success formula. And this is a template for those activities that the sales force should execute each week, each month, and they are building a stronger management base with a relevant earning opportunity. We have also launched several experience studios in Russia, and these studios provide a physical footprint for sales leader to hold demonstrations, rallies, recruiting events, while also providing a consumer-facing presence, which enhances access and engagement. Now this is only a single digit portion of the business so far, but we do see it as a growth engine for the future.

Switching gears to Asia Pacific, our new area leader there, Justin Hewett, hasn't quite reached the 90-day mark, but it is clear that his top priorities are Indonesia, India and China.

In Indonesia, it was another tough quarter. I was recently in Indonesia, and I met with the new leader we put in place earlier this year, who is very experienced in executing strategic and structural changes. He's focused on the manager opportunity. And as we have pointed out before, this is really the engine of our business, as managers are the more productive sellers and they do the vast majority of attracting the sales force additions. We are piloting a new manager onboarding program in Indonesia, and we've seen sequential improvement in manager activity rate. So, there is more engagement.

There are other positive elements that Justin has identified in this business. Firstly, we have a very strong purpose, and our life-changing opportunity does resonate in Indonesia given the local income level. Secondly, our brand remains very strong after years of investment there, and it is still a profitable earning opportunity for our distributors, and it's seen as an aspirational level, which is really important. And finally, we have the opportunity to better leverage productivity through product demonstrations as we grow the sales force.

So, going forward, there is a dual pronged focus. In the short-term, management wants to ignite campaign energy with more targeted incentives to drive the right behaviors, including narrowing the sales force deficit and building and promoting sales force managers. And so we've changed the onboarding focus from new consultants to managers to generate some momentum as we head into 2019. We also look to scale up the experience studio opportunity for business leaders, and you'll recall that this is a new sales force leadership level there that breaks them away from distributors, providing a more aspirational pull to the top. And this has been really well received in the market.

Now in India, we have continued to have difficulty bringing in new sellers, and our incentives are too skewed too much toward the product awards rather than just the pure earning opportunity. With Justin's leadership, we're taking a fresh look on how we're going to operate there going forward. It will, of course, involve the core elements of our global growth strategy, providing an earning opportunity that changes lives and an integrated and online and offline business that will also have physical locations and demonstration selling with digital tools that enhance engagement and access for the sales force and the consumer.

Now, China continues as a growth engine for us. We had another nice quarter of growth up 12%. We now have 6,700 outlets, which is a 14% year-over-year increase. And as with the second quarter, we did see flat productivity, but we consider this to be a relatively short-term issue. And I'm sure that you've seen there -- there is some macro pressure there on consumer spending and GDP growth is slowing a bit in China.

So, looking ahead, we feel it's important to diversify our product offering for a wider range of product price points. That's why we launched the MicroPro Grill earlier in the year, which is still at a premium price point, but it's lower than the $1,000 water filter that's been so successful. We're now training outlet owners on how to demonstrate and better sales in MicroPro Grill. And we have a team dedicated to product innovation, specific to China that we expect to stimulate the next wave of growth.

So this is truly an integrated online and offline model, as we current market -- as we currently market and transact certain product like drinking flask through both of our channels. Over time, the flask will be more and more online.

And in addition, we recently introduced a nutritional line that has seen early success. Now it's still a low single-digit portion of the sales, but in the future, our plan is that all the nutritional sales will take place online with growth coming from leveraging our member base, our brand ambassador program and nutritional seminars in the outlets. So, this model still has plenty of room for dynamic opportunity ahead.

And lastly, I just want to point out, we also had a solid quarter by Malaysia and Singapore. They were up 6% and that business is truly focused on the earning opportunity. The Philippines were up 9%, and this is a big direct selling market, where we have plenty of room for growth. And in the Philippines, we also have a very strong management team. And I also want to say how proud we are of them, and the way that they handled the aftermath and navigated the typhoon that happened there in September.

We also see positive results in learning from the studio that we opened in Korea, and that -- those studios are still growing for us. So all of these businesses are solid -- have a solid core and strong management team.

Now, in the US and Canada, we were down slightly, primarily due to a blockbuster campaign in July 2017, that was not repeated in July of 2018. So as the quarter progress, the sales growth comparison normalize. We do continue -- we continue to see the business working as it should, allowing us to remain focused on growing the studio count and developing the full suite of digital marketing strategies that will allow us to take this business to another level over the long term.

One example of our enhanced digital approach; we have a new digital marketing platform that allows us to leverage data and run enhanced email marketing campaigns with targeted recommendations and personalized communications. We saw that our email open rate was around 3% to 4% in the United States and Canada, which is above industry average. And this platform is currently live in 10 other countries, and we plan to replicate similar campaigns in an additional 10 markets by the end of the year. The US business is the furthest along in our digital approach. So, we expect to leverage our learnings there to enhance our success globally.

So, let me turn to Brazil. We were down 2% after being down 11% in Q2. So, a nice improvement there. And given the external headwinds that we've seen, as I mentioned, a good improvement. We have very high expectations for this market, and it's really not in our DNA to celebrate down quarters, but sometimes you have to deal with the externals as they come to you and continue building for the long term.

Following the truckers' strike in Q2, July was still a bit rough. But as that worked its way through, and with some changes that we made to marketing, also our product offerings and the brochure, we did see significant sequential improvement in the sales and the sales force KPIs in each campaign as they progress through the quarter, with the last campaigns being the best of the year. This was achieved through a new recruiting approach that use promotional dollars to incentivize managers to increase recruiting efforts and reactivate sellers, as well as enhance communication platform that provided a significant amplification of our message through WhatsApp, leading to improve recruiting results.

So, as Brazil is a direct selling channel market, a high share of consumer goods are sold through the channel and many sellers carry more than one catalog. So accordingly, there is competition for sellers, and we continue to amplify our opportunity and engage the masses. And also we are well positioned for Q4 and 2019. There are still some external risks, primarily related to consumer confidence and the political uncertainty in connection with the presidential election that will be finalized in just a few days. But, barring any significant external disruption, we do expect to see continued progress in Brazil. We have a very strong management team there, and they are prepared to react as necessary, while maintaining a solid business model with plenty of opportunity for the future.

In Mexico, there was a similar story for both our Fuller beauty and our Tupperware businesses. July got off to a rough start due to the distraction caused by the presidential election there and its impact on recruiting and activation. But we saw improvement through the rest of the quarter. Fuller finished down 1%, while Tupperware grew 6%.

In Tupperware Mexico, we put out a call to action, through our dynamic contact platform that really led to activation and reactivation of the sales force managers in August and September. And this gave us the needed boost that we needed for our sales force additions. This, once again, demonstrates the resilience of the Tupperware Mexico business and the importance of having a career-oriented sales force, as you can go through short periods of distraction, but then come back when you pull -- when we pulled the levers of the business.

So to sum-up, we are pleased that we could come in slightly over our guidance, we recognized that we have a long way to go, and we are continuing to focus on building our strong foundation in executing our strategies to drive change and create enhanced value for all of our stakeholders. We believe that the steps we are implementing are taking us in the right direction.

Mike, I'll now turn it over to you.

Michael Poteshman -- Executive Vice President and Chief Financial Officer

Thank you, Tricia. Tricia touched on what we have going on in the units, where we had bigger sales increases this quarter, China, Germany and South Africa, and in Indonesia, where we were down meaningfully.

As she said, putting aside the 3-point impact of not having Beauticontrol, which by the way we've now left and the impact of having merged the two units in Japan at the beginning of the year, local currency sales were up a fraction of 1%. And the contribution of price and volume and mix to the sales comparison, price was plus 2%, the same as in the second quarter, and volume and mix was at minus 4%, 2 points better than in the second quarter.

Within the volume and mix comparison with last year, there was a 2-point benefit from B2B sales, primarily in Germany, up from 1-point in the second quarter, and a 3-point hit from not having Beauticontrol and the Japanese unit combination.

Tricia mentioned that on a more comparable basis, we see our total sales force size comparison is being slightly favorable year-over-year at the end of the third quarter. What we mean by that is that we made the change in standards to join the sales force more stringent as in the first quarter of 2018 and the two South African businesses in the CIS. This had a negative 5-point impact on the comparison at the end of September, taking us from plus 1% under the old standards to minus 4% under the way we've reported things now.

Versus 2017, active sellers were down 7% in the quarter, versus down 4% in the second quarter, both without the Beauticontrol impact on the comparison. The biggest contributors were Fuller Mexico with a disruption around the Presidential election show-through, including our sales force additions, and in Venezuela, with what is going on there in the economy. Given the exchange rate, the Venezuelan sales and profit numbers are tiny, but there is a drag within the active seller comparison. The 7% shortfall versus last year without Beauticontrol is mainly from Indonesia about in line with the lower number of total sellers there. Fuller Mexico with a higher percentage impact than on the total seller comparison also from the Presidential election impacts and in Venezuela.

On slide seven, overall, on earnings per share without items, we came in $0.06 over the high end of the range. Tricia already highlighted the $0.05 impact benefit from income taxes versus the forecast, and the smaller impacts from the worse FX rate and lower shares.

Operationally, there were some pluses and minuses versus what we had expected. First, we achieved the reengineering benefits that we had foreseen that were a mid-single digit dollar amount. Profit was higher than anticipated in Europe, reflecting along with reengineering benefits, good profitability on the B2B sales, with some offset from the sales decreases in the quarter in Germany, France and Italy, that have high contribution margins. And there were some elevated provisions for bad debt.

In Asia, profit was down by a higher percentage of sales as the lower volume in the plants (ph) and higher resin costs show-through, and there was higher promotional investment in Indonesia to reinvigorate the business.

The relationship of the change in sales to the change in profit was good in North America, reflecting not having the 2017 sales from Beauticontrol that was at breakeven. And in South America, profit was lower on a small sales increase from the high product cost -- high product cost in Brazil, together with investment of gross margin there might have difficult externals, and we lagged inflation with our pricing in Argentina.

Taken together, this resulted in segment profit about $7 million below the high-end of the range for the quarter, which is more than offset from lower unallocated corporate costs to manage the lower expense for management incentives in the benefit of cost saving initiatives and the lower tax rates.

Turning to slide eight, this brought our pre-tax return on sales without items in a 12.7% in line with July guidance. We would have been up 10 basis points versus the forecast, but took a 10 basis points hit from worse FX. Versus 2017, we were 40 basis points up in local currency, although 40 basis points down in dollars, reflecting an 80 point -- 80 basis point drag from translation FX on the comparison. I spoke a minute ago about the things that moved us on profitability versus what was expected in the guidance.

Gross margin at 66.2% in the quarter was 10 basis points better than 2017. The main contributors that were largely offset were a positive impact from not having Beauticontrol, where there was a low margin last year during the wind down, and hit from higher resin costs around the world. As well, there was lower margin in Brazil from costs associated with reacting to the trucker work stoppage in May, and related to moving product moulds in and out of the country, along with some investment in margin to reintegrate the business.

DS&A as a percentage of sales fell 40 basis points versus last year to 52.1% in the quarter. FX was a hit on the comparison notwithstanding generally weaker currencies, reflecting where we incur our costs including with a lot in dollars. There was also more bad debt expense this year. Going the other way, we benefited from country mix, where we had relatively more sales and lower DS&A cost units, lower promotional spending as a percentage of sales, particularly in Germany in light of the contribution of B2B sales and lower expense for management incentives given the performance.

Turning to slide nine, cash flow from operating -- operating activities net of investing activities in the quarter was $38 million, up $15 million from last year. For the full year, we now foresee a $145 million to $155 million in cash flow from operating net of investing activities, which is down $20 million from the range given in July. This is predominantly from lower forecast pre-tax profit versus July, and I reference pre-tax profit rather than net income because while our tax rate has come down from the July forecast, this is primarily from non-cash item, most significantly the guilty tax. The cash flow forecast includes $65 million of capital spending, which is down $5 million from July.

On slide 10, turning now to the outlook, for the fourth quarter, the sales range even to down 2% in local currency. At the high end, this is in line with the third quarter, excluding the Beauticontrol and Japan impact, but includes less than a 1-point benefit from business-to-business sales, while the third quarter actual had a 2-point benefit from B2B. The fourth quarter outlook range is 2 points lower than what we used in July. This reflects most significantly not turning the trend in the core business as fast as we expected in Germany and Brazil, and softer-than-anticipated trends coming out of the third quarter in the United States and Canada and Fuller Mexico businesses.

In terms of earnings per share without items and profitability, the fourth quarter range without items is a $1.31 to $1.36, which includes a $0.16 drag from translation FX. This guidance is $0.06 worse than what had been included in the full year guidance in July, of which $0.02 is from changes in the foreign exchange rates. There was a decrease in expected profit from the segments of about $0.18, around one-third of which is coming from the lower sales assumption at the average contribution margin of sales changes.

Beyond this, there are investments in gross margin and promotional spending in certain units, where that is necessary to turn the business for future growth. This is most notably in Brazil and Indonesia. As well, given the pressure on volume and the plans in light of the trend in the businesses versus where we were before, together with the need to manage inventory levels, there is an impact of higher product costs. Part of this is the cost of procuring resin in US dollars, where currencies are weakened, but also by Brazil where the real was down year-over-year as of the end of September by 23%, although about half of that is since come back.

While the direction of some of the items was already there when we gave the guidance in July, we expected some moderation to be able to react to these hurdles -- and to be able to react to these hurdles to a greater degree than we now foresee. A lower (ph) forecast operating tax rate excluding items is worth about $0.10 and that provides a partial offset, together with $0.04 from less shares. This guidance would bring in the fourth quarter pre-tax profit return on sales without items to 16.3% compared with 17.8% last year, with 60 basis points of the 150 basis point decrease coming from translation foreign exchange.

Together then with third quarter actual, this brings the full-year sales range to minus 3% to minus 4%, including a 2-point drag from the Beauticontrol and Japanese unit impacts, meaning down 1% to 2% on a more comparable basis. This is no change from the full-year sales guidance in July. The earnings per share range excluding items is now $4.30 to $4.35. No change from July at the high end, though we did bring at the low end by $0.05. This includes the pre-tax return on sales of 14.2% at the high end, down 40 basis points from last year in dollars, and in line with last year in local currency.

For unallocated corporate expenses, the forecast includes about $50 million, down from the mid 50's in July, and there was net interest expense of about $43 million, which is no change from the last update. The full year tax rate without items is now expected to be 27.3%, down from about 30% previously, mainly reflecting the lower cost from the guilty item, compared with July, and also some other changes in estimates. While about 2.5 points down from the last outlook, the full year estimated rate is close to 3 points higher than 2017.

On the reengineering program, there has not been meaningful changes from the July update. We foresee total program expense of $90 million to $100 million, of which $78 million has been incurred so far, $13 million of that has been in the first three quarters of 2018, and we foresee about $3 million to be incurred in the fourth quarter. The cash cost is still expected to be $80 million to $90 million before the benefit of related asset sales. Of the cash outlays, $44 million have been made so far, including $31 million in 2018 to date. Further $11 million is included in the fourth quarter outlook.

Total proceeds from asset disposals to date have been $28 million, and up to another $17 million could be achieved over time to bring the total to as much as $45 million. Of this, $5 million could be in the fourth quarter.

As for P&L benefits from the program, the full annualized amount remains $35 million, of which $25 million is foreseen in 2018. While these benefits are coming in and we're investing about $10 million we had foreseen, the remaining $15 million that was supposed to show on the bottom line is obviously being offset by other factors, including sales being lower than what we had expected when we first gave guidance for 2018 in January, incremental operating investments, lower absorption of fixed costs in the supply chain and higher resin costs.

The full year impact of higher resin costs in pre-tax income now shows at $9 million versus $11 million in July, with the decrease having to do with lower resin purchases and some mixed shift toward less engineered resins where there is a lower cost. The actual impact of higher costs in the third quarter was a little over $2 million versus the $3 million we have foreseen, and the fourth quarter outlook includes a $3 million hit.

And with that, we're going to turn the call over for questions.

Questions and Answers:

Operator

(Operator instructions) Our first question comes from the line of Frank Camma from Sidoti. Your line is open.

Frank Camma -- Sidoti & Company -- Analyst

Good morning, guys.

Michael Poteshman -- Executive Vice President and Chief Financial Officer

Hi, Frank.

Patricia A. Stitzel -- President and Chief Executive Officer

Good morning.

Frank Camma -- Sidoti & Company -- Analyst

Couple of quick questions. First of all, let's start with Indonesia, since that was obviously such a star just a couple of years ago, and you addressed what you're doing to kind of turn that around. But what's the risk that -- you know what happened there will happen in other large markets. I mean it's basically been in free fall for I think couple years now. So I mean what is isolated about that market that might make it different, I guess, is what I'm trying to understand?

Patricia A. Stitzel -- President and Chief Executive Officer

Hi, Frank, good morning. So, you know, we've learned a lot from Indonesia. And what I've said about Indonesia in the past is that we really -- we stayed with what works for too long, and hadn't really looked toward innovating toward that next wave of growth. And I would say that that's one of the things that we look for in, in many of these other markets.

So, for example, in China, where I talked about the new product lines, the different things that we're doing, rather than just letting things right as they were and even though it may still be working for a certain amount of time, we're catching those early warning signs as yellow flags to say we need to change it up. Even though it may not be in decline, be always fresh, be always working at that. And also you've seen from the actions that I talked about in Brazil changing the brochure, changing the format, doing different things, and being much more aggressive about how we look at innovation in these markets. So, I would say, that's one of the major differences.

Frank Camma -- Sidoti & Company -- Analyst

Okay. And switching to China then, I mean, it did look like, obviously, the numbers grew, but little less productive given the number of openings you had there. Is that reflective of what's going on in their economy or is that too soon to tell what are you hearing from your guys or salespeople on the ground there?

Patricia A. Stitzel -- President and Chief Executive Officer

Yeah. Our openings were still good. So, we were still up 14% in terms of the openings. So we're seeing that continue as we normally would and in line with our plan. Our productivity was flat, and we also had that in Q2, and so that's -- that is where we start to hear a bit more about the tighter consumer spending and so forth. And so, in fact, I was just there a few weeks ago and talking with them about that. And so they're really looking at diversifying that product line. They have a fairly narrow product line in the outlets, and so they don't want to -- they do a great job in demonstration and they don't want to overcomplicate it by having too many SKUs. And so what they started to do was really to put in still premium, but not quite high as price points.

So, to be able to engage those consumers, that may be a bit more sensitive with discretionary spending, that we give them options. Right? We still have the $1,000 water filter, that's still a great demonstration, but if you don't have the $1,000, there is also other options there for you.

Frank Camma -- Sidoti & Company -- Analyst

Does the Chinese consumer have access to the full catalog though or is it just what's in the store is what you can buy? Is that how it works, like how does that work logistic wise?

Patricia A. Stitzel -- President and Chief Executive Officer

It's essentially what's in the outlet. However, we also do have products online as well, and those -- they can access those.

Frank Camma -- Sidoti & Company -- Analyst

That was like the nutritional line like you were talking about, right?

Patricia A. Stitzel -- President and Chief Executive Officer

Well, the nutritional line will -- right now, we have introduced the nutritional line in the outlets. And so we are doing that recently, and piloting that if you will, good acceptance, but eventually, the nutritional line will be online.

Frank Camma -- Sidoti & Company -- Analyst

Okay. And my last question is just on capital allocation. It looks like you're not -- from a market standpoint, you're not getting credit for your high dividend yield. I mean, what is the board -- let's just talk about, have you thought about perhaps temporarily reducing the dividend given the fact that you're not really given credit for it, it's a lot of your cash flow going out of the door. Is there a way to temporarily at least maybe reshape that toward share repurchases because you did step up the share repurchases? Just wondering what the thoughts are there?

Michael Poteshman -- Executive Vice President and Chief Financial Officer

Hey, Frank. Yeah. As we point out in our 10-K and have for a number of years, our Board really evaluates capital allocation at least annually with the dividend declaration that we've done in January the last several years and as they would look to take a balanced and thoughtful approach to the strategies that we're employing. As you've seen, our current plan certainly prioritizes funding the business as it should be, but then returning capital to shareholders, we've done well at that, while continuing to have the right kind of flexibility to make all of that happen.

So as we look ahead to 2019, the Board with management will continue to review those priorities. And as always looking to maximize things from a shareholder value point of view, considering like you say, dividends, share buybacks and obviously making sure that we're investing in the right way and at the right point in time we'll be able to update that.

Frank Camma -- Sidoti & Company -- Analyst

Okay. Thanks, guys.

Patricia A. Stitzel -- President and Chief Executive Officer

Thank you.

Operator

And the next question comes from the line of Olivia Tong from Bank of America. Your line is open.

Olivia Tong -- Bank of America Merrill Lynch -- Analyst

Good morning. Thank you. Tricia, it was great to see that there was less pressure on the local currency sales in Q3, and that Q4 looks like at least from the guidance that you expect to be stable potentially, but as the impact of that is flat. But a few questions there. First, when you look at the two-year stack, what's the expected deceleration in Q4, given the easier comps, can you talk through that? And then on the B2B sales, this is a new area you're focused on building or is it just going to be episodic? And then I have a follow-up question.

Patricia A. Stitzel -- President and Chief Executive Officer

Okay, great. So, let me start with the B2B sales. So, it is something that we do from time to time, and they pop up at different times based on the success of what we saw in Europe and specifically Germany. We do see more interest in Europe to continue these types of arrangements. So we're looking toward continuing that with the partners that we have over there. And then I didn't quite get the first question, Olivia, about the fourth quarter, or Mike you heard --

Michael Poteshman -- Executive Vice President and Chief Financial Officer

Yeah. Olivia, you're asking about the two-years stack, and you're right, it is in terms of how that local currency shows through. On a more normalized basis for the things like the Beauticontrol exit and also that in the fourth quarter of '17, we were lapping the extra week from '16. We really see that it's on the high end of the range. It's an improvement of 1-point on a two-year stack going from again on this more normalized basis 2% stacked in the third quarter to 3% in the fourth.

Olivia Tong -- Bank of America Merrill Lynch -- Analyst

Got it. That's helpful. And then on the active sales force being down double-digits, yeah, I understand that you changed some parameters around it with pressuring the numbers, but is there an expectation for productivity to improve? And if not, can you help us understand sort of the key drivers to that sales improvement as you go forward?

Patricia A. Stitzel -- President and Chief Executive Officer

Yeah. So, activity, especially in the third quarter, it was brought down a bit early in the quarter. I've mentioned a few markets in my comments in particular in July, and then of course, the summer (ph) month is always a challenge with activity levels. We saw that improve in September, and then fourth quarter, we have things in October, for example, record breaker, and these are normally higher activity months for us. And so we certainly see a better trend over what we saw early in the third quarter happening there. On productivity, it's more market by market, so we do see some trends improving there in productivity. That's a harder thing to get than activity in the short term. But -- so I wouldn't expect any significant gains in productivity necessarily in Q4, slightly up maybe.

Michael Poteshman -- Executive Vice President and Chief Financial Officer

Yeah. And Olivia, I don't have the specifics to be able to give you like a share on this, but clearly for the last two quarters with China being flattish in productivity versus the big growth in the past that's showing through including because there's -- really the active sales force is just the number of outlets. So it had an outsized impact from a mix point of view from the first quarter, going back a number of years. It was showing productivity through the overall numbers.

Olivia Tong -- Bank of America Merrill Lynch -- Analyst

Great. Thank you for the answers. And Mike, best of luck.

Michael Poteshman -- Executive Vice President and Chief Financial Officer

Thank you.

Patricia A. Stitzel -- President and Chief Executive Officer

Thanks, Olivia.

Operator

And the next question comes from the line of Beth Kite of Citibank. Your line is open.

Beth Kite -- Citibank -- Analyst

Terrific. Good morning. I had a couple of questions. First to start off on the e-commerce and digital initiatives. Tricia, as you look forward into 2019, and the next couple of years, what do you think the boost to sales growth can be from some of these efforts? Specifically, do you think they can help you get kind of a low to mid single-digit top line growth on an organic basis?

Patricia A. Stitzel -- President and Chief Executive Officer

So, really what we look for when it comes to the online connection right is really helping us to further our relationships and the demonstration based selling, and really amplify the power of our 3 million sellers that are out there. And we really look to this notion of both access and engagement. And what we say is that we want to have better communications to the people who our with us. We also have the opportunity to connect with the people who have left us.

So, as you know, we have 3 million sellers, 3 million or a little less than that leave us every single year, but they don't leave us because they no longer like the brand. They may move or they may have other things going on in their life. And so they still well many of them want to stay connected with the brand. And so we want to maintain that connection with them digitally and pushing out the information, and then also the people who can't find us. We know there is many people today that love and know and want the brand, and want to make that connection with us. And so we really see the online component as giving both this access and engagement piece to our community and really looking at growing our community overall.

Beth Kite -- Citibank -- Analyst

Very good. Thank you. And one, if I may, quick question on the business-to-business sale in Germany, is it correct to understand that that was not in the third quarter guidance? And also are you expecting anything of that nature in the fourth quarter?

Michael Poteshman -- Executive Vice President and Chief Financial Officer

Yeah, Beth, it was mainly not in the guidance in the third quarter. And we have assumed some B2B and some of the businesses in the fourth quarter, not as much as in the third quarter, I talked about -- yeah, it's there, but it's not as big.

Beth Kite -- Citibank -- Analyst

Okay, terrific. And then one last one if I may. With respect to just thinking about innovation, some of the new nutritional products you have coming in China, is there anything on the horizon, like the microwave coral that's kind of a bigger launch for either at the end of this year or into 2019.

Patricia A. Stitzel -- President and Chief Executive Officer

Well, we always have new product launches coming up and we are looking even at different ways to use the technology that we have in the MicroPro Grill and in other products for that as well. So we will typically launch two to three blockbuster kind of products every single year in addition to several more products as well.

So, absolutely we see new products coming up. We typically will begin that launch during our big weeks time is the time where you start to see some of the new products come in the fourth quarter. What we'll see is those -- the newer products that we had throughout the year up to this point for some of them only the sales force has been able to earn them, and it will be a launch to consumers for example, in the fourth quarter, and it's different products in different markets.

Beth Kite -- Citibank -- Analyst

Very good. Thanks very much.

Patricia A. Stitzel -- President and Chief Executive Officer

Thank you.

Operator

And the next question comes from the line of Doug Lane of Lane Research. Your line is open.

Doug Lane -- Lane Research -- Analyst

Yes, hi. Excuse me, good morning, everybody. I want to start with Europe, particularly emerging Europe where your growth in average actives is double digits in the quarter. It's been pretty strong for the better part of the year now. So I just wondered what specifically is driving the growth in average actives in emerging Europe, and what could you learn from that to translate into some of the other regions, which are not growing so rapidly?

Patricia A. Stitzel -- President and Chief Executive Officer

Yeah. So, good morning. Doug. You know, what we love about what's happening in emerging Europe is the fact that they have really been following the systematic approach that we have talked about with things like success formulas and onboarding, and those kinds of things. And what we see there is a much more disciplined approach toward the execution of these things, and that has been building over the past couple of years. So Russia, for example. They had been really one of the early adopters to success formulas, and they have really stayed the course. They've done things, for example, with the unit manager base to raise the level of expectations and standards that we had. And, you know, we went through a trouble time in Russia, and so often people think, well, we just want to bring in masses of people and then you never really get the training and the standards in there as you want.

And so really taking the time to stick with this success formula is to train them in for the unit managers to raise the level of expectations of standards. And it's hard initially to do that, right, because you have to train all these people, but they did it and they stayed the course. And so really we are holding them up as examples of that.

In South Africa, they've done a great job with our new unit manager onboarding program. They were piloting this program for us and they've seen fantastic results with that. And what we find is, you know, as I said, unit managers are the engine of the business, They are also the trainers of the business. So, they are the recruiters. When they're bringing people in, if they have disciplined approach and consistent activity, then they're going to train their people to do that as well. And so that's why we feel so good about these success formulas, about the onboarding and the systematic approaches that we have put in and continue to roll-out.

Doug Lane -- Lane Research -- Analyst

Now, is this something that you are beginning to implement in other markets that are struggling like Indonesia? Is this sort of the model that you're using to try to get Indonesia back on track?

Patricia A. Stitzel -- President and Chief Executive Officer

Yes, exactly. So, I commented that. Really the new leader there is focused in on this unit manager level. And what he has done is really shifted the focus. We were implementing the consultant onboarding program, and he really saw that we can get more leverage from the unit manager program. So we've shifted the focus there now to be focused on unit manager onboarding, and actually in the third quarter saw a good result. With the new unit managers, we saw more recruits per unit and we saw a higher level of productivity for those new unit managers.

And as I said, what's critically important in Indonesia is that we get to a solid earning opportunity there for the unit managers, and that comes from raising the standards and really teaching them not only to personally sell, but to build a team. And that's where the power and the engine of this gets going.

Doug Lane -- Lane Research -- Analyst

That's helpful. Shifting gears, Mike, you mentioned, you trimmed your cash flow forecast by $20 million, Will this impact your pace of stock buybacks going forward? Or are we going to continue with this sort of $50 million a quarter until the $2 million is used up?

Michael Poteshman -- Executive Vice President and Chief Financial Officer

Well, we don't have any share buybacks in our fourth quarter. We had mentioned in July that we thought that the program might extend into 2019. So, along the lines of what I said toward the beginning of the Q&A, as the Board has its look at capital allocation and so on, then we'll have an update on how things should roll-out in 2019.

Patricia A. Stitzel -- President and Chief Executive Officer

So. Okay. I mean you've never really had share buyback in your forecast, but are you saying that you really actually not going to buy back shares in the fourth quarter?

Michael Poteshman -- Executive Vice President and Chief Financial Officer

Right. We don't expect to.

Doug Lane -- Lane Research -- Analyst

Okay, got it. Then lastly, you know, there's a CFO transition going on. Mike, you announced you are stepping down after the close of the year. Can we just get some more color may be behind your decision, and then Tricia what you're looking forward from the incoming CFO?

Michael Poteshman -- Executive Vice President and Chief Financial Officer

Sure, Doug. Yes, I mean, I'm leaving for positive reasons. Reasons you know how I want to spend my time and so on. And when I look at Tupperware Brands, we're doing so many exciting things with the global growth strategy. We've had great leadership from Rick for extended period of time, but Tricia is an exciting new leader that's got a lot of great ideas and is executing on them.

So I am leaving because of how I want to spend my time even though it's difficult to leave so many friends and colleagues that are doing such good work, and I think Tupperware has to be optimistic as a company, and as a management team on what's going to come out of all of that.

Patricia A. Stitzel -- President and Chief Executive Officer

So, and I'll just comment that, you know, we are of course very sad to see Mike go after 25 years of really great contributions to this business. And he's obviously an important part of our team. I'm happy that he's able to move on to do the things and spend his time that he wants to do. And we very much appreciate that he has given us the notice that he has and give us a good transition time to find the right person to take this CFO role.

So we have started the search with Spencer Stuart. And so that is under way. We're looking, of course, for the core financial accounting kind of skills that you need in this role. But I would say, the additional things maybe that that we would look for would be experience with transformation, but also technology as well. So maybe those are two things to add to the description.

Doug Lane -- Lane Research -- Analyst

Okay. Thank you.

Patricia A. Stitzel -- President and Chief Executive Officer

Thank you.

Operator

There are no further questions at this time. I'll turn the call back over to Tricia for the final comments.

Patricia A. Stitzel -- President and Chief Executive Officer

Great. Well, thank you. Thank you very much. We very much appreciate your time, your interest, and we are excited about the future. We're excited about the global growth strategy, and beginning to execute on this in a really significant way, and excited about the plan ahead. So, thank you very much for your time today. Bye-bye.

Operator

Ladies and gentlemen, thank you for joining us today.

Duration: 57 minutes

Call participants:

Patricia A. Stitzel -- President and Chief Executive Officer

Michael Poteshman -- Executive Vice President and Chief Financial Officer

Frank Camma -- Sidoti & Company -- Analyst

Olivia Tong -- Bank of America Merrill Lynch -- Analyst

Beth Kite -- Citibank -- Analyst

Doug Lane -- Lane Research -- Analyst

Patricia A. Stitzel -- President and Chief Executive Officer

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