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Tupperware Brands (NYSE:TUP)
Q1 2019 Earnings Call
April 24, 2019, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning. My name is Tom, and I will be your conference operator today. At this time, I would like to welcome everyone to the Tupperware Brands Corporation First Quarter 2019 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.

I would now like to turn the conference over to Jane Garrard, Vice President of Investor Relations. Ma'am you may begin your conference.

Jane Garrard -- Vice President, Investor Relations

Thank you. Good morning. As Tom said, my name is Jane Garrard and I'm the Vice President of Investor Relations. I'm here today with Tricia Stitzel, our President and Chief Executive Officer; and Sandra Harris, our new Chief Financial Officer and Executive Vice President.

Along with our prepared remarks we have uploaded slides to our Investor site including the standard message on forward-looking statements.

I will now turn the call over Tricia for her remarks on our first quarter results.

Patricia A. Stitzel -- President, Chief Executive Officer

Thank you Jane. And good morning everyone. First I'd like to welcome Sandra to her very first earnings call with Tupperware Brands. Sandra joined us on April 1st and in just a few weeks she is already proving to be a great addition to our team. Now as a quick reminder, Sandra joins us from VF Corporation, a global retail and manufacturing company, and she brings decades of executive experience developing and leading impactful financial and strategic initiatives globally at VF and previous organizations as well. We are very pleased to have her part of the team and she is going to introduce herself and deliver the details on our financial results and forecast later in the call. Jane is also here with us today, as Sandra is only three weeks into our history.

Now, I'd like to begin today by providing some color on the transformation initiatives that we are beginning to roll out. And the foundation of our plan to drive value over the long-term. I'll then give some high level color on first quarter's financial performance, including our view on some of the key markets in our portfolio.

As many of you know, this is an important moment in Tupperware's 73-year history. We are executing a global growth strategy designed to ensure that we can achieve sustainable growth in both the near and long term, while constantly advancing our mission to inspire women. Now we are entering a new era here at Tupperware, one that is grounded in the tenants of greater engagement, access, and relevance. But what does that really mean in application? Well, it means that we're innovating across products and sales force and consumer experiences. We're making it easier for the sales force and consumers to connect by extending access. We're deploying technology to drive engagement and enhance connections, which is going to make it easier for our sales force to earn.

We're updating our service and business models, and we will continue to streamline our global organization to make sure we're operating efficiently and effectively. In this way, we're confident that we can leverage Tupperware's foundational strength in innovative and diverse pipeline of iconic products, an expansive geographic footprint with a strong presence in emerging markets, and a relevant relationship in social selling model, to truly transform the business and deliver value for our shareholders. Now we are working with a sense of urgency, and we are intent on accelerating our progress. We know that there's much work to be done and we're focused on doing it and delivering the value inherent to this very special company.

Turning now to the results for the first quarter. We delivered sales of $487 million, and that included $16 million from B2B sales. Q1 sales declined 2% in local currency versus last year and earnings per share was $0.90. Both sales and earnings were within our guidance. We are pleased to report a 5 percentage point sequential improvement in our sales comparison, coming most significantly from China who was up single-digits and the units of France, Germany, Indonesia, and Italy all of whom had double-digit sequential sales comparison improvements.

We improved our overall manager count since December with the success of our Extend a Hand initiative, and you've heard me say that Unit Managers are the engine for our business because they drive recruiting on a weekly basis.

Turning now to our geographic segments. In Europe we generated sales of $139 million and a profit of $18 million, which included a majority of the $16 million B2B revenue that I mentioned. We leveraged B2B partnerships for the purpose of brand awareness, connecting us and connecting us with new circles of consumers and potential new sellers. The largest current partnership we have is with Carrefour in France, where we enhanced our normal approach of just demonstrating the product in the store to also allow our sales force more freedom to date parties and to share the opportunity. In addition, Carrefour has included us in their media campaign with many billboards displaying our logo and that has been great for our brand awareness. The partnership has been well-received by both the sales force and consumers in France.

Europe's core sales comparison improved by 11 percentage points from the fourth quarter to down 3%. Also our active sales force grew by 1% year-over-year through better sales force engagement.

In Asia Pacific, we generated sales of $156 million and a profit of $30 million. We were pleased to see China's sales return to strong growth with a local currency increase of 7% year-over-year. We continued our outlet expansion efforts this quarter increasing the number of outlets by 6% year-over-year to bring our total to about 6,800. These improvements are supported by our successful e-commerce platform which is driving traffic back to the growing number of outlets.

In Indonesia, while sales were still down 17%, but it's important to note that this represents an 18 percentage point sequential improvement in local currency sales, mitigating the declining trend that we have been experiencing. We are implementing an important compensation plan change effective in early Q3 in Indonesia, aimed at the manager level, and we are working to create a compelling program that is more competitive in the market.

Turning now to North America, sales were $120 million and profit was $17 million. We are disappointed with the results in the U.S. and Canada which stem largely from a decline in sales force activity. In January, we made a shift in the feature product category in an effort to be less predictable after many years of using the same approach. The campaign was well-prepared and launched, but it wasn't well received by the consumer. So we had a very slow start to the year for both sales and recruiting. We also rolled out revised qualifications for incentives which had not been increased in many years. So, disappointing results, but the cause is more tactical in nature and the good news is that with adjustments we improve the activity as we came through the quarter.

Now we remain confident in the potential of our operating model in the U.S. and Canada, and we are evolving our studio strategy to include a smaller scale format and more sales force leadership levels, which will provide us with the opportunity to increase the number of studios in this market.

In Latin America, we are experiencing uncertainty around the new governments in both Mexico and Brazil that led to tightened consumer spending. Additionally in Mexico, both Tupperware and Fuller were impacted by the gasoline shortage we mentioned last quarter. However, the impact on the Fuller Mexico business was more significant as it impacted the mobility of our field managers who deliver the orders.

Our South American business delivered sales of $73 million with an operating profit of $9 million. The consumer spending environment in Brazil, that I just mentioned, has impacted a number -- the number of orders that the sales force member make during the month. Although we have a double digit sales force size advantage, we have a smaller number of orders given the environment. We are continuing to focus on recruiting and growing the size of the sales force, as we need more sellers to compensate for the declining order size. Now it's important to note that we have not lowered qualifications for promotional awards and compensation, but we have reduced the minimum order size to encourage sellers to place more orders.

We're in the process of deploying new distributors, in new locations, to the under penetrated areas of the Brazilian markets, which will expand our reach.

Now, I'd like to also provide you some information on the specific actions we took during the quarter as we implement and accelerate our transformation initiatives. Driving innovation is at the core of our business, and it's an important part of our go-forward strategy. We are proud of the recent design awards we've won for several of our products which you can see here on slide 5. We are focused on continuing to launch innovative products that are both responsive to and drive consumer demand. For example, we are launching in Q2, a new version of our water filter in China and a new Cold Brew carafe in the U.S., Canada and Europe.

Innovation isn't just happening with our product design, we are driving innovation through collaboration with our raw material suppliers as well. As we announced yesterday, we have partnered with one of our suppliers to introduce a new circular material made from mixed plastic waste. We will have our very first global launch of this sustainable product also in the second quarter. And we continue our cutting edge innovation work with NASA, literally launching into space last week, a Tupperware product that allows plants to grow in space. And this is to help us keep our astronauts well-fed.

As part of our efforts to extend access, meaning make it easier for our sales force and consumers to connect, we are focused on expanding our experience studios. Right now we have approximately 300 studios in 11 countries. Our goal is to reach a 1,000 studios by 2022. And as a reminder, our studios provide consumers with visibility and ease of access to our brand and increase sales and the number of new sellers for our studio owners. Studios are also a part of our go-forward strategy.

We are making progress in deploying technology across our business units that helps to improve our sales force and consumer experience. This quarter, we completed the rollout of a new marketing communications platform that is now in 27 countries. The platform allows the sales force to easily and efficiently communicate with consumers and other sales force members across multiple channels, including email and social media applications. We also recently launched in the U.S. and Canada personalized emails on behalf of the sales force manager, which is delivering a consistent 10% to 15% increase in new sales force activation. We are rolling this program out to France and Germany in the second quarter.

We are also in the process of creating a new e-commerce website, which we expect to launch in August of 2019 in the U.S. and Canada. We plan to leverage this site through the search -- through search engine optimization, influencer marketing, and ad retargeting, all of which will elevate and increase consumer awareness of the Tupperware Brand and generate leads to new consumers.

This quarter we piloted a new sales force tool called TupSocial in the U.S., with plans to expand to Europe in the third quarter. TupSocial is a platform that allows the sales force to reach prospective sellers and consumers through a variety of social media sites, thus increasing the members reach, efficiency and effectiveness. The platform will feature tutorials on how the individual can grow their business through social media and we believe this platform will be a key contributor to our efforts to expand our active sales force going forward.

The final two elements of our strategic roadmap are included in our transformation project, focused on making it easier for our sales force to sell with minimal administrative functions and no logistics. Additionally, we are currently conducting business model and competitive analysis to ensure a solid value chain as we move into a new operating structure in Europe. To support this future transition, we are implementing global processes and standardized software, which will allow us to move more quickly as we implement across continental Europe. We have staffed the team for these projects and we have developed a detailed project plan. We will provide an update next quarter that includes milestones and metrics.

Now, we are firing on all cylinders across the global organization to make impactful changes to accelerate our transformation and create value. We are pleased with the early signs of progress that we're seeing.

With that, let me now turn the call over to Sandra for some additional detail on our results.

Cassandra Harris -- Executive Vice President, Chief Financial Officer

Thanks, Tricia, and good morning everyone. First, let me start by sharing how thrilled I am to join the Tupperware team at this important time in the company's evolution. It is great to hit the ground running, working alongside Tricia and the rest of the management team, as we diligently work to transform the company to enhance performance.

Turning now to our results. Sales were down 2% in local currency, which was a sequential improvement from down 7% in the fourth quarter and in line with our guidance range. Sales in the first quarter did include $14.7 million more B2B sales than last year. Core sales were down 5 percentage points in the year-over-year comparison for Q1, but showed 3.5 percentage points of sequential improvement from the fourth quarter comparison.

Tricia already highlighted sales performance by key units within her segment discussion. I will now drill down on some other specifics around sales and profit. Looking at price and volume in the quarter, price contributed minimally to sales and was more than offset by a decrease from volume between 2 to 3 points. The largest volume decreases came from Brazil, Fuller Mexico, Indonesia, and the U.S. and Canada. We are very aware of the need to continue to expand ways to get Tupperware products into the hands of consumers through continuing to work on growing the sales force size, expanding studios, leveraging B2B partnerships and deploying technology as Tricia talked about earlier.

Sales volume is highly correlated with the size of our total and average active sales force. Total sales force size was down 3% while average active sales force size was down 8% from the same quarter last year. We are seeing positive trends, however, from the end of the fourth quarter in Europe. Europe's total sales force was up 2% and their average active sales force was up 7%.

Now, I will discuss some specific components impacting profit during the quarter. Gross margin in the quarter was down 10 basis points from 67% last year, mainly due to cost in some inflationary markets that could not be offset through price increases. As we stated in our last quarter call, our update on resin is that it is expected to be about even to slightly better than 2018.

Distribution, selling and administrative expenses were 20 basis points higher than last year in local currency at 53.9% due to lower volume predominantly in U.S., Canada, and Brazil.

2019 pre-tax return on sales excluding items for the first quarter was forecast at 12.4% at the low end, actual was 12.2% in local currency. The 20 basis point shortfall came from slightly lower gross margins and higher distribution as a percentage of sales on those lower volumes, partially offset by lower unallocated expenses.

Our earnings per share came in at $0.90 per share within our guidance range. Compared to last year, earnings per share is $0.10 higher than in 2018 in local currency. The change in the hedge accounting, the lower tax rate from GILTI, each contributed $0.06 in the quarter, while lower shares contributed $0.04. These are offset by a $0.09 reduction from operations related to lower sales volume partially offset by the lower unallocated expenses.

Regarding cash flow for the quarter. Cash flow from operating activities net of investing activities for the quarter was an outflow of $52 million which was $2 million worse than last year's first quarter. For full-year 2019, we foresee cash flow of $120 million to $140 million.

Turning now to the outlook. Our sales in local currency in the second quarter are expected to be down 2% to 4%, reflecting a 1-point to 3-point improvement versus the first quarter in the core sales. B2B sales will be flat with prior year. Our full-year outlook remains at flat to down 2% as we believe core sales trends will improve throughout the year.

We expect continued stabilization in Europe due to consistent standards, rhythm of the business and sales management. In Indonesia, the year-over-year comparison began to improve in the first quarter and the new compensation plan is expected to gain traction by the fourth quarter. We believe the U.S. and Canada business will improve its marketing execution, and Brazil will capitalize on its sales force size advantage.

For the full-year, the earnings per share range outlook is $4.03 to $4.14 without items, and is down $0.03 due to worse foreign currency since we gave guidance in January. Additionally, we've narrowed our range, at the top end by an additional $0.04 that is the amount by which we were under the high end of our range in local currency in the first quarter. This range compares with $4.16 in 2018. This is the $4.30 we've previously reported less the $0.14 FX impact in this year's guidance.

As we stated in the press release, we did not make any share repurchases during the quarter. We continue to keep open the possibility of $100 million in opportunistic repurchases this year but have not included 2019 repurchases in our EPS outlook.

Finally, you may have seen in our recent 8-K that we've completed a Second Amendment to our credit agreement. We initiated this in the ordinary course of business as the prior agreement was set to mature in mid-2020. The amended agreement provides for $650 million in capacity which is an increase of $50 million and runs five years into 2024.

Our consolidated leverage ratio requirement was loosened half a turn from 3.25 to 3.75 to 1. Other terms and conditions are largely similar to that of the prior agreement and are described in more detail in the 8-K which we filed with the SEC on April 4, 2019.

And with that, we'll turn the call over for questions.

Questions and Answers:

Operator

Thank you. (Operator Instructions) Our first question comes from the line of Olivia Tong from Bank of America. Your line is now open.

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

Good morning. Thank you and welcome to Sandra too. I guess, can I just start with a couple of questions on the various countries, regions. First, in the U.S. If you could give a little bit more color in terms of what's happening there, because the declines obviously seem to be worsening. What you're doing to change things? You mentioned a tough start to the year. I don't think there is any seasonality to your business, but if you could give just a little bit more color in the U.S. to start that would be great. Thank you.

Patricia A. Stitzel -- President, Chief Executive Officer

Hi, Olivia. Thank you for being on the call, and yes I'll be happy to do that. This is Tricia. So in the U.S. and Canada, as I said, we were disappointed with the results. They were off to a difficult start. January is a big promotional period for them, and for many years we've run the same category, the same product, essentially the same promotion. And you know we have a new leadership team there. They're looking to do some things differently and you know in this business you don't want to be too predictable but at the same time, you can't change things too quickly either sometimes with promotional approaches. And so they were working to have some newness and they executed on a campaign that although we had some good early signs from the sales force, it just didn't resonate with the consumers. They were expecting something different and it really fell short.

And then as a result, we didn't engage with the recruiting in the way that we expected and really fell short there which hurt us in February as well. And so with that then, we came short in the quarter. We did mitigate some of the lower levels of activity as we came through the quarter and overcame some of that and changed up the approach as well, so that later in the quarter we saw the activity coming back. You know we have a lot of things going on in the U.S. that are encouraging and you've heard me in my comments make a lot -- tell you a lot about the technology that we're using in the U.S. in order to really heighten the engagement in the activity level, in addition to what we do with just sales force size growth and I would say the more fundamentals of the business.

And we're really encouraged there by the early signs. We piloted the things that I talked about there and we're seeing some good results with those. So you know, the thing in the U.S. business is that it was more tactical kind of issue. It was marketing related and so we don't really see a problem going forward there with the model or any really, of the more challenging things to change. So we think we can mitigate this and move forward in a positive way there.

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

Got it. Thanks. And then, perhaps if you could give a little bit more color on Indonesia. Obviously the declines lessened there. Do you feel like you're turning the corner there? Is it still pretty or is it still pretty touch and go? And then on the B2B businesses, if you wouldn't mind reminding us the comps for the remainder of the year? The contribution in Q1 obviously, I appreciate the sort of talk about core sales, if you could just remind us the comps for Q2 to Q4 that would be great? Thanks.

Patricia A. Stitzel -- President, Chief Executive Officer

Okay. So I'll begin with with the comments on Indonesia and then I'll turn it over to Sandra for the B2B comments. So for Indonesia, we were still down 17%. So we're not trying to be too -- pat ourselves on the back too much about Indonesia. However, it is a good sequential improvement over what we had seen there, especially last year and after several quarters.

Now just as a reminder, what we have been working on in Indonesia would be a few key things. We made changes to the incentive qualification structure. We used to be very regimented on how we did this. So in week one, they had to do a certain thing and in week two, they had to do another thing. And what we said is we keep the qualifications the same, but you have the whole month and you have freedom to do it in the way that you want. So that we're not so strict and prescribed on the things that we're doing.

And we've been running that now for a few months and that seems to be well received. So they're starting to get more into the flow of that. Originally, the first month we did it, they didn't quite know how to react, and so we had some issues with activity levels. Now, they're starting to get more into the groove and that seems to be a good thing.

We're also -- we've introduced new onboarding programs for both consultants and managers and both of those, again, good early results. You know, not a huge impact overall on the numbers, but good early results and by getting these consultants and managers off to a good start, you keep them engaged and retained for a longer period of time.

And then finally, we're working to make this manager compensation plan change in early Q3. We've started already some early discussions with our distributors and they seem very encouraged by it as well and they're excited about the change and think it's going to have a good impact. Now saying that, compensation plan changes are always a bit challenging and even if you're going to a better place just getting through the understanding and getting them up to speed is something that you always have to work through. So, yes, we're encouraged by the results in Indonesia, but we still have our ways to go there. We did improve the gap in the sales force size by 2 points over Q4. So, again, steady progress includes -- in closing that sales force size gap which is the all important thing to really higher level sales.

Cassandra Harris -- Executive Vice President, Chief Financial Officer

And, Olivia this is Sandra. In regards to the B2B question. We were 3% in Q1, expected to be flat in Q2, down 2% in Q3, and down another 2% in Q4.

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

Got it. Thanks Sandra. And then just lastly for you. I know it's only been three weeks since you joined the company, but as you look at the company's targets, have you had a chance to sort of do your own assessment, any early views on how you intend to return cash to shareholders, whether it be a share repurchase dividend, how you feel about those levels for the company? And I know there wasn't any share repurchase in the quarter but how do you think about order of priority in terms of some of those different buckets? Appreciate it.

Cassandra Harris -- Executive Vice President, Chief Financial Officer

Yes. So thanks Olivia. I'll say that I'm truly excited, again, to be part of the Tupperware team. I think the timing is right, as Tupperware launches this transformation initiative and with Mike transitioning after 25 years. I'm actually encouraged by the guidance for the first quarter and the sequential improvements that we're seeing. I think that these showed a positive momentum and combined with the transformation gives us confidence that we're going to be able to return shareholder value.

I've worked for the last 10 years in a company that invested in and transformed purpose-driven, consumer-focused brands and Tupperware is a purpose-driven strong global brand, focusing on transformation.

In regard to the priorities and questions on what we'll focus on, I'm here to help drive Tupperware shareholder return by focusing on revenue, margin growth, and increasing cash flow through working capital improvements. I fundamentally believe people want more Tupperware. I also believe we have a plan to do this. As Tricia discussed today, we can do this through digital technology, more innovative products and more consumer experiences through studios.

By telling the story through the numbers, I'll work with the team on identifying ways to improve margin and working capital, by operating more effectively and efficiently. I previously drove an initiative that leveraged spend globally and improved margins by 120 basis points, and I also have extensive experience with working capital, specifically related to inventory where I achieved a 20-day reduction in my previous role as CFO of the supply chain for VF. So I fundamentally believe that I can apply those experiences here at Tupperware and can continue to drive shareholder value.

Specifically in response to your question on the buybacks, as we've stated previously, we will look at those opportunistically, and have up to $100 million of potential to do that.

Operator

And our next question comes from the line of Frank Camma from Sidoti. Your line is now open.

Frank Camma -- Sidoti & Company -- Analyst

Good morning. Thanks for taking the question.

Patricia A. Stitzel -- President, Chief Executive Officer

Good morning, Frank.

Frank Camma -- Sidoti & Company -- Analyst

First question just on the studios themselves. Can you just update us now that you have 300 of them, can you give us some numbers around any improvements in sales there? What data you get out of those centers et cetera, just to kind of get a frame for what would happen if you get your goal of 1,000 by 2022?

Patricia A. Stitzel -- President, Chief Executive Officer

Sure, Frank. Well, what I can tell you is just overall what we see in terms of the trends and this is really now across all 300 that we have. We exclude -- obviously, we're excluding China from those numbers. And so, when we look at those numbers overall and the performance of the studios, what we see is that leaders in a studio do double-digits better than those who are not in a studio. And so, again, it's a high level number. It's very early in the process for these things and we have 300 of them. So we have to see how that plays out, also year-over-year what happens to those numbers year-over-year as well. But I would say that based on that early signs are good.

Frank Camma -- Sidoti & Company -- Analyst

Okay. And on the -- you spend a lot of time on the initiatives to grow sales which I think obviously a important thing, but a lot of money has been spent over the last couple of years on reducing cost as well. Can you talk about sort of -- if not obviously showing up on the margins here yet, so as an investor where should we be most -- where should we be looking at reducing -- probably not cost of products sold but DS&A? And where do we see those efforts come through as far as things like closing down factories that you've done in the past and restructuring like where do -- where would we model that I guess going into the future of those savings?

Cassandra Harris -- Executive Vice President, Chief Financial Officer

Yes. So I'll take that one Frank. This is Sandra. As you know, we finished or we're in the process of finishing our revitalization plan that ran from 2017 to 2019. And as that plan came to fruition, yes, there was about $89 million that was spent in that program, but we did deliver $38 million of annualized benefit which was higher than the expected amount in the guidance that we provided. Unfortunately, with the issues that we're seeing in Brazil and other locations, the higher promotional levels and some of our operating costs in relation to volume, as I spoke about earlier, is offsetting that. We have seen those savings come through, through the closures of plants that we had planned on like France last year. As you know, we're embarking upon the transformation initiative which is in its early stages and as Tricia shared, we're willing to talk about that more next quarter. And we do expect that we will see annualized benefits of about $15 million related to that project. And the more important thing here is also that its expected to drive sales growth as we go through that transformation process.

Frank Camma -- Sidoti & Company -- Analyst

Okay. Last thing, just on the B2B since that was pretty meaningful in the quarter incrementally. Why is like a relationship with Carrefour, for example, work better than what years ago I think it was Target, you did something similar, right, in the U.S. So why does that work in Europe, let's say rather than and why doesn't it maybe work in a place like the U.S. with a Target? Can you speak to that?

Patricia A. Stitzel -- President, Chief Executive Officer

I can. So it's a completely different structure on the way we were doing it. So the way we did it in Target is that we actually put product for sale on the shelves in Target, sold through Target, direct from the company. So that essentially we were selling retail via Target. That had a profound impact on our independent sellers because people felt like I don't need to go to an independent seller, I can just go to Target and buy it. And so, the way we do it when we do B2B sales is that we include in the process our independent seller who is in the store.

Now, we also -- one of the great things about the collaboration that we're doing with Carrefour is that we have gone a step further. So typically with B2B, they let us sometimes be in the store by us I mean our independent sellers, but they only allow them to demonstrate. And what we negotiated with Carrefour this time is that our independent sellers would have more freedom in the things that they would do in the store. So, yes, they would demonstrate the product, but they would also be able to date parties, find new consumers and also share the opportunity to welcome new sellers onto their teams. And so these independent sellers are in the communities that are close to their homes and that has a fantastic impact on helping them to reach new circles of consumers and sellers.

The other thing that we did with Carrefour is to ensure that our logo was included in their media campaigns, so they have many, many billboards all over France, and our logo is on those billboards. And so it really helped us to overcome some of that negative sentiment that may have been lingering and people thinking, oh, what happened to Tupperware. They see us, they are loud and clear. It really gave a lot of confidence to our sales force, really a sense of pride and it's just offering a lot of encouragement to them. So completely different dynamic from the Target situation which was detrimental to the business, and the way we've structured it in France with Carrefour.

Frank Camma -- Sidoti & Company -- Analyst

So when a customer though buys at Carrefour, right, because you do sell it to Carrefour, does the independent rep that's there get a cut of that or how does that work?

Patricia A. Stitzel -- President, Chief Executive Officer

Not of that sale directly, because Carrefour, they're purchasing the product. However, certainly a portion of those sales, because we always want to feed -- want our people to share the benefit of that, we do it through promotions, incentives. We support them with different kinds of samples or materials that they then can use in their marketing.

So, in the case of Carrefour as well, we would put into the product a bounce back coupon, for example. And this would have to -- a bounce bank coupon to the party, they would welcome them to the party and then when you come to the party you might be able to get the remainder of the set. I think another important point of differentiation that I want to make sure it's clear is that in Carrefour we're not really selling the product, it's more a fidelity program, so just to clear that up. So consumers have -- they buy the amount of food or whatever they buy at Carrefour will earn points and with those points they can use to buy the product.

Frank Camma -- Sidoti & Company -- Analyst

Yes. I got it. I got it.

Patricia A. Stitzel -- President, Chief Executive Officer

Okay.

Frank Camma -- Sidoti & Company -- Analyst

Okay. Thank you.

Patricia A. Stitzel -- President, Chief Executive Officer

Thank you.

Operator

Our next question comes from the line of Beth Kite from Citi. Your line is now open.

Beth Kite -- Citi -- Analyst

Wonderful. Good morning everyone.

Cassandra Harris -- Executive Vice President, Chief Financial Officer

Hi, Beth.

Patricia A. Stitzel -- President, Chief Executive Officer

Good morning.

Beth Kite -- Citi -- Analyst

If I might ask one more on the B2B, and then I just have another question too after that. But you had a couple of quarters last year with benefits from it. Seems like this first quarter is certainly dead. Where do you think this can go as a component of your business and might you sort of try to scale it, invest in that effort to a greater extent or at this point are you just sort of kind of maintaining the focus you've had to-date?

Patricia A. Stitzel -- President, Chief Executive Officer

Yes. So we're really thoughtful about how much B2B we do. And we want to make sure that it has the impact what -- what we say about B2B is we only do it when it builds the brand and feeds the core. And frankly, in the past, sometimes it works well and sometimes it doesn't and depending on how we can structure it we really feel that we have this formula now with Carrefour or what we've done with Carrefour that it is truly feeding the core, at least it did. I mean we're four weeks in, right, so I don't want to take to things too strongly but so we're feeling better about that.

You know if we -- and as we look at these going forward, we would continue to do them as long as it does those two things. And we think that is important, but we are thoughtful about it and we take care not to overdo it because, we want to make sure that consumers don't get this mindset like we had in Target at one time that, oh, Tupperware is retail now, because it hurts the -- it negatively impacts the independent seller or it can.

Beth Kite -- Citi -- Analyst

Fair enough. Great. Turning to the studio concept, I think that I heard in the prepared remarks that you said maybe here in the U.S. you are trying some smaller format studios. If I did hear that correctly, kind of why and do you think you're right now at a footprint that now you can sort of move forward with, it's the right formula for them? And I guess related to that, I think that there are a number of studios in South Korea. Can you just give us the geographical breakdown of those 300 that are currently in the portfolio?

Patricia A. Stitzel -- President, Chief Executive Officer

So let me start with the U.S. and the smaller studio. So when we first launched this, we went out and we said this is an opportunity for really our top leaders. And one of the requirements was that they had to have -- they had to be at least $1 million business and certain other requirements. And so, we had good reception to that. We have many leaders who were interested in it. We have about 40 of those in the U.S. and Canada business now. And because of the good reception, $1 million organizations, there's only so many of those who have in a business, and we had people who were deeper in the organization saying I'm also interested. So, we want to make sure that we set them up to win. So we don't want somebody to go in who is you know has a tiny organization and doesn't have the revenue and that that will fuel this.

So, but we did take a look at it and we said, we could go with a smaller footprint and it's really from what we learned in markets like Korea and China to say, you know, you don't need 2,000 square feet in order to have a demonstration space, that you can consolidate this, and in China I think it's like 50 square meters or something where we actually demonstrate and do a great job. And so we said let's scale this thing down and let's have it at a lower entry point, and then we could open it up to the director level. And so, and at the director level we have a broader audience that could participate in that. So that's exactly what we're doing and that will just help us to expand the physical presence that we have and help with visibility and access throughout U.S. and Canada.

So, with regard to the geographic breakdown, I'm not sure that we really want to get into the details of every single country. I'll say that, so I gave you U.S. and Canada, outside of that Korea would be our largest market in terms of number of studios. They're roughly about 30% of that.

Beth Kite -- Citi -- Analyst

Great. Great. Thank you. Two quick other questions. One on China. It was nice to see I think, after the fourth quarter had a slight decline I guess you'd say of outlet counts and to see that resume to growth, again, here in the first quarter of '19. Are you able to share kind of here in 2019 or even maybe on a multi-year range, what your outlet growth is in China at this point and kind of baked into your model?

Patricia A. Stitzel -- President, Chief Executive Officer

Yes. I'm not sure, Beth, that we'd get into that kind of detail on any particular country. But you know that we have seen strong growth in the outlets. What we've said over time is that we we feel we can get to 20,000 and so you know that -- it continues with you know we have 6,800, we feel we can get to 20,000 so good room for growth I guess I would say.

Beth Kite -- Citi -- Analyst

Fair enough. And one last one real quickly on guidance. For -- given the 1Q results and the guide for the second quarter, I think it implies that a pretty good second half of '19 for you to get to your full-year guidance range. Are there one, two or three items that either countries, points of innovation, B2B sales or something that really gives you confidence in that acceleration of growth in the second half?

Patricia A. Stitzel -- President, Chief Executive Officer

Yes. I'll comment and Sandra, I don't know if you want to add to this or not, but Sandra commented on a few key things. So we're encouraged by what we've seen in terms of the stabilization and the more consistent standards that we have in Europe. Also the positive impact that we've seen in Indonesia, but also this impact of a -- the new compensation plan that we're putting in there to be more competitive in the market. That's really aimed at that unit manager level and as I've said that's unit managers are the engine of that business, and that's been a challenge for us in Indonesia. So, if we're able to, again, restart that unit manager engine, I think we'll see good things there.

Brazil also I mean that was a challenge for us in Q1 but with that double-digit sales force size advantage, we really feel that we can -- even with continued tightened consumer spending, we feel we can switch up the product mix, the merchandising and the price points there in order to really start that market back on a more positive path. And in Brazil, our recruiting continues to be good as well. So, those are all things that I would say give us confidence about the second half.

Beth Kite -- Citi -- Analyst

Wonderful. Thank you all so much. Pardon me.

Cassandra Harris -- Executive Vice President, Chief Financial Officer

That's OK. I was just going to add that we talked about seeing the improvement in the core is what we expect in the second quarter and continuing on through the third and the fourth. So for Q2 we expected 1 to 3 points of improvement related to that core and we expect that trend to continue based upon the initiatives that Tricia just discussed.

Beth Kite -- Citi -- Analyst

Perfect. Thank you.

Patricia A. Stitzel -- President, Chief Executive Officer

Thanks.

Operator

(Operator Instructions) Our next question comes from the line of Doug Lane from Lane Research. Your line is now open.

Douglas Lane -- Lane Research LLC -- Analyst

Yes. Hi, thanks. Good morning everybody. Tricia, I'd like to focus on the active sales force. Trends in the active sales force have been weak and if you look at it, they're about 20% below levels from five years ago, and you really haven't grown in any quarter in over three years. So what are you doing focusing on getting the active sales force to grow again?

Patricia A. Stitzel -- President, Chief Executive Officer

So we're really focused, Doug, on making sure that we have engagement of the sales force. So, recruiting is always the first step in that process and making sure that we have that engine moving well, if you will. But many of the things that we've talked about, first of all with the fundamentals, the things that we talk about with the rhythm of the business in Europe and some of the things that we've worked on during the first quarter and we're seeing a better level of engagement.

Sandra talked about the more positive impact that we have in team with that and gave you some of those numbers. So the sequential improvement that we saw there in our sales force size, but also the active sales force and team that was a 5 point improvement over Q4 and they were up 1 point year-over-year. And then many of the -- so it's the fundamentals and those kind of things that we talk about with regard to rhythm of the business.

Also our onboarding programs are an important part of that. That's really where a new seller comes in or a new manager to ensure that she's effective. We have these 13-week systemized programs that come in to ensure that she gets the training that she needs. And we've seen good results from these programs.

Now, they are -- so the consultant program is -- we rolled that out last year. It's still getting up to speed, I guess I would say. But the results where we're doing it are good. Also good results from the manager program that we have seen in countries like South Africa and CIS. CIS is doing this very well and making sure that we execute on those.

And then in addition to supplement all this are all the things that we're doing around technology. Because we know that the best way to engage someone is face-to-face or at a meeting, but often today that doesn't happen. And so making sure that we're using social media in such a way that we can be top of mind each and every week, each and every day with people, and the platform that I talked about that we're rolling out are this automated email and social media platform. You know, it just allows our leaders to do this in a simpler way. So rather than typing an email to every single person, especially during the onboarding program, we have a series of welcome emails that that we do on behalf of the sales force. So we're sending them out but we say, Sandra is the leader and on behalf of Sandra welcome Jane to Tupperware, here is what you should be doing this week. And so she gets this email and she can engage and facilitating all these communications across these platforms that people are on every single day, every hour of every day is important to us. So a little pace, sorry I can go on and on.

Douglas Lane -- Lane Research LLC -- Analyst

No, that's helpful. I mean and you mentioned your optimism in the second half of the year and the changes going on in Brazil, do you think that will be enough to drive a positive number for active sales force in the second half of this year?

Patricia A. Stitzel -- President, Chief Executive Officer

That's what we're working to do certainly. And...

Douglas Lane -- Lane Research LLC -- Analyst

Okay.

Patricia A. Stitzel -- President, Chief Executive Officer

And as I said a lot of these things that we're rolling out, we're rolling out, we piloted in the U.S. in Q1 with good results, and so now we're just kind of putting them out there for everyone. So we hope to be -- have an aggressive roll out on those.

Douglas Lane -- Lane Research LLC -- Analyst

Okay. And lastly, I think I heard you mention a change to the compensation plan. Can you just elaborate on what changes you are looking to make or are making in the compensation plan?

Patricia A. Stitzel -- President, Chief Executive Officer

So that was in Indonesia, specifically, and what we're working to do in Indonesia is that in Indonesia managers are essentially paid on a certain number of levels deep into their organization. And what we see is that other companies are paying on a wider and deeper organization. So we want to offer the opportunity for our unit managers also to build teams both wide and deep and rather than just focusing on a few people that are reporting to her that really they can start to build those teams and engage with them at all levels. So that's what is important to us. But it's important to note, again, we're not saying that that's going to be a hit on the value chain that we're reallocating in order to do that so that we keep, we stay hold.

Douglas Lane -- Lane Research LLC -- Analyst

Okay. Thank you.

Patricia A. Stitzel -- President, Chief Executive Officer

Thank you

Operator

And that concludes our question-and-answer session. I would like to turn the call over to Tricia Stitzel for closing remarks.

Patricia A. Stitzel -- President, Chief Executive Officer

Thank you. Well, thank you everyone for being on the call today. Let me just conclude by telling you that we are all confident that the sequential improvement we saw throughout our business units in this quarter in both sales and the sales KPI are a strong sign that we are laying out this promising foundation for our transformation and our efforts to drive enhanced shareholder value.

Well, we recognize that there's much work to be done. We do believe that we will continue to see improvements in 2019 and beyond. We thank you for your interest in our company and our stock, and we look forward to continuing to update you as we make progress. Thank you everyone. Appreciate your time.

Operator

And this concludes today's conference call. Thank you for your participation. You may now disconnect.

Duration: 57 minutes

Call participants:

Jane Garrard -- Vice President, Investor Relations

Patricia A. Stitzel -- President, Chief Executive Officer

Cassandra Harris -- Executive Vice President, Chief Financial Officer

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

Frank Camma -- Sidoti & Company -- Analyst

Beth Kite -- Citi -- Analyst

Douglas Lane -- Lane Research LLC -- Analyst

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