Tupperware's (NYSE:TUP) investors just can't seem to catch a break. Their shares rise steadily, month after month, and then slide back down when the company's numbers come out. True to form, the company's shares were down more than 8% in early trading following today's news of fourth-quarter and 2003 net income that fell sharply year over year.
The story at Tupperware still looks a lot like the one we told back in September. The food storage product maker is still smarting from a scrapped sales alliance with Target (NYSE:TGT) because it angered the company's core direct sales force of Tupperware Partiers. In addition to the loss of the lucrative deal, the company is maneuvering a slow transition to a new domestic selling model.
Sales, meanwhile, are growing fairly well across the globe -- but not in the U.S., where North American sales fell 25% for the fourth quarter. That number looks worse if you ignore the impact of the new sales model, which gives the company higher up-front revenues but also increases administrative costs. (Its BeautiControl North America operation is faring better here.) Tupperware North American still makes up a good chunk of company revenues, and was the only division to report a loss -- of more than $22 million -- for all of 2003.
The company's model is easy enough to understand: Recruit more people to sell more products to more people. But recruitment costs money and takes time, and now there are indications that the allocated money and time aren't being spent as well as the company hoped. In its Q3 filing with the SEC, Tupperware was shooting for mid-2004 as the early point to see its recruiting efforts really bear fruit. Now, the company is extending that until Q4 of this year.
Tupperware has plenty of attractive characteristics, among them strong history, an established brand, appealing cash flows, and a dividend. But the continued trouble Tupperware has making sense of its U.S. business keeps costing the company both money and investor support.
Fools are poking around the company on our Tupperware discussion board. Check it out.
Dave Marino-Nachison can be reached at [email protected].
