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Why the SEC Is Investigating Tupperware Brands

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Price movement of Tupperware

Tupperware Brands (TUP) has a market cap of $2.5 billion. TUP fell by 4.3% to close at $49.47 per share as of February 24, 2016. The price movement on a weekly, monthly, and year-to-date (or YTD) basis is 0.08%, -1.3%, and -11.1%, respectively.

At times, the stock has broken the support of all moving day averages. Currently, TUP is trading 2.9% above its 20-day moving average, 3.2% below its 50-day moving average, and 11.5% below its 200-day moving average.

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The Vanguard Small-Cap Value ETF (VBR) invests 0.16% of its holdings in Tupperware. The ETF aims to track the CRSP US Small Cap Value Index. The index selects from a list of stocks in the 85–99% market cap range based on five value factors. The YTD price movement of VBR was -7.0% as of February 23, 2016.

The Schwab US Mid-Cap ETF (SCHM) invests 0.14% of its holdings in Tupperware. The ETF tracks a market-cap-weighted index of mid-cap stocks in the Dow Jones US Total Stock Market Index.

The market caps of Tupperware’s competitors are as follows:

  • Newell Rubbermaid (NWL): $10.1 billion
  • Fortune Brands Home & Security (FBHS): $8.2 billion
  • Nu Skin Enterprises (NUS): $1.7 billion

SEC violations by Tupperware Brands

Block & Leviton, a Boston-based law firm, is investigating possible violations of the federal securities laws by Tupperware Brands. The company has also notified the Securities and Exchange Commission that it was unable to file its annual report on time. As per the company, it was assessing deficiencies related to IT systems used in financial reporting, and these deficiencies could represent a material weakness in its internal control over financial reporting.

Moody’s Investors Service affirmed Tupperware Brands’ senior unsecured rating of “Baa3.” The rating outlook is stable.

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Performance of Tupperware Brands in fiscal 4Q15 and fiscal 2015

Tupperware Brands (TUP) reported fiscal 4Q15 net sales of $592.1 million, a fall of 12.9% when compared to net sales of $679.9 million in fiscal 4Q14. Net sales for the Europe, Asia Pacific, Beauty North America, and South America segments fell by 17.7%, 12.8%, 18.6%, and 16.8%, respectively. However, net sales for TW North America rose by 5.6% in fiscal 4Q15 compared to fiscal 4Q14.

The company’s net income and EPS (earnings per share) fell to $58.1 million and $1.15, respectively, in fiscal 4Q15 compared to $82.3 million and $1.63, respectively, in fiscal 4Q14.

Fiscal 2015 results

In fiscal 2015, TUP reported net sales of $2,283.8 million, a fall of 12.4% YoY (year-over-year). Its net income and EPS fell to $185.8 million and $3.69, respectively, in fiscal 2015, compared to $214.4 million and $4.20, respectively, in fiscal 2014.

Meanwhile, its cash and cash equivalents rose by 3.6% in fiscal 2015. Its current ratio and long-term debt-to-equity ratio rose to 0.90x and 3.7x, respectively, in fiscal 2015, compared to 0.85x and 3.3x, respectively, in fiscal 2014.

The price-to-earnings and price-to-sales ratios of Tupperware Brands are 13.4x and 1.1x, respectively, as of February 24, 2016.

Projections

The company has made the following projections for fiscal 1Q16:

  • US dollar sales growth versus the prior year in the range of -12% to -10%
  • GAAP EPS in the range of $0.74 to $0.79
  • Local currency sales growth versus the prior year in the range of 1% to 3%
  • EPS excluding items in the range of $0.81 to $0.86

The company has made the following projections for fiscal 2016:

  • US dollar sales growth versus the prior year in the range of -6% to -4%
  • GAAP EPS in the range of $3.81 to $3.91
  • Local currency sales growth versus the previous year in the range of 3% to 5%
  • EPS excluding items in the range of $4.07 to $4.17

In the next part, we’ll take a look at Ford Motor.

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