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TUPPERWARE BRANDS CORP (TUP)·Q4 2022 Earnings Summary

Executive Summary

  • Q4 2022 revenue was $313.7M, down 20% year over year; gross margin rose 100bps to 62.6%, marking the first YoY improvement in six quarters. Diluted EPS (continuing ops) was -$0.79; adjusted diluted EPS was -$0.24 .
  • Segmentally, South America grew 18% (24% ex-FX) with 18.5% segment margin; Asia (-31%), Europe (-30%), and North America (-19%) declined on weaker sales force activity, China COVID disruptions, and lower consumer sentiment in Europe .
  • Liquidity actions: total debt ended 2022 at $705.4M; the company entered a Third Amendment to its credit agreement for covenant relief and expects compliance through the year following issuance of financials. Management disclosed a material weakness in income tax-related controls; FY22 had an extra week that lifted Q4 net sales ~4% .
  • Management indicated the turnaround continues with price increases to protect margins, accelerated re-engineering, inventory reduction, and ongoing omni-channel expansion (retail entry in the U.S.)—but expects 2023 to be a transition year .

What Went Well and What Went Wrong

What Went Well

  • Gross margin improved YoY to 62.6% in Q4, benefiting from pricing actions and category management—the first YoY improvement in six quarters .
  • South America strength: net sales +18% YoY (24% ex-FX) led by Brazil and Argentina; Q4 segment margin of 18.5% .
  • Omni-channel expansion: “In the US, our first major retail expansion effort exceeded our expectations,” said CEO Miguel Fernandez .

What Went Wrong

  • Volume and profitability pressure: Q4 diluted EPS (continuing ops) fell to -$0.79 vs $0.30 a year ago; adjusted EPS -$0.24 vs $0.39, driven by lower volumes/margins, higher interest and tax rates .
  • Asia/China disruptions: Asia Pacific net sales -22%; supply chain affected by pandemic-related absences even after lockdowns reversed .
  • Internal control issues: company identified prior-period misstatements (primarily income taxes) and concluded a material weakness existed in ICFR as of Dec 31, 2022 .

Financial Results

Headline P&L and Margins (Sequential trend)

MetricQ2 2022Q3 2022Q4 2022
Revenue ($USD Millions)$340.4 $302.8 $313.7
Gross Profit ($USD Millions)$220.7 $196.6 $196.5
Gross Margin %64.9% 64.9% 62.6%
Operating Income ($USD Millions)$24.8 $15.8 $4.2
Diluted EPS - Continuing Ops ($)$0.09 -$0.09 -$0.79
Adjusted Diluted EPS - Continuing Ops ($)$0.41 $0.14 -$0.24
Adjusted EBITDA ($USD Millions, covenant)$38.1 $29.9 $24.4

Year-over-Year comparison (Q4 2021 vs Q4 2022)

MetricQ4 2021Q4 2022
Revenue ($USD Millions)$390.1 $313.7
Gross Profit ($USD Millions)$240.3 $196.5
Gross Margin %61.6% 62.6%
Operating Income ($USD Millions)$42.0 $4.2
Diluted EPS - Continuing Ops ($)$0.30 -$0.79
Adjusted Diluted EPS - Continuing Ops ($)$0.39 -$0.24

Segment Breakdown

RegionNet Sales Q3 2022 ($M)Net Sales Q4 2022 ($M)Segment Profit Q3 2022 ($M)Segment Profit Q4 2022 ($M)
Asia$85.4 $77.9 $11.1 $1.6
Europe$60.8 $75.0 $2.0 $5.3
North America$86.3 $87.4 $5.7 $10.0
South America$70.3 $73.4 $14.3 $13.6

KPIs (Active Sales Force)

RegionQ3 2022 CountQ4 2022 Count
Asia Pacific42,245 36,736
Europe66,773 58,674
North America55,496 49,181
South America141,091 139,434
Total305,605 284,025

Balance Sheet & Cash Flow (selected)

MetricQ4 2022
Total Debt ($USD Millions)$705.4
Cash & Cash Equivalents ($USD Millions)$110.1
Net Cash (Used in) Provided by Operating Activities FY22 ($USD Millions)-$53.2

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Company Guidance (Revenue/EPS/Margins)FY2023Not providedNot provided; management expects a “transition year” in 2023Maintained (no formal guidance)
Operational calendar effectQ4 2022N/A53rd week added ~4% to Q4 net salesInformational

Earnings Call Themes & Trends

TopicQ-2 (Q2 2022)Q-1 (Q3 2022)Current (Q4 2022)Trend
Supply chain & resin/logistics costsInflation and logistics pressures; pricing actions to mitigate margin erosion Higher resin and logistics costs; continued inflation CFO expects resin and logistics costs to decline in 2023; Q4 saw disruptions as China reopened Easing expected in 2023
China COVID impactLockdowns impacted results Continuing lockdowns; weaker recruiting/activity Adverse impact continued; supply chain affected despite reversal of lockdowns Improving mobility expected
Pricing & marginPricing actions taken; gross margin 64.9% Additional pricing actions; gross margin 64.9% Pricing helped drive first YoY gross margin improvement in six quarters (62.6%) Pricing supports margins
Omni-channel/retailPlan to enter retail later in year Retail expansion in North America First major U.S. retail expansion exceeded expectations Expanding channels
Credit agreement/covenantsFirst Amendment: leverage ratio relief (4.5x Q3; 4.25x Q4/Q1’23) Progressive tightening; going concern risks discussed Third Amendment provides additional relief; trailing leverage ratio ~4.9, within amended max (~5.25) Temporary relief secured
Internal controls/tax——Material weakness in tax accounting; prior-period misstatements identified Remediation needed

Management Commentary

  • CEO: “In the US, our first major retail expansion effort exceeded our expectations… we have now pivoted towards a new post-pandemic phase… focusing on recruiting and training our next generation of business builders” .
  • CFO: “We raised prices to protect gross margins… accelerated our re-engineering efforts… developed innovative programs to significantly reduce inventories in the fourth quarter. We expect 2023 to be a transition year” .
  • Call clarification: Management noted the Q4 2022 gross profit was $196.5M (appendix correct) and discussed higher interest expense trends tied to bank agreements and macro rates .

Q&A Highlights

  • Cost environment: CFO expects resin and supply chain logistics costs to decline in 2023, aligning with industry trends; Q4 still saw input cost increases due to logistics disruptions as China reopened .
  • Interest expense: Management indicated interest rates increased as a result of the bank agreement and macro trends, with similar impact expected ahead .
  • Reporting and controls: Discussion emphasized preliminary nature of results, tax-related open items, and planned disclosure of material weakness in ICFR in the FY22 10-K .

Estimates Context

  • S&P Global consensus (EPS and revenue) for Q4 2022 was unavailable due to mapping limitations in our SPGI/CIQ data source. As a result, no “vs. consensus” comparison can be provided for this quarter through S&P Global, and investors should benchmark against prior periods and segment trends [SpgiEstimatesError].
MetricQ4 2022 Consensus# of Estimates
Primary EPS Consensus MeanUnavailableUnavailable
Revenue Consensus Mean ($USD Millions)UnavailableUnavailable

Key Takeaways for Investors

  • Sequential revenue improved modestly (+3.6%) from Q3 to Q4, but profitability deteriorated as operating income fell and EPS turned more negative; watch for margin stabilization as input costs ease .
  • Pricing actions are helping gross margins (first YoY improvement in six quarters), but volume declines and higher interest/tax rates offset; segment profit mix favors South America while Asia/Europe remain challenged .
  • Liquidity remains a focal point: $705.4M total debt, covenant relief via Third Amendment, and disclosure of material weakness—follow remediation progress and covenant headroom .
  • China normalization and logistics easing could support Asia recovery in 2023; monitor sales force activity trends and omni-channel retail traction in North America .
  • With no formal quantitative guidance and consensus unavailable via S&P Global, focus on execution milestones: inventory reduction, re-engineering savings, retail expansion outcomes, and margin cadence .
  • Calendar effects: the extra week lifted Q4 sales (~4%); underlying demand trends should be assessed net of this impact .
  • Near-term trading: headlines around controls/tax restatements and covenant amendments can drive volatility; medium-term thesis hinges on successful omni-channel expansion and margin recovery amid cost tailwinds .

Sources

  • Q4 2022 8-K earnings release and exhibits: .
  • Q3 2022 8-K earnings release and exhibits: .
  • Q2 2022 8-K earnings release and exhibits: .
  • Earnings call transcript (Q4 2022): .
  • PR release distribution: .