<SPECIAL FEATURE>
February 9, 1999

Stocks Fools Love

Tupperware Corp.
by Selena Maranjian (TMF Selena)

Trading at 18 1/2 as of February 8, 1999

First off, a reminder about Foolish investing. Always do your own homework, remember? Never just take the word of anyone like me because you never really know how much research I've done on the company or how deep my understanding of it may be. I did not go to Tupperware University. I own no Tupperware <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TUP)") else Response.Write("(NYSE: TUP)") end if %> shares -- and my actual investment history includes some gutter balls as well as some strikes. So, be warned.

Have you moved on to the next stock yet? I hope not, because there is a lot about Tupperware that's very interesting.

A look at Tupperware over the last three years shows that recent investors have not had a pretty ride. Sales have slowed recently, especially abroad. We can't easily look much further back for this half-century-old company, though, because in its present configuration, it has only been public since 1996, spun off from Premark International <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PMI)") else Response.Write("(NYSE: PMI)") end if %>.

Let's review the company's promising points first. For starters, there's that all-important factor, brand name. In 1997, out of some 250 household brand names, Tupperware ranked third. People know the name. Plus, it's a relatively easy-to-understand business. Don't ask me to explain the semiconductor world to you, but when I read of Tupperware's "molding plants," I think I have a good idea what they do.

For most of the 1990s, sales have been growing at around 10% per year. And sales are boosted by the firm's independent sales representatives. All one million-plus of them. You read that right -- one out of roughly every 6,000 people on the planet sells Tupperware. That might not sound like much, but consider that, on average, for every small town of 6,000 people, there's a Tupperware hawker. And their ranks are growing. Hmm...

Tupperware's overseas operations are considerable. Rubbermaid <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RBD)") else Response.Write("(NYSE: RBD)") end if %> is one of Tupperware's top competitors. In 1997, only 13% of Rubbermaid's sales came from outside the U.S (total 1997 sales for Rubbermaid: $2.4 billion). For Tupperware, just 13% of sales were generated in the U.S. Fully 87% came from abroad (total Tupperware sales in 1997: $1.2 billion). Tupperware already sells in more than 100 countries, having recently launched operations in many potentially lucrative regions, such as India, Indonesia, Russia, and China. (India's plastic housewares market alone is about $142 million in size, growing at an estimated 30% per year.) Tupperware adapts to local cultures, too, featuring a best-selling "Kimono Keeper" in Japan and a "Kimchee Keeper" in Korea.

The management seems open and honest. In the company's 1997 annual report, there were two letters from the chairman -- one with good news and one with bad, labeled as such. The bad news of struggling sales wasn't hidden or downplayed. Management stated then that its primary goals included: building the sales force; expanding the worldwide presence; enhancing the product line; and building on core strengths of brand equity, distribution muscle, global positioning, and strong cash flow.

One more good thing about Tupperware is its dividend. At the time of this writing, it's around 4.6%. That means that even if the stock goes nowhere for a while, you'd likely still collect 4.6% on your investment each year. Not a bad reward for patience. (And dividends are typically increased incrementally over time, as well.)

On to the half of the cup that's empty. Let's start with problems abroad. Sales have been sluggish lately (with the company trying to beef up its sales force to compensate), and the strong dollar has also put pressure on international earnings. Turmoil abroad may continue for a while (witness Brazil's recent struggles).

Another thing that jumps out to my not-that-well-trained eye is Tupperware's debt. Long-term debt was a sizable $237 million at the end of September 1997, but a year later, it had only grown -- up 33% to $315 million. Debt overshadows equity considerably. Average debt-to-equity for that year-over-year period was an alarming 1.67. Now that Tupperware has completed its recent share buyback initiative, though, it plans to plow much of its substantial free cash flow toward paying down debt and getting its house in order.

Knockoffs might represent another concern. Tupperware has an incredibly strong brand name going for it, but shoppers may still be tempted to buy the less-expensive no-name container. Plus, competitors like Rubbermaid and others are lurking in the wings, always trying to steal market share.

I like Tupperware for its potential, though. If it can boost sales, taking advantage of the growing global middle class (and employ many people who can use the work), and address its debt problem (some advice), this may prove to have been an appealing entry point.

Analyst Rommel Dionisio at Friedman Billings Ramsey agrees, saying, "TUP shares are now [10/21/98] trading at just 10.7x our 1999 EPS estimate of $1.45, or 0.9x its long-term growth rate, while other household product and direct selling comps are at an average P/E of 16.1x 1999E and 1.1x long-term growth." He adds, "Our 12-month price target is $20-21 per share." Three analysts currently have a mean estimate of 13.5% for Tupperware's EPS growth over the next five years.

This isn't a slam-dunk investment decision, though. The idea, if it appeals to you, calls for more reading, more research, more thought, more discussion. Head to our Tupperware message board, our Reading Financial Statements message board, and elsewhere, to see what others think. Then put all your gathered intelligence together, and see what you think.

Tupperware Company Information:
Trades on the NYSE under symbol TUP
Web Site: www.tupperware.com

Company Address:
14901 S. Orange Blossom Trail
Orlando, FL 32837

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Can Tupperware Party in 1998? -- Fool Plate Special 4/21/98

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