Sales-Force Headaches Crash Tupperware’s Party

Tupperware Corp. shares fell 19 percent after the company warned that third-quarter earnings will plunge because of poor sales of its namesake storage containers in Latin America.

The shares fell 6-11/16 to 28-7/16 in trading of 8.36 million, making it the sixth-most active stock in U.S. markets. Earlier, the shares hit 27-1/2, the lowest point since its spinoff from Premark International Inc. in May 1996 at about 42 a share.

Sales were particularly bad in Brazil and Argentina, where inexperienced distributors sold products door-to-door instead of at parties. Tupperware said cash bonuses and other sales-force promotions failed to boost Latin American sales, which also were hindered by slower consumer spending and competition from WalMart Stores Inc. and other rivals. Tupperware will have a new plan for the region in October.

“If you hold the Tupperware parties, you will get the sales,” said Gary Prestopino, an analyst for Mesirow Financial. “If a distributor’s been doing five parties a month, they need to get her to do 10.”

Tupperware hasn’t performed well since it was spun off, largely because it is vulnerable to missteps with its sales force, which has a turnover rate of 75 percent to 100 percent a year. Last year, for example, it lost some U.S. sales people after raising the amount of sales needed to qualify for a minivan.

“As the business gets bigger, it’s hard to handle that kind of turnover,” said Prestopino. “The new sales people who come in are just not as productive.”

Tupperware said it expects third-quarter net income to be “down significantly” from the year-earlier quarter. Analyst Ajay Mehra at Morgan Stanley, Dean Witter, Discover & Co. said he expects Tupperware to earn 3 cents a share. The company is scheduled to report earnings the week of Oct. 20.

The Orlando, Fla.-based company was expected to earn 23 cents a share, based on the average estimate of eight analysts surveyed by IBES International Inc. A year ago, Tupperware earned $18 million, or 29 cents a share, on a pro forma basis. Sales were $290 million.

The steep drop in profit is largely because Latin American profit was expected to be 22 percent of operating profit, up from 17 percent last year. For the year, the region’s profit will be down 50 percent to $22 million, analysts said.

Some of the stocks that moved substantially or traded heavily Friday on the New York Stock Exchange, Nasdaq Stock Market, and American Stock Exchange.

NYSE

Procter & Gamble, down 3-7/16 at 133

Gillette, down 1-7/16 at 81

Smith Barney downgraded its ratings on the shares of several consumer-products concerns, the Dow Jones News Service reported. PaineWebber also downgraded Gillette.

Boston Scientific, down 13-1/4 at 62-5/8

The medical-device maker cautioned that its third-quarter earnings will come in below expectations, prompting analysts to downgrade the stock. It was the second time this year the Natick, Mass.-based company has issued a profit warning.

American Standard, down 4-1/8 at 41

The plumbing, air-conditioning and vehicle-products maker expects to report disappointing third-quarter earnings. American Standard blamed unfavorable currency-exchange rates and cool climates in air-conditioning markets.

NASDAQ

Biogen, down 2-3/16 at 37-3/8

Merrill Lynch downgraded the biotechnology company, the Dow Jones News Service reported. Biogen is based in Cambridge, Mass.

Maxim Integrated, up 2-11/16 at 73-1/8

Deutsche Morgan Grenfell upgraded its rating of the computer-chip maker’s stock to “buy” from “accumulate,” the Dow Jones News Service reported.