Tupperware Brands' Weakness In Financial Reporting Triggers 33% Price Target Cut By This Analyst

DA Davidson analyst Linda Bolton Weiser reiterated a Neutral rating on the shares of Tupperware Brands Corporation TUP and lowered the price target from $4.50 to $3.
On Mar. 1, TUP reported 4Q22 sales decline of 20% Y/Y to $314 million, above the consensus.
Sales are still being hurt by volume declines that exceed pricing benefits, but gross margin was up Y/Y for the first time in quite a while and inventory did come down sequentially, said the analyst.
TUP's sales performance in Target Corporation TGT stores exceeded expectations, and the Tupperware brand immediately captured 10% market share, but sales to TGT represented only 1% of total company sales, noted the analyst.
On Feb. 22, 2023, TUP entered into a Third Amendment to its November 2021 credit agreement, which provided for additional relief with respect to the maximum permitted leverage ratio and minimum permitted interest coverage ratio, said the analyst.
Management anticipates the company will remain compliant with financial covenants for the year following the issuance of the 2022 financial statements.
The analyst remarked that Tupperware identified misstatements in its financial close process in prior periods, the most significant of which relate to historical accounting for income taxes.
TUP also concluded it did not design and maintain effective internal controls related to the accounting for the income tax provision and related income tax assets and liabilities.
The company said it would start marketing cast-iron Dutch ovens in 2023, as well as reusable silicon food storage bags.
Mexico and Brazil now represent >25% of sales and an even higher percentage of operating cash flow - while Brazil is currently growing, Mexico is still experiencing lower sales force productivity, with Y/Y growth not expected until 2H23, said the analyst.
Price Action: TUP shares are trading lower by 12.9% at $2.57 on the last check Monday.
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Tupperware Brands' Weakness In Financial Reporting Triggers 33% Price Target Cut By This Analyst

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