The tale of this stock is also a tale of this market, filled with irony and luck...
I call it the "Tale of the TUP"... I'm talking about Tupperware Brands (TUP), the company whose iconic brand has become the Kleenex of plastic storage containers.
Last week, Tupperware reported extremely disappointing first-quarter results – so bad that the company withdrew guidance, blaming a variety of things... including the effect of COVID-related lockdowns in China and the "knock-on effect" of the conflict in Ukraine.
Meanwhile, inflation and freight costs were among the culprits hurting margins – all of this happening at the end of the quarter. Management also cited "outdated field management processes."
Reading between the lines, it appears that management was caught by surprise and that something much worse might be simmering under the surface.
Consider this comment by Executive Vice Chairman Rich Goudis (emphasis added)...
Management has been digging in deeper to further understand the root causes for its missed revenue assumptions, modifying strategic and investment decisions to fix any foundational issues, and they are making the necessary changes to help improve profitability.
And this one from CEO Miguel Fernandez, who was quoted in the earnings release as saying (emphasis added)...
This quarter illuminated elements within our core direct selling business that still require fundamental improvement, and we are refocusing our efforts to address them.
That management was even caught by surprise is in itself surprising.
After all, this is a company that supposedly has been in 'transformation' and 'turnaround' mode under a new management team for two years...
Trouble at Tupperware is nothing new. We had red-flagged it back in 2017 at Pacific Square Research, the short-biased research firm I co-founded but have since departed. At the time, the stock was in the $60s... on its way down to almost $1.
As the financial results went on to prove, the company's Tupperware Party business model was broken... not just in the U.S., but across the globe.
And not just because its core direct-selling model was increasingly challenged, but something more basic – lots more competition at retail from the likes of Rubbermaid, Glad, and Helen of Troy's (HELE) Oxo brand, among many others.
Since it's a direct-selling business, Tupperware also faces competition for salespeople – which isn't easy in the gig economy, especially in the U.S. from the likes of Uber (UBER), DoorDash (DASH), and Lyft (LYFT), but also other direct-sellers... including the Pampered Chef, Perfectly Posh, and Stella and Dot.
But none of that mattered, certainly not at the beginning of 2020...
Long before "meme stock" madness had kicked into high gear, a series of events collided to turn Tupperware into one of the first meme stocks, with an ironic twist missed by most folks.
That story began just as the pandemic was starting to pound away.
At the start of 2020, a long-beleaguered Tupperware brought in a new management team, led by two seasoned multilevel marketing execs from Avon and Herbalife Nutrition (HLF).
There was clearly a big opportunity here for investors, but especially for executives, whose performance stock units had been set at seemingly realistic levels.
For the two top executives, whose options were set at $2.27, that amounted to less than a mere doubling to $4 to reach the first tranche. Short of the company devolving into bankruptcy, that seemed more than possible given the iconic nature of the brand... and since just a few years earlier, this was a $70 stock.
If nothing else, it would seem, the company could be sold... Surely someone would want the Tupperware brand.
As the below chart from the 2021 proxy shows, the higher the stock rose, the more stock the execs could get – a potential windfall as long as the stock didn't do a complete round trip.