There are some industries which manage to hold their own whatever the macro-economic backdrop, one of these being durable household products. Perhaps one of the best-known household names, Tupperware Brands Corporation (NYSE:TUP) has a very strong position in this industry. A defensive stock, it has been growing earnings at a steady clip over the last few years, boosted by strength in emerging markets, where the company is contributing to local development. This earnings strength could allow the stock to continue its impressive run.
The company is probably best known for the plastic kitchen containers to which it owes its name. It has branched out to offer a wide variety of kitchenware, beauty and personal care products. These products are marketed in nearly 100 countries worldwide. Despite its fairly low 1.12 beta, the stock has rallied almost 50% over the last twelve months, and additionally, it offers a handsome 3% dividend yield.
Innovative business model
Most producers of household wares rely on retailers and wholesalers to market their products. Tupperware Brands Corporation (NYSE:TUP) is famous for having employed a different approach. Instead of selling its products through intermediaries, the company uses a very large independent sales force consisting mostly of women, nowadays totaling around 2.8 million.
The bulk of sales are still derived from the somewhat euphemistically named “Tupperware Parties,” informal get-togethers where independent merchants display and market their products . Although this business model goes back to the end of World War II, its resilience and flexibility has translated into formidable bottom-line growth, even in today’s economy. Tupperware Brands Corporation (NYSE:TUP)’s annual earnings per share has increased from $2.25 in 2007 to $4.99 in 2012.
While innovative, Tupperware Brands Corporation (NYSE:TUP)’s business model is not unique. Avon Products, Inc. (NYSE:AVP), which competes with Tupperware Brands Corporation (NYSE:TUP) in house-ware and beauty products, also relies on direct selling and independent representatives. However, Avon Products, Inc. (NYSE:AVP) isn’t doing nearly as well, with its annual EPS dropping since 2009. Its latest report showed considerable softness in Asia, with China revenue plummeting 27 %. Analysts are expecting a 3-5 year growth rate of around -15%.
Newell Rubbermaid Inc. (NYSE:NWL) is the other prime competitor, although it functions with a traditional sales model and is, as such, a little more difficult to compare. A tremendously diversified company, Newell Rubbermaid Inc. (NYSE:NWL) offers all kinds of products for the home and office. A comparison would probably be best made with the company’s home solutions segment, which saw segment sales increase 2% and 3.5% overall. The company still relies on the United States for the vast majority of its income, so it’s hard to see Newell Rubbermaid Inc. (NYSE:NWL) putting up the same kind of growth figures as Tupperware Brands Corporation (NYSE:TUP).
Emerging markets and development
While Tupperware’s brands continue to perform well in its more established markets, growth in emerging markets propels the company forward nowadays. A truly global company, it derives 90% of its sales from outside the US, and some 65% from emerging markets. In the last report, established markets were down 1% compared to 2012, and emerging markets sales grew by a whopping 14 %.