Q1 2022 Tupperware Brands Corp Earnings Call
Good day, and thank you for standing by and welcome to the Tupperware Brands Corporation first quarter 2022 earnings Conference call.
At this time, all participants are in listen only mode.
After the speaker presentation, there will be a question and answer session.
To ask a question during the session you will need to press star one on your telephone.
If you require any further assistance simply press star zero.
We thought that would now like to hand, the conference Overeager Speaker today Alexis Callahan. Thank you and please go ahead.
Thank you operator, good morning, and welcome to Tupperware brands first quarter 2022 earnings conference call.
Joining me today are rich students executive Vice Chair, Miguel Fernandez, President and CEO and Sandra Harris CFO Anne CLO, we will all be available for Q&A following our prepared remarks.
Earlier. This morning, we issued a press release announcing our financial results for the first quarter of 2022, which is available on our Investor Relations website.
In addition to today's press release, we have also published supplemental materials to accompany our prepared remarks and both items can be found on our investor Relations website.
Let me remind you that the following discussion and our responses to your questions reflect management's views as of today may 4th 2022 and May include forward looking statements actual results may differ materially from such statements.
Additional information about factors that could potentially impact our financial results is included in our Form 10-K for 2021 and subsequent filings with the SEC and in our press release filed this morning.
Please review the forward looking statements disclosure on page three of today's press release.
Please note that all references today are being made on a constant currency basis, which reflects the application of the current period foreign exchange rates to any prior period results, enabling comparison, excluding the impact of foreign exchange rate fluctuations.
Please also note that all references unless otherwise noted are being made on a continuing operations basis.
During this call, we'll discuss certain non-GAAP measures, including those we refer to as normalized measures additional disclosures regarding these non-GAAP measures, including explanations and reconciliations of these measures to the most comparable GAAP measures can be found in today's press release, which has been posted to our investor Relations website.
A replay of this call will be available on our Investor Relations Web site later today.
And with that let me turn the call over to you rich.
Thank you Alexis.
As you've seen in our earnings release, we had a very disappointing quarter.
While we expected our turnaround plan would not be linear.
And what at times be difficult to predict this quarters results were lower than we had expected on both top and bottom line based on a number of internal and external factors.
Revenue was lower than we had gross margin and operating margin erosion versus last year.
Our topline performance was impacted by poor service levels.
Continued technology issues.
This model changes and quite honestly revenue assumptions that just didnt materialize won't be expected.
These internal issues when combined with the global events, such as the Covid shutdowns in China and the knock on effect of the Russian invasion of Ukraine resulted in a 14% decline in our topline.
Our year over year margin suffered for many reasons as well.
The primary contributor was the result of inflationary cost increases not yet offset by price increases.
Tommy disconnect that we identified during the fourth quarter earnings call.
Coupled with volume related impacts such as lower contribution dollars and higher inventory and receivable reserves.
Additionally, we had higher freight expense in an effort to improve service levels and delivery of high demand products in the U S.
Higher investments in our Omnichannel capabilities.
FX losses.
Much of this happened after we issued annual guidance for the first time in over two years and initiated an accelerated share repurchase program to buy back $75 million of our stock.
The quarter's lower profitability also indicate a higher breakeven point that we had a year ago after our aggressive right sizing.
As you know, we were making investments to bolt fix our core business, while we make new investments to open up an omnichannel business.
With lower than expected contribution from our direct selling business in the quarter, our profitability was dramatically affected.
In the long term this cost structure can only be justified if we are successful in driving revenue growth.
To that end, we continue to make progress in turning around our core direct selling business as seen in Mexico, which was up 7%.
Mexico's leadership team has embraced a more analytical approach to the business and is effectively using these insights.
With the input from our independent Salesforce to make decisions that are driving growth.
We believe other countries are embracing and learning to use the same analytical approach and this gives us confidence that we that we will not only be able to stabilize our core direct selling business, but that we can actually sustainably grow it.
We're also continuing to make progress on our strategic efforts to open up the tupperware brand to all consumers.
In preparation for this channel expansion, we made progress in talent acquisition.
Packaging systems, and key account relationships to open more doors to accelerate growth into new channels.
The more work, we do to turnaround the business.
The more we invest in new capabilities.
The more buyers we meet in the more consumer insights recapture our excitement and confidence grows to reintroduce tupperware to consumers around the world.
Before I turn the call back to management, let me reiterate these first quarter results are not acceptable to us and we take full responsibility for this poor performance.
Management has been digging in deeper to further understand the root causes for its missed revenue assumptions.
<unk> strategic and investment decisions to fix any foundational issues and they are making the necessary changes to help improve profitability.
Now, let me turn the call over to Miguel.
Thank you rich and good morning to everyone.
What's clearly a challenging and disappointing quarter.
I will first expand on the comment rich made and then walk you through the key drivers of our results as well as provide updates on the business and the status of our turnaround plan.
Todays results and our reported performance in the first quarter show, we have a lot more work ahead of us in order to turn this iconic brand around.
Results came in well below expectations, and we can pinpoint a combination of both internal and external causes.
Starting with a macro external factors.
This has been another challenging quarter for most consumer goods businesses, particularly those with significant international exposure as well as for most direct selling businesses.
Late in the quarter, the Russia, and Ukraine conflict impacted consumer confidence and Salesforce activity in most of Europe .
Also strict lockdowns in China caused by the outbreak outbreak of Kobe.
Basically shut down many cities in the country for the last two weeks of March.
Additionally, our year over year profitability was significantly impacted by inflationary pressures, particularly in increasing the coastal bresson factory inefficiencies and higher freight and sourced product costs.
Internally sales were impacted by demand planning servicing systems issues.
Lower buying ahead of announced price increases done than what we anticipated.
Inefficient promotional activity and outdated field management processes.
I should also note that the lack of in person gatherings and incentive trips for two years now is increasingly waiting on direct selling efforts as these events have historically energized salesforce members boosting both recruiting and productivity.
Profitability was significantly impacted by the extreme lag between rising input costs and when and how quickly we determined to increase prices to offset those cost increases.
Cause much of our Miss versus our expectations can you late in the quarter Wouldnt cut the time effectively to react and modify our investments in the turnaround plan this investments, including upgrading systems and processes were material in the quarter.
In terms of performance by region, all four reporting segments were down year over year with a greatest impacts coming from Europe , and Asia Pacific with those two regions responsible for 70% of declining sales.
In terms of performance of our top four markets, China was heavily impacted by Lockdowns due to the only corn variant and all of Europe was impacted by the Russia and Ukraine conflict.
The U S and Canada were down 25% and got tough comps. Additionally, it experienced lowered buying ahead of price increases lower inventory sell through and experienced significant service issue.
In demand and Salesforce systems.
Although I should note that the U S and Canada grew 38% on a two year stack.
We're making fundamental and rapid changes in the market, including 10% price increases effective in early May which is the first time, we've taken pricing actions and quite some time.
This changes that have been communicated to our salesforce and with B.
Stop this changes that have been communicated to our Salesforce and we believe they will result in a more sustainable direct selling business.
Mexico was a bright spot in this quarter up 7% year over year, driven by changes, we've made to improve and optimize our direct selling business and it is up 27% on a two year stack.
Our confidence in stabilizing our core direct selling business is seeing strong performance in Mexico.
Brazil was down 11% year over year, which was in line with our expectations largely due to a challenging economic conditions in the country and therefore performance could be volatile throughout this election year.
On a two year stack, however sales were up 29%.
Other business expansion channels and put our retail studio model, which our physical store locations as well as our b to b loyalty programs with retailers.
Tourist markets outside of China grew 7% in the quarter led by the expansion in Korea.
While our b to B programs deliver 8 million revenue more than double last year's contribution to same quarter.
You would have been even higher.
But for one European programs shifting from Q1 to Q2.
And last persistently not least we continue to prepare for retail expansion in the second couple of our turnaround.
We mentioned on our last call we've invested in talent to develop and grow retail partnerships.
<unk> with third party distributors across the globe implemented technology tools and developed specialized packaging and labeling.
All of these capabilities are needed to tupperware, but necessary to compete in channels outside of direct selling.
We look forward to sharing progress on this front.
While the results of the quarter were below expectations, we are identifying and taken immediate actions to address a number of these sectors.
First we have plan to raise prices of mentioned last quarter with most of them taken effect in the second couple of the second quarter.
Now, we're choosing to be even more aggressive to ensure that price increases were taken a sufficient to maintain gross margins while in place inflationary pressures continue we're closely monitoring continued cost increases.
Be proactive to take prices going forward.
Second we're continue into evolve our demand planning process to improve visibility to demand signals and supply chain capabilities. This will help with many of our service issues, we experienced in the quarter related to overselling popular items like the $1 Boe what future on the Amazon Sirius them.
<unk> Mrs Mason.
On our number one seller in Mexico that equal Bartow.
Stop.
And our number one seller in Mexico, the equal water bottle <unk>.
Service continues to be a carry of focus for us.
Third we're in intense.
Intensively focus on selling through excess inventory to improve communications and visibility with opportunities in both our direct selling on our business expansion channels.
Fourth we have elevated our hedging strategy on long term intercompany loans with outside advisers to ensure we meet our FX exposure.
Fifth we're utilizing data to implement segmental promotional activities and customer referral programs across the globe to boost recruiting a retailing activity.
And lastly, although we cannot control macro factors like Covid lockdowns or a conflict in Ukraine, we can respond and rightsize the business to manage profitability to that end, we have restructured our organization in both Europe and Asia Pacific in recent weeks in an effort to be layer of leadership and bringing them closer to the business.
Yeah.
We are we're in the process of making right sizing decisions given the current volumes in these markets we feel these changes.
We will enable our market leaders to react and move more quickly in the directions, they see fit locally.
All in.
We're taking this opportunity to reiterate our commitment on aggressively refocus our efforts on improving certain limits of our core direct selling business.
This quarter illuminated.
One element that has found a foundational is technology for decades. This company has been run as a very decentralized organization.
And perhaps significant structural and technical debt.
Many of our systems need to be upgraded because more centralized unless customize and be more compatible compatible across the markets.
We're actively working on this with significant expenditures in the quarter again, our turnaround Air force still require a lot of work, but we continue to make progress.
These enormous unimportance undertaken and lastly.
On the topic of technology, we're continuing to address the issues with our Salesforce system, especially in the U S and Canada, we're working to resolve them as quickly as possible.
On the ESG front, we made donations of $1 million to the world Central kitchen, and the American Red Cross to support relief efforts to those impacted by the crisis in Ukraine.
Many of our global markets got a separate initiative their own support efforts donating eight items and deliver them to those we continue to make great progress in this important area.
Given this quarter's performance was always that we have greater uncertainty on lower basically limited and previously anticipated.
As Richard already mentioned.
We are therefore withdrawing our previously issued guidance I should note that we're not taking the decision to pull guidance lightly. However, we feel that as part of Paramount importance.
To be transparent about our current state of first as possible to share with you all the moving pieces are currently impacting our financial performance and to inform you of what we've learned and what we're doing to address each of these items.
We're also taking this opportunity to acknowledge that this turnaround plan will fill the right one.
And one that we believe will ultimately be.
Be successful still requires a lot more work were effective effectively building a new internally.
Scott.
We're effectively building an entirely new company quite literally building a ship or peloton yet.
It will take time to strengthen our teams processes our systems, but we remain confident that we will get it done.
The changes were making our core direct selling business are comprehensive in nature and are being implemented rapidly to create a more predictable and sustainable business.
Simultaneously, we're creating a new omni channel focused business. So there will necessarily be some no linear financial performance as we tried to.
To do what has not been done can direct selling taking a direct selling Brent omnichannel.
However, as these changes take root our confidence feels that this strategy will pay off.
Or regardless of the near term noise. We continue to believe that our strategy remains the right. One our products are superior our brand is iconic.
And consumer demand is still strong.
So increasing consumer access to our beloved tupperware products remains a strategy and we're currently executing on the strategic initiatives required to achieve this.
<unk> is <unk>.
Improving and then optimizing our core direct selling business by increasing service levels, providing the right products and using data.
Opening and expanding into new channels.
Introducing our brand to consumers and entering new product categories, where consumers gives us permission to be.
I am confident that we will transform our iconic brand and then we will build a more predictable and profitable company.
Okay.
While disappointed with our first quarter performance, we're taking immediate actions to improve our business to address what what is within our control.
I am confident that despite the ongoing impacts of Covid in Russia, Ukraine country.
We would copycat, a stronger quarter and that the organizational adjustments from fundamental changes, we're making to the business, we will better align our organizations to our growth strategy and priorities and then going forward, we will be much stronger more efficient.
And more profitable competitor as a result.
And lastly, one final update after a lengthy and thoughtful search I'm pleased to announce that we have hired a new chief financial officer to join the Tupperware executive team Ms.
Ms Maria Elena Tuesday.
<unk> will be joining US later this month Marella is you'll see some finance executive who comes to us with more than 20 years of experience in senior leadership roles, and who has blue chip experience in technology consumer and manufacturing sectors as well as in turnaround situations. We look forward to her contributions towards strengthening our <unk>.
Initial foundation, and enabling us to continue to grow and expand.
Also want to take this opportunity to say a big Thank you to Sandra Harris, who has been serving as both Chief Financial Officer, and Chief operating officer for more than a year and will transition the CFO role to Maria.
We think central for her many contributions to rightsize this organization I bring them bring it to its current state of Coke. She will now be able to dedicate all her time towards optimizing operations and systems.
Hello.
Look forward to her focus on this important area of our business.
I will now turn the call over to <unk> to discuss our first quarter financial performance in more detail.
Thanks, again, and I look forward to focusing on <unk> operations and supply chain on a go forward basis, there is opportunity to improve efficiency and optimize our operations across the entire organization and I'm excited to continue to enable our turnaround journey.
During the quarter, we opted to make significant investments in business expansion, our global sourcing office and.
All of which are in advance of the anticipated sales that will come from new channels in future periods those investments coupled with the unforeseen lockdowns in China and the effects stemming from the Russia, Ukraine conflict contributed additional pressure on profitability in the quarter.
Before we begin our discussion of our financial results a quick reminder.
We had an accounting change in the third quarter of last year to classify our sold and held for sell beauty and personal care businesses as discontinued operations, which is consistent with our strategy to focus on the performance of our core business and expansion efforts.
Therefore, our comments today reflect results from continuing operations only.
For the first quarter net sales were 348 million, representing a decrease of 14% compared to last year driven by both internal and external factors as previously mentioned.
From a top line perspective, our sales were primarily impacted by three main drivers.
First weakness in our European business caused by lower Salesforce activity and service issues, which were exasperated by regional disruption and lower consumer sentiment caused by the conflict in crane.
Second weakness in several of our larger markets in Asia Pacific.
Exasperated by correct on the crime related Lockdowns in China during the last three weeks of March.
And third demand planning issues, namely the opportunity, we have temporary demand forecasting and better coordinated promotions with available product as well as service in general.
<unk> loyalty program revenue in the quarter with $8 million up from $4 million last year.
We also sell through 15 BTB channels in the quarter as compared to six last year. These are great indicators that our strategic focus in this area is working.
Turning to sales performance by region.
Discuss each of our four regions, including specific performance in our largest markets.
In Asia Pacific net sales decreased by 15%.
China, which was down 24% in the quarter was severely impacted late in the first quarter by strict lockdowns caused by the recent COVID-19 outbreak in the country and China's zero Covid policy acutely affecting the last three weeks of March essentially shutting down all economic activity in many cities.
Performance was also impacted by studio closings and fewer new openings.
China continues to be an important market for the <unk> brand in stabilizing our business. There is one of our priorities in 2022.
The remainder of the Asia Pacific region, Excluding China was down 8% in the quarter driven by lower Salesforce recruitment and productivity due in part to Covid Lockdowns sales model changes as well as underperforming raia holiday promotions.
In Europe net sales decreased by 19% driven primarily by lower Salesforce activity.
<unk> and activity in that region were impacted by lower consumer sentiment and overall disruption due to the heat, Russia, Ukraine conflict.
Sales in the region were also impacted by a delay in <unk> arrangement that was pushed from Q1 to Q2.
Going forward. We also expect the organizational changes made in this market will help.
Yeah.
In North America, net sales decreased by 14% net.
Net sales in the U S and Canada decreased by 25% driven by lower buy ahead of planned second quarter price increases product mix, along with technology and service issues.
A bright spot in the quarter, however, with the success of our Wunderlich <unk> vintage bolt collection after being showcased on Amazon's recent pop culture hit the Martha this nasal.
And beyond the positive impact it had on sales. It was also a great branding opportunity for tupperware here in the United States.
Net sales in Mexico increased by 7% in the quarter, driven primarily by higher recruitment and productivity.
And South America sales decreased by 2% in the quarter.
Net sales in Brazil were down 11% driven by challenging economic conditions impacting recruiting.
Now moving down the P&L to margin.
Gross profit in the first quarter was $222 million or 63, 8% of net sales, which represents a decrease of approximately 720 basis points compared to last year, primarily driven by inflationary pressures as well as an increase in obsolescence reserves.
We mentioned on our last call that we ran a process of announcing price increases that the vast majority would become effective in the second quarter and that they would not helped to offset cost increases until the second half of the year.
As Miguel mentioned earlier most of these increases are now in various stages of implementation.
However, despite the fact that they are in process and nevertheless, significantly lag a rise in input costs that have already hit.
Going forward, we will be proactive in taking pricing actions in order to protect margins.
It's also worth noting that much of our business still relies upon physical printed catalogs.
Only a few times in a year and many markets, causing changes to be slow.
Regardless this lag significantly contributed to the margin compression we've seen in the last few quarters.
Although SG&A on an absolute basis was down year over year as a percentage of sales. It was 58, 4% in the first quarter compared to 53, 4% last year.
Percentage increase was driven by lower fixed cost coverage due to lower volumes.
Higher allowance for credit losses of $3 1 million Enterprise award from the local China government received in the prior year period.
And higher third party warehousing cost to improve service.
We also made ITM business expense related investments to support our omnichannel efforts, such as Adi to support retail and professional services associated with tax strategies that we continue to implement.
Adjusted EBITDA for the first quarter was $29 million or 8% of cells, which reflects the impact of lower sales higher input costs, the latency of pricing action implementation and higher investment spend all previously mentioned.
We've also continued to enhance our treasury strategy, specifically around foreign exchange and cash management.
Our first quarter operating tax rate was 52, 5% as compared to 31, 8% in the same quarter last year.
Our operating tax rate was driven by our lower global earnings and increases in U S losses, which do not currently produce a U S tax benefit.
Now earnings per share.
Adjusted earnings per share was <unk> 12 in the first quarter compared to 81 since last year driven by all factors previously mentioned.
Our accelerated share repurchase positively contributed approximately <unk> <unk> to the adjusted EPS in the quarter.
Turning now to cash on the balance sheet on a reported basis operating cash flow net of investing with negative $47 million compared to negative $7 million last year.
<unk> lower cash flow from operations, driven by lower earnings combined with an increase in working capital.
We ended the first quarter with a healthy cash balance of $246 million and a total debt balance of $810 million at quarter end. Our consolidated net leverage ratio was two nine times, which remains below both historical and required covenant levels.
In regard to capital allocation as previously mentioned we are pleased to have made significant progress over the past few years in strengthening our balance sheet refinancing our debt investing in the business of selling non core assets.
After paying down debt and investing in the business. Our next priority in terms of capital allocation is returning value to shareholders.
Our board authorized a $250 million share repurchase program in June of last year and in the third quarter of 2021, we returned $25 million to our shareholders through buybacks.
On February 28 of this year, we announced a $75 million accelerated share repurchase program.
We're continuing to execute on that program and expect it to be complete by the end of June .
We repurchased and retired three 4 million shares of common stock immediately upon announcement and the remaining number of shares repurchased will be a function of the volume weighted average price across the term of the program.
They currently have another $150 million of capacity remaining under our original $250 million board authorization available to us.
And we will continue to look for opportunities to effectively and efficiently deploy capital.
Despite our first quarter results, we remain committed to our capital allocation strategy of paying down debt as needed investing the business and returning value to shareholders.
I should note that given the ongoing uncertainty in China and the conflict in Ukraine uncertainty regarding the execution and timing of certain business expansion efforts in the second half of the year.
The magnitude of the changes, we're making in our core business.
Pricing actions largely hitting in the last half of the year.
Consumer spending trends, giving the current inflationary environment as well as reliance on our current cashless strategies, we will continue to monitor our liquidity and we will address <unk>.
Adjust our capital allocation framework as appropriate.
In summary, it was a disappointing quarter and results came in well below expectations, especially late in the quarter. When we had little time to react.
That said, we have either already taken action or have plans in place to address many of the issues within our control and to better manage against those that are outside of our control.
I believe these fundamental changes, we're making to our business will enable us to operate more effectively and efficiently going forward and.
And with that let's say to Q&A.
Thank you at this time I would like to take any questions you might have for us today and as a reminder to ask a question you will need to press Star then the number one on your telephone keypad. Once again to ask a question. Please press star one do we draw your request you may press, the pound or hash key.
We'll pause for a moment to compile the Q&A roster.
Our first question comes from the line of Anthony <unk> from Sidoti and company. Your line is open. Please go ahead.
Yes. Good morning again, thank you for taking the questions.
So first just looking at the quarter or so.
Called out obviously March being a tough month.
Just wondering if you guys could provide any sort of additional color as to the cadence of the monthly sales I mean, how much.
How much worse worthy.
March sales versus what you were experiencing in January and February and then if there was any way you can comment on what you've seen thus far in the second quarter that that would be helpful. As we try to assess for.
How we should think about the rest of the year as far as <unk>.
<unk> got models.
Yeah. So Anthony this is Andre.
So obviously, we talked to you at the end of February and we were pretty compelled to give guidance at that time and to what we were seeing that wasn't indicating what you definitely occurred.
And in March and so what happened between February and March there was many things that happened as we've talked about on the call. Today are you know, Russia, Ukraine had a big impact on our European businesses, not just specifically in our businesses, obviously in Russia, and Ukraine, but across.
And in the entire region in that area are.
The other thing that was completely unanticipated is Andy you've obviously, followed the news the China situation happened late in the first quarter are largely the last three weeks of the month significant lockdowns and shutdowns, which we didn't anticipate it is where the external factors. We also had in our March.
Aggressive promotional programs in several different regions I mentioned the riot holiday.
In Malaysia, which typically performs really well and it just was softer this year and then we also had anticipated that in advance of the price increase announcement that we had the U S would have done buy ahead, and then I mentioned, the one significant VW program that within Europe .
It just shifted based on timing with everything that's happening in Europe from Q1 to Q2, so what I would say is that largely.
What happened in the quarter really did happen between the last time, we spoke to you in February until the end of March and it all happened at the same time. Unfortunately.
Right, Okay, and then as far as.
Q2, thus far can you give us any any comments.
Is it kind of similar to what Youre seeing in March or has there been any relative improvement.
So certainly this is miguel good morning, So as you know, we don't give guidance, but the nature of direct selling our markets are like piece is.
The worst thing that can happen to in any direct selling companies are distractions.
We're facing a lot of distractions right now external.
The war on.
And.
Uncovered in APAC, but also we had our first share of internal distractions around service and systems. So it's a.
A combination of all of things that we believe are transitory, but theyre still with us today.
We still have it so we see pretty much the same trend at least in the beginning of the quarter.
Got it Okay and then.
As far as you know the price increases so.
Your products are generally premium priced already.
You know as you look to implement the price increases.
How are those price increases versus competition.
What is your concern about whether consumers will actually be able to.
Certainly.
As far as those prices higher prices, what the reaction will be as far as elasticity of demand and how you guys think about that.
So Fortunately we have a lot of experienced increase in prices in many parts of the world because that's just the nature of our business.
And we obviously, we take into account all the elasticity in all the markets that I'm going to say that the one.
New market or the one that we haven't increased prices is the U S.
So so that is you know that.
That we don't have as much of history, but we take we tend to.
To price with the competition and we're seeing that the competition has come into the same inflationary pressures as we as we have so so in the in the countries that we've got you know.
<unk> had no surprises on that front.
Okay. Thanks, So then.
Sure.
You mentioned that you have had success in Mexico.
So what would be a reasonable timeframe as to when you would expect to replicate the success in Mexico to other parts of your business.
Any sort of ballpark estimate.
Yeah.
Yeah, Yeah, absolutely. So it varies by country right. There are some countries that we have.
More senior management, like Brazil, and they're getting closer and faster to those to the benchmark and there are some other ones that are to be Frank we're still we're still in the early stages. So so it's going to you're going to see.
Countries coming on developing little by little but again the key point here is the elimination of distractions because every single destruction around service around systems or around conflict. It takes a week time from recruiting and retailing, which is our basic.
<unk> part of our business and then as I mentioned in the call. You know, we haven't kind of in person meetings or incentives in many parts of the world. We're starting to have it when we see a positive effect. So we were going to have a pretty soon and the rest of the world.
This is we feel this is the time that we need it so so theyre going to come in a little by little some of them are going to be pumped way faster than other ones. You can imagine obviously, we're prioritizing W countries.
To make to make sure that we have the fundamentals in place.
Got you, Okay and the last question for me. So you mentioned that many of your systems outdated.
So given the changes that youre looking to do within the business.
Whats the estimated cost of the new systems.
How long do you think this will take to get you get the systems to be where you want them to be.
Yeah, I'll just add point generally overall about our system. So yes, I mean, we have 75 years of technical debt that we're working with specifically to the system issues in the U S that technical debt creates.
Complexity is every time, a new release comes out of the system installation and then you know because our business is definitely unique and different in many areas. The customization also create the complexities as upgrades happen. So that's what we continually are struggling with here in the U S business is managing upgrades to products with the.
<unk>.
His deep level of technical debt that we have that support the systems going forward. So I mentioned in the quarter that we had investments we're continuing to make those investments in 19.
We disproportionately shifted due to support in our retail businesses that we have been implementing solutions, both digital as well as getting ready for the retail channels and so we've made investments in things like <unk>, which are fundamental for the business.
Mrs Invoicing and.
We're taking that comes with a different channel and different business. We've made those investments ever Q4 into Q1, it's one of the reasons that obviously with the decline in cells. Those investments are ahead of the sales that will come.
This expansion, which will happen more in the second half of the year.
We haven't disclosed the dollar value yet, but obviously there would be significant investment in the future to truly take out all the technical depth that we're being very strategic and <unk>.
Changing out the systems and solutions enhancing our infrastructure.
In the areas that makes the difference which is there are big markets and in the markets that they definitely are leading.
Leading toward multi channel and the markets that are less profitable in Berlin.
Berlin.
I would like to remind everyone to please limit yourself to one question and one follow up. Our next question comes from the line of Doug Lane from Lane Research. Your line is open. Please go ahead.
Yes, hi, good morning, everybody.
Mcgill I'd like to stay on the line meetings I think that's an important part of this whole model.
Of course.
Just wanted to try to get more specific and have you had lagged meetings, yet started them to Germany in the first quarter.
And what is kind of a scheduled for your larger meetings for the rest of the year. If you could just put a little bit more color on that.
Yes, absolutely, yes, we started we started with smaller meetings in the major markets.
Starting in the U S. A couple of weeks ago in Mexico, a few a few weeks ago old so but now we're.
We're getting ready for the big ones or come in the summertime.
And that would be in Europe , and North America in Asia. There is no yes genes that don't happen.
Okay, it's going to be absolutely yes.
That's helpful. And then another large direct seller indicated with a global footprint indicated.
Short slowdown in April from an already weak March and.
And you clearly had a weaker march than you anticipated can you at least directionally help us out here.
And give us some color on how April was relative to March.
Yes, we are.
It's a similar trend as the one that we saw in March again, I'll go back to the construction so the world Hasnt changed.
Once we started seeing a little bit of less restriction and probably be in China or less government sanctions in APAC and we start recovering the normality or if we get a solution or people you know in a way to get used to the conflict in EMEA than all these things take away time from from our activities.
If anything we can that we can point to Americas, Latin America, too to perhaps been a little bit better the one big.
The one big question that we always have an American service and products because you know that we offer many products with a lot of frequency and we changed those with a lot of frequency. So said, sometimes it becomes.
The challenge to keep up with a good service.
Okay, and then just one last comment can you touch on Russia, Ukraine, how much new business do you have there and what specifically do you see.
Has that impacted your outlook for this year.
Yeah, I'll start with the financial case, and then the Gulf and address the business itself.
The Russia, Ukraine, and Kazakhstan in that as well as about 2% to 3% of our revenue. So it's not overly significant.
Yes in terms of the business in general again.
It's an emotional impact that are you having people right and obviously you have people in both sides of the conflict.
And then just bite.
That fact, you know people talking about that instead of talking to our products that is time that theyre not doing our activity. So that is.
The more the most current vendors the more time it takes it takes from our activity, but you know.
The after.
In the aftermath of that is even more inflationary pressure, nor cost or more pressure and the pricing, which could impact even more than consumer sentiment in Europe . So that is that and what it could be that's what it could be unfolding in EMEA and I just one last financial point, we did take reserves.
Permit related to the Ukraine. It was only 400000 in the quarter.
Okay. That's helpful. Thank you.
Thank you Doug.
Again, I would like to remind everyone. If you wish to ask a question. Please limit yourself to one question and one follow up. Our next question comes from the line of Linda Bolton Weiser from D. A Davidson. Your line is open. Please go ahead.
Hi, Thank you.
So I was just curious.
What is the status of your planned entry into the retail market in the U S, which I think you were planning for the second half of the year are you proceeding with that and can you just give us an update there.
Yes, absolutely no. Good morning, Yes, we are we are proceeding with our plans.
Expect to see some activity towards the end of Q3 full time full full blown in Q4.
And what would be the timing of when you might announce who your retail partner or partners would be when will we hear about that.
I think it's going to be as soon as we have appeal and we have everything final.
I think that that could be the timing it could be probably.
And about <unk>.
In about a summer time of about two or three months.
Okay, and then I'm just curious I know theres a lot of stuff going on in Europe , but I'm just curious about the U K I know that you had entered the U K regular retail with a partner.
Is that product being sold at retail in the UK currently and how is that going.
So we're not in retail yet.
The way, we're approaching the U K, we had an option of going in and out with a few products or going as part of their lineup.
Since we want to build a sustainable business, there, where we're going with our lineup and obviously, we need to follow their their seasonality on the timings and so on and we might be we are going to be there.
Probably in Q4, the latest Q1 of next year.
And the rest of the activity that we're doing is in the other channels, which is indirect direct response, which has got great. Great response from.
From us and every single.
Research that we do have run consumers brand and everything around in the U K is very very positive all the partners that we know we have they're always very excited everyone is very excited with those going into the U K.
Okay.
And then.
Well just on Russia, I mean, you sized it up but just to be clear I mean are you operating or is it shut down do you have any people located.
Or like is that just completely not operating currently in Russia.
We are operating.
We're not close so we're trying to make it a save sulfate self sustainable business.
Okay.
And then.
Just in China.
<unk>.
You know I mean that you already have big declines there. So even though you had I think it was down 24% or something I mean, that's maybe not that much worse than what we would've projected anyway. So I'm just curious how much worse was it just because of the shutdowns is there any way to size up.
Let's say, maybe what you had planned versus what it actually was just to give us a sense of how the impacts are happening there.
So actually January and February were ahead of our expectations. We were opening up more studios and our retail activity was higher than what we were anticipating at the beginning of the year, but everything on Raveled tours.
Towards the end of March and we estimate an impact of around a million and half to 2 million in sales per week.
In China.
Okay. Thanks, that's helpful.
And then.
Just on China for a minute.
You did put a new management in place I believe and so I think youre hopeful that apart from the shutdown that you can kind of start to see things improve.
Do you feel like there's a plan in place or are you still formulating the plan and another.
Another company Este Lauder actually said that they think there will be lifting of restrictions in China. In mid May are you hearing a similar thing. Thank you.
So we are hearing that they are releasing little by little difference different cities. So.
We don't we don't really have a specific time I think it's going to be a grotto.
<unk>.
In terms of our management there we feel very very confident we liked the results that we saw in October and in November and December January and February but this was.
Obviously, a big thing that we were not a.
Thinking about.
And you know obviously as you pointed.
Pointed out you know China's contribution to the overall company's key on is very important for our plans. We know that we have local manufacturing we have 5000 retail locations.
There is a need for a product right because there's.
I think.
Middle class, a 300 million Chinese.
Now waiting for our products.
Once again I would like to remind everyone. If you wish to ask a question. Please press star one.
Please note to limit yourself to one question and one follow up only.
We have no further questions at this time Mr. Fernandez Chan. Please go ahead for any closing remarks.
Thank you very much and close in the first quarter of 2022 was full of challenges both external and internal in nature and our results reflect that.
We have not only address or put plans in place to address a number of those issues, but we have learned a great deal and we will be a stronger company as a result, we acknowledge the setback this quarter represents the time delay that it causes however, we reiterate our turnaround plan commitment to improve those areas within our core business, which will serve us.
Going forward our strategy remains the right one to increase consumer access to our iconic tupperware brand and I have unwavering confidence in our ability to achieve our goal of.
Of making our business as big as our brand.
I want to thank you the entire tupperware team, our Salesforce, our associates, our board and our executive team for their tireless effort and commitment to our vision of making this company as big as a brand.
<unk> try and moment for all of US. However, I know that we will be stronger for it and do that we will ultimately succeed.
Thank you for being with US today and look forward to speaking with you soon.
This.
Today's conference call. Thank you all for participating you may now disconnect have a great day.
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