Shares in Tupperware have tumbled to their lowest level on record as the iconic food storage company warned investors that it is in danger of going out of business.
The company’s stock price fell by 50 per cent on Monday after the company said in a press release over the holiday weekend that it has hired financial advisors to explore options for the company and to “remediate its doubts regarding its ability to continue as a going concern .”
Shares in Tupperware had been on a downslope for years, as the company’s 77-year-old main business model of selling direct-to-consumers via consumer salespeople fell out of favor.
But that trend reversed in the early days of the pandemic, as the sudden popularity of eating meals at home led to a new demand for its core product: sealable, reusable food storage containers.
Tupperware books most of its revenue from sales from independent representatives who sell the product door-to-door. At last count, there were more than three million such salespeople — whom the company calls Tupperware Business Leaders — in more than 70 countries around the world.
The early days of the pandemic led to a surge in demand for its products. Shares gained nearly 3,000 per cent from $1.40 in March of 2020 to nearly $40 per share in January the following year. Tupperware booked $489 million in sales in the fourth quarter of $2020 alone.
But that trend has since reversed, as sales for the first quarter slipped to about half that, $255 million. The shares were changing hands at around $2.50 a piece on the New York Stock Exchange last week, and tumbling as low as $1.24 each on Monday after the news came out.
‘substantial doubt’
A major problem is the company’s debt load, which has ballooned to $705 million — more than 10 times the company’s current market value of a little over $60 million, according to regulatory findings. The company failed to file its annual report for the last year on time, which put it in breach of various covenants with its lenders.
“The company currently forecasts that, if it is unable to obtain adequate capital resources or amendments to its credit agreement, it may not have adequate liquidity in the near term,” Tupperware said in a news release. “As a result, the company has concluded there is substantial doubt about its ability to continue as a going concern.”
Chasen Bender, an analyst with Citi, said Tupperware’s creditors appeared to be working with the company to give it breathing room but “the path forward appeared highly uncertain.”
“The stock will face headwinds so long as these issues persist, especially as there remain lingering questions about the underlying business and turnaround.”