Tupperware admits it could go bankrupt and plummets on the Stock Exchange – 04/10/2023 – Market

Tupperware is best known for reusable plastic containers that can encourage users to store food much longer than they should before throwing it away. The company’s shareholders know how this is. They — like many investors in pandemic-era crazes — learned a painful lesson about the limits of their own forecasting.

Last Friday (7), Tupperware announced that it had hired financial advisors in the midst of a cash crisis. Citing a challenging economic backdrop and rising borrowing costs, the company admitted it may not have the resources to continue operating, and its status as a viable business is in doubt.

This Monday (10), the first trading session after the announcement, Tupperware Brands Corp. plummeted 48.8% on the New York Stock Exchange, and the company’s market value dropped to less than $100 million, compared with debt of more than $700 million.

In 2023, the company posted revenue of $1.7 billion, up from $2.7 billion a decade ago.

“Tupperware has embarked on a journey to turn around our operations, and today [sexta] marks a critical step in addressing our capital and liquidity position,” said Miguel Fernandez, chief executive of Tupperware Brands. “The company is doing everything in its power to mitigate the impacts of recent events and we are taking immediate steps to seek funding and resolve our financial situation”.

The pandemic forced people to cook at home, and sales skyrocketed. Tupperware’s market value rose to more than $1 billion by the end of 2020, and the company believed that demand for branded plastic packaging would be sustained. The FT column correctly predicted that the boom would be short-lived.

Earl Tupper founded the business in 1946. It prospered thanks to so-called “Tupperware parties” where groups of neighboring women would meet and buy the jars. The company also has direct sales to hundreds of thousands of distributors and independent sellers. This seems anachronistic in the digital age.

Prior to the pandemic, the company completed a debt swap that cut the principal owed. In 2022, Tupperware recorded Ebitda (earnings before interest, taxes, depreciation and amortization) of just $124 million. The company appears to be heading towards a final restructuring in which creditors would become owners of finer Tupperware packaging.

Pandemic-era investment crazes have also included Peloton, Zoom and Domino’s Pizza. Some investors have a bad habit of “recency bias,” extrapolating long-term trends from short-term bubbles. They must bet on Tupperware to keep that perception fresh, even if the food isn’t.