Tupperware Brands Corp (TUP) 2012 Q1 法說會逐字稿

Good morning, and welcome to Tupperware Corporation's first-quarter 2012 earnings conference call. I would now like to turn the call over to Rick Goings, Chairman and CEO of Tupperware Brands. Mr. Goings, please go ahead.

Thank you, and good morning, everyone. I will refer -- our discussion today will involve the outlook of our business, so you know the drill on this on forward-looking statements. Joining me on the call this morning are Mike Poteshman, our CFO, and Teresa Burchfield, our Head of IR. They are in our Orlando headquarters. I am in Africa. I'm in South Africa with our President, Simon Hemus, our group presidents and just under 500 of our top people from 27 countries. Every other year of interest, we do a summit somewhere in the world that's a combination recognition event, but even more than that, it's to train our top people, both people who are associates, managing directors. But even more importantly, our independent sales leadership team out there. Additionally, what we try to do is, at the same time beyond that training is to encourage healthy competition.

By the way, along that same line, we've said so often direct sales fundamentals and knowledge are key to success in our business. Each of our four regions of the world, we do this twice a year, and just three weeks ago, I was with 200 in Indonesia from all of our Asia-Pacific markets. And what was so stimulating about that was that the group of young leadership people in their thirties that are coming along in our business, I've never seen it at this level, the level of education, the level of passion, and the seasonal already under their belt and our businesses.

Now, let me get on with the quarter. We understand your time's valuable, so I'm going to make some opening statements, trying our best again not to be redundant with what you've seen in the release. Mike will add to that, and I'll turn it over to questions. We've had a point in time where I was somewhere else in the world and communication wasn't what it should be, so I would ask your patience. If I fall off the call, Mike will finish it. First-quarter 2012 was a record for us. We were up 3% in local currency, came in at the high end of the guidance range. However, it is important to note when comparing this quarter to last year, the impact of one less week, we try to put together what that impact was, and we think it was 5 percentage points. So it means our first quarter was up apples to apples about 8%. Diluted EPS without items was $1.03, which is also a record in Q1, $0.04 above the high end of the range. And this really came in from better profitability in our segments, along with $0.01 of foreign exchange benefit. Mike will go through those nuances when he does his section.

We did see impressive performance in a number of our markets, in both the portfolio of emerging and in the established. I'm going to highlight some of those, and in a bit, I also, I want to comment on some of the markets where there are some performance issues. Again, I would remind you that we are a global portfolio of countries. As mentioned, I'm here with 27 of them, and there's only a very short list of our markets where we have any issues. And I've got to say it, I've only had one year of my business career where in a portfolio there were no issues. Let me begin with our established markets, just top line a couple of noteworthies. Germany, which you know is a very important market to us, they were up 3% in the quarter, and that's really 6% adjusted run rate. And that's not only -- it's in line with the positive trend we've been seeing recently. Italy was up 46%, which really speaks to our decision to invest in growing that top line. By the way, Italy at Tupperware in more than 40 years has never grown at these kinds of rates. We also had strong growth in our Nordic businesses, which is really eight countries, up 17%. Double-digit growth in Portugal, which is really encouraging to see in light of their economic difficulties.

Worth noting, too, that none of these businesses that I've just mentioned has seen growth rates like this in recent years. And what it really speaks to is the effectiveness of the continued refreshing of the levers that give a direct-selling Company like ours competitive advantage. And there's simply this. Number one, a flow of unique products. We try to put into the barrel 25% of our sales coming from new products every year; two, entertaining selling methods and relevant selling methods to different consumer groups; third, a compelling earning opportunity; and fourth, I think most important, solid direct-selling fundamentals. Now, it's working in those markets, and the good news about the established markets is there, you'll get a per capita income in the $30,000 to $40,000 year range.

Turning to our emerging markets, India, Indonesia, Brazil, each of these big markets had growth rates in the high 30% range. If you took into account the impact of the extra week, that really made the run rate into the 40% range. Also, without taking into account the impact of the extra week, our very nice Turkish business here in Europe was up 17% in the quarter. And by the way, it meant they lapped a 32% increase in the same period last year. Here in Africa, we've got a wonderful business called Avroy Shlain, in addition to our Tupperware business, but I've been with the Avroy Shlain people and reviewed their business. They were up double digit in the quarter as well. Also, in this portfolio of emerging markets, Malaysia, Singapore, up double digits. China, up double digits. Ditto, Korea. So good news in a lot of markets.

Now, as I said, we also had markets where we he had performance issues. Our Tupperware business here in South Africa came up against, after an incredible six-year run, came up against some challenges in 2011, toward the end of the year with strikes, with counterfeit products, coupled with a couple of promotions that really didn't work very well. These factors, along with the slippage in recruiting effectiveness over the past few quarters, resulted in a real soft first quarter. To drive the activity and combat the counterfeits, our people had been introducing a lot of new products, and that really speaks to the strength of our global marketing, where we're able to dip into kind of the war chest of what are some things that we can drop in.

We've also stepped up our focus on recruiting. Real solid management team here in South Africa, headed by Allan Dando, and I've met at our headquarters in Jo-burg this past week with them, reviewed all of their initiatives, reviewed all of their key people and positions. And additionally, this week, I got to be with a number of their top sales leaders and believe that we're going to see this business return to solid growth as this year continues to unfold. By the way, I've got to say, real solid, profitable business here, with a very high and impressive ROS.

In Russia, our business there under CIS, we saw some improvements in the front-end indicators. As we've I think educated all of you in the past, we had 10 solid years of double-digit growth, but simply stated, we grew our distributor base too wide, from six distributors to almost 200 distributors in a 10-year period of time. You'll see a line statement never serve it before it's time. We grew it too fast. And what that meant, if everything stayed fine in their economy, it would have been fine. But when the ruble collapsed and then it was compounded three months later with the massive heat wave and fires, well simply stated, many of these smaller fringe, less seasoned distributors simply couldn't stay profitable. And we had to fold them into other larger distributorships or close them.

Well, we've gone a long way to get this thing done and get it right-sized. Now we're down to 150 mostly solid profitable distributors. And once we start to lap and close the gap on the sales force size comparison, it's getting better quarter by quarter, I think you'll begin to see this market grow again. The good news about us in the CIS versus direct sellers in beauty, is it's a crowded space for beauty direct sellers. They are all there, and we don't have any competition. So that's going to make us coming out of this a lot easier.

Just a couple of words about Tupperware Australia. In the last quarter, we installed a solid and seasoned managing director in Australia and New Zealand. It's still a very, very profitable market for us and one that, as mentioned in the past, it was country of the year for four out of six years at one phase over the past decade, but we started to have some problems with a smaller sales force. Worth noting, this managing director, who happens to be an Australian, has been with us more than 20 years, and he has 100% success rate as an MD with turning around markets. He just came off his third successful turnaround, so Charles Henry is just a world beater, and we feel that we're going to see improvement as the year unfolds in Australia.

We also saw some improvement in our Fuller Mexico business in the quarter. After adjusting for the extra week, our sales comparison, the adjustment was down to a minus 4% versus a down 7% in the fourth quarter. We do still see very aggressive promotional activity by Avon in the market, and we know that's going to hamper our quick return to top line sales growth, but we're not going to get involved in heavy discounting. We're brand building there. We generally lead with fragrance and skin care, and we have an emerging middle class. That's what they look to do, is to get the better brands and better products. So I don't want to have a short-term victory and a long-term loss. We've still got a very slight deficit in sales force size. Mike can add to it. I think it's 1% or 2%, which I believe we can close in this quarter. The faster we can get that closed and that to a plus, the quicker we'll return to top-line growth. But we've got our spending in line, margins back where they ought to be in that market. And I must say, too, even with not the kind of growth rate in the top line, this is a very profitable business for us.

Finally, just a word about BeautiControl, as I go through the markets. We were down 13% in the quarter. That's 11% on the run rate. This is a 3% improvement versus trends in the fourth quarter. Sales force size there continues to be the issue, but I think we're recruiting better regarding the kind of kit and the return to training, but it's going to take some time. We could put a cheaper kit in, fast track people, but I don't think that's going to be the way to do it. So we're really getting back to a solid training program. By the way, we have one of our best managing directors in the world managing that, somebody who has got a lot of experience in the beauty business and experience with Tupperware. Daisy will do a great job there. She's been there a year, and we already feel the effect. And just last month, I met with all of their senior field leaders, about 2,000 of them, and I've got to say the energy is good, starting to see the core KPIs strengthen. And those are the things that will lead to this thing growing again.

Now, let me wrap up and turn it to Mike, but before I do, let me comment just a little bit more philosophically on our growth story. We are a global portfolio of businesses, and again, established in emerging markets. And I want to put the perspective, and this is how we in the Board, we look at it. If you bifurcate these markets of the world, you find out that only 14% of the world's total population are in the established markets. That's Western Europe, the US, Australia, Japan. Now, in every one of these established markets, we believe that there's lots of runway for growth left. Firstly, the big plus is high per capita income in these markets.

For these established markets, though, the way we're going to mostly grow is stitching together some niche plays. Firstly, going after unserved segments of the market. Next, new and unique products to current customers. And it's this combination, along with more unique selling kinds of methods that are going to lead to that growth. I'll give you an example. In the US, we're really focused greatly on the Hispanic population. They are an ever-growing percentage of the country's population, and they are not only enthusiastic about direct selling and our earning opportunity, but really, they like to buy this way. And they really don't have as much earning opportunity in other ways. So it's starting to really happen for us, and their growth rates often can be two to three times what we see with Anglos in the US. So you're going to see us niche growing these markets.

If I went in established markets, like Western Europe and I went through all the proof is that our strategy's working, is when you start seeing dynamic growth in Germany, Italy, Nordics, where we've been 50 years. It starts to say something's working, because the economies aren't particularly good. We're seeing a rebirth of the entrepreneurial spirit as the social contract, European socialism is going broke, and people are understanding, hey, I've got to get back to -- the focus isn't on 35-hour work weeks now. It's how do I make enough money, how do I get more control of my life? We're also learning that the efforts to attack these unserved, larger urban areas like Paris, where we're underpenetrated, is a great opportunity. And the way we've been doing it there is focusing on updating the kind of party, making it more a girls' night out, updating the kind of product offerings, products that really appeal to a busy, working woman. And it's really starting to work.

Turning to our emerging markets of the world, clearly they are faster growing. You see that the total population, simple math, if the established markets are 14%, all the rest are 86% of the world's population. In these markets the primary drivers are, number one, simply stated, a huge population. Secondly, a rapidly exploding middle class. Now, we mentioned the stats in our release. It's believed right now that Asia's middle class is 500 million today, and that by 2020, the middle class is going to explode to 1.7 billion. And when you look at Maslow's Hierarchies of Needs, you start to sit there, kitchen formation, the kind of products that we sell, the desire for western quality brands. I never will forget Robert Polet, a friend of mine, who up until two years ago, ran Gucci. I asked him, how come you're growing 20% in China, and I said, with all the counterfeit Gucci there? He said, Rick, you don't understand. A Chinese woman will not buy a counterfeit Gucci. She wants a real Gucci, because it tells her friends, I'm not poor anymore. That's why product positioning and branding really matters.

The other thing that's really going to help us grow, in not only established markets but emerging markets, is our new product strategy. Again, 25% of our sales. One marketing analyst over this last year suggested when looking at our business, he said, in some ways you guys are like Apple. They started with, at the core, the Mac. Then they jumped into the music business with the iPod, and then they jumped into telecommunications with the iPhone, and then again, another place, with the iPad. And when you put it together, Apple, Apple store, where you can demonstrate, and I'll tell you who first showed me how to use an iPod was one of our group presidents, who was what I call an Apple advocate. We have the same things happen at our business. We started out basically in food storage products, but then we branched out into flanker categories -- table top, kitchen prep, cookware, cutlery, cookbooks, micro steamers, and it's interesting to note what makes our business work is Tupperware products, Tupperware demonstration. Think Apple store. And think also Tupperware advocate, hostesses.

Every 1.5 seconds somewhere in the world, one of our advocates is sponsoring a party for which she doesn't charge us rent, and we're able to utilize that expense and utilize expense that normal retailers have spent on advertising to build this incredible sales force. So it really is working, and Tracy just got me the numbers. Now in 2011, only 30% of our sales were even in food storage products. And another interesting category, when I joined the company, 98.1% of the products that we sold were made by us. Now, 40% are outsourced. So we're moving really in the right direction. And the net of all this is simply that Tupperware Brands has a lot of growth potential. Established markets have their pluses, mostly with big incomes, but emerging markets with their powerful populations and growing middle class, they're a place to be as well. Mike, let me turn it over to you, and then we'll handle Q&A.

Okay, thanks very much, Rick. As has been covered with 3% local currency sales increase in the quarter, we were at the high end of our external range. Some of the more significant positives in the quarter, versus what we included in our forecast, were first, in Italy and the Nordics in Europe, and here it's really a continuation of good KPI trends that we've seen in recent quarters. Then in Asia, in Australia, Tupperware Australia and Japan, we didn't get to growth, but we had better comparisons than we have been seeing and than we had expected and put into our forecast. And then finally in Brazil, here we continue to grow at a very fast pace, and better than we had baked into our outlook.

We did have a few going the other way. We struggled, as Rick talked about, at Tupperware South Africa, and that was particularly early in the quarter. And our decrease there was more than in the fourth quarter and than what we had expected and included in our outlook. France was also somewhat below what we had forecast, although it continues to operate as a business at a very high level. And then at Fuller, Mexico and BeautiControl, we had better comparisons than we did in the fourth quarter, so we had progress there, but still didn't improve as much as we had included in our forecast.

Looking at the profitability side, our 23% increase in diluted earnings per share, excluding items, was $0.04, or 4% over the high end of our range. Most of the upside came from our segments, and that was most notably in Asia and Tupperware North America, mainly from better gross margin in Asia and more efficient spending by the Tupperware United States and Canada business. And then we also did benefit by $0.01 from foreign exchange versus the outlook we gave on February 1. We've laid out in our second quarter, we've laid out our second quarter and full-year outlooks in our release.

As a reminder there on the full year, the 5% to 7% increase that we're calling for in local currency does include a 1-point hit on the comparison with 2011 from having the one less week. So it was 5 points in the quarter, but on a full-year basis, it's the 1 point. And then on diluted earnings per share without items, we maintained our full-year range from February 1, which is $5 to $5.10. Now, we were able to do this on the strength of our $0.04 upside versus our guidance in the first quarter. And this was notwithstanding that our FX outlook did get $0.05 worse than where we were in our February 1 guidance. So it went from a [minus 22% to a minus 27%]. Our EPS range would give us versus 2011 an increase in local currency of 20% to 22%. Underneath this, we improved our outlook for our pretax return on sales 10 basis points versus our February outlook, so it's 14.3% now, and that compares with 13.9% last year. The 40-basis point improvement then that we're talking about is after taking a 30-point hit from foreign exchange rates on the comparison. So you could look at it up 70 basis points in local currency.

Within our full-year guidance, our outlook for unallocated corporate expense and net interest expense have not changed from February 1. This includes unallocated expenses down slightly from last year, and net interest expense still at about $33 million. Updating our outlook on resin, we currently foresee, including in cost of sales this year, about $165 million. That $165 million would cost us about $1 million more than what we would have paid in 2011, from price increases in the resin market. Our previous outlook on February 1st was for a positive $5 million comparison, so we were also able to overcome this with being able to maintain our guidance at the $5 to $5.10.

On cash flow, while we were below 2011 in the first quarter, we've not changed our full-year guidance, which is still for cash flow from operating activities net of investing activities, to be $220 million to $230 million. This is where we were before. And it continues to include forecast of $90 million in capital spending. Just a comment here on where all this cash is going. This is before the $220 million to $230 million is before our dividend, which is at $1.44 run rate right now. That's about $75 million a year. And then included in our outlook in the shares that we've included is $200 million of share repurchases. We will have done $75 million through the first half with the $50 million that we did in the first quarter and $25 million we forecast for the second. If you take that $200 million of share repurchases along with the dividend, that comes to close to $5 a share, which is a pretty good payout when you take it together on a stock that's in the $60 to $65 range. So we wanted to make that point clear as well. And so with that, I'll turn it back over to Rick.

Thank you, Michael. And we'll open it to questions.

(Operator Instructions) Your first question comes from Olivia Tong with Bank of America.

First question is on sales growth. Your expectations by segment, which you provide in the press release, are either in line or slightly below what you posted on an adjusted basis in Q1. I realize there's European macro and a couple of weaker markets out there. But just wondering, what you're seeing, if there's anything that you're seeing so far in Q2 that makes you feel like those are the correct ranges going forward?

Sure. Well, maybe I can lay out some of the specifics first. We did raise what we were looking for in Asia and South America, versus what we said in the first quarter or the call on February 1. We are a bit softer in a couple of the other segments and about even in the fifth one. So really, when we look at it, we were at a run rate of 8%, when you adjust for the week in the first quarter. The full-year guidance, as it was on February 1, continues to be for 5% to 7% local currency. That does take the 1-point hit from not having the 53rd week. So we really think that given where we are with the sales force, in the various segments and how we've adjusted things, some up, some down, that we're really on track for continuing to operate in this really 6% to 8% range, which is our long-term run rate, if you put aside the week. Rick, do you want to comment on some of the specific segments?

No, I think you've covered it.

Your next question comes from Jason Gere with Royal Bank of Canada.

I guess two questions. One, I was just wondering, in your mind, and a lot of it could be macro, but you have the strength in emerging markets right now. What is it going to take to get the established markets back to that 1% to 3% evergreen target out there? I was just wondering if you can provide a little color. And then I have a follow-up question.

Yes, I will first comment on that, Mike, and if you would like to jump in. What we first had to do was to get this formula down on what's -- how do you differentiate yourself and have competitive advantage in an established market, given the difference in the market environment there? Because in emerging markets, the biggest things you have going for you is lack of retail infrastructure, lack of earning opportunities, specifically for women, and this emergence of the middle class. You don't have those three things, so you have to find other ways to win. And how we found to win in that, we had to first, we didn't get it right early on. That took us about six or seven years to figure out the strategy, that it wasn't a silver bullet. It was the combination of find the unserved markets in an established market. And what we generally find out, think of Europe for example, like a pepperoni pizza, that all the metropolitan, high density urban areas were absolutely vacant of Tupperware penetration.

So then we had to go for the strategy there, was, okay, why? Higher penetration of working women there. She wasn't so much looking for earning opportunity, so we had to then change the product line. We had to change the earning opportunity in those markets. And when we got it France was the first real, first market to really get it right, and they were our established market of the year for three years in a row of, I think we had 4 years of double digit. We've stumbled for a quarter or two, but there's a lot going on in France. I think the first piece of this is get the formula right.

Well, back to your question about the 1% to 3%. We still have markets in various levels of implementation of that. France was ahead of Germany. Germany is now just kicking in. Italy is now just kicking in. But you've got some other laggard markets out there. The US still hasn't kicked in like some of these European. Spain hasn't kicked in. We've got to get Australia kicking again at that high. We've got to get Japan. But the good news on all of those markets, all the new things have already been implemented, but they are in various phases of downloading them right now. Mike, would you add anything?

Just a couple of things. We did look at the split by emerging markets and established markets on a run rate basis, and we saw the established markets up 1% in the first quarter on a run rate basis. We were down 3% in local currency, as we reported it. Underneath that, the ones that were doing well and better in Europe, we were up 6% on a run rate basis. That was up after being up 5 in the fourth quarter. Really, Germany is a big contributor there, as we've talked about. It's our largest established market in Europe. So that was good. In Asia-Pacific, we were down 5% in the established markets. It's not a big share of our business in Asia, but much better than the fourth quarter when we were down 17%. And there, we really saw an improvement in the trend in both Tupperware Japan and Tupperware Australia that we're hopeful really is starting to reflect the things we worked on the last few years, as we've been talking about them.

The other ones were more in line with where we were in the fourth quarter. But fortunately, again, on the run rate basis, we were in the low single-digit range. I say fortunately. Obviously, we think we can do better, or ought to be able to do better. But that's how we see it at the moment.

Okay, and I guess on that point, if you look, does this mean that you need to make some more strategic investments? If you look at Italy in the 46% I think was the number you quoted, just a couple of quarters after making the big investments, I know you were saying that in Fuller Mexico you don't want to play the short-term games with Avon right now. I'm just wondering, is a bigger piece of getting to that 1%, 3%, that maybe doing some of these more strategic investments a little bit more than maybe what you previously thought?

I think we do continue to invest. We look at it on a market-by-market basis. So the couple of things that we've highlighted over the last year have been cases where it's not just the only places we invest. It's the places where we've had an outside investment. And we've highlighted Fuller Mexico and Italy. We did better in both, certainly in the first quarter than we had been doing. In Italy, we got this really good growth, but we did have a positive contribution margin. So we were making more money on more sales. Still not quite where we want it or not where we want it, but I think we'll be more efficient as we go forward.

As we look to, I would say, to other markets where there's particular issues, there will be cases where we invest an incremental amount, and we just want to do that probably more temporarily and wisely, I would say. Where we saw some of that in the first quarter, we still did invest in Italy some contribution margin, even though we were positive. We certainly invested in Tupperware South Africa, and we think that was the right thing to do. And even in South America, when we looked at the contribution margin, we were down -- it was positive, but down from where we'd been in some other quarters. And that reflected some spending in Brazil, which really wasn't because there was any problem, but because we wanted to start the year well and we thought it made sense to do, and I think it turned out to be a good choice. So I would say we continue to look at it over time market by market.

Okay, great. And then just the second question. I know that was a long first question. Just thinking about the margin progression, if we go back and look at 2010 years prior, you guys had this strategy of getting a lot of SG&A leverage coming through on strong comps. And 2011, we did see some of the higher spending in some of those choice markets. I think operating margins were flat this year talking about 40 basis points. I guess I'm trying to think about, how do you think about the DS&A or SG&A type of leverage going forward, especially when your comp expectations really haven't changed much? You still deliver among the best comps in the peer group, but we haven't seen as much SG&A. So I was wondering if you could give a little bit of perspective, maybe how we think about it for 2012 and then even longer term?

Mike, let me handle one piece of that first, because there's this continuing discussion of what kind of operating margins, how high can it go with us. And the answer is firstly, I don't know. But I have a sense that -- because part of that is clearly the SG&A, but we really believe that when we target markets, that we ought to be able to make 15% ROS. That's within a market. But I also believe that pretax operating margins for this Company probably won't go over 15% for any same period of time. And the reason for that is that if our pricing, if we're too aggressive on pricing, we could lose share in some of these markets, and I want to keep the right balance there. But, Mike, you might get more granular than that.

Yes, so Jason, for this year, like you said, we're up with our outlook on the high end of our range, 40 basis points versus last year. That's after overcoming this 30-basis point hit in the value chain, a lot of which comes from the dollar-denominated corporate costs we have and the interest expense that we have. As we look out in the future, we talk about 50-basis point improvement per year. You've probably heard us say that we think around half, when we look at it, half of our DS&A, or SG&A is fixed in the short-term. We do make incremental investments in brand building and things like that. Sometimes we do the defensive investments that we've talked about for Fuller and other places, and some of that comes through on the DS&A line.

So we -- along the lines of what Rick is saying, we certainly look to balance it. There's markets that are considerably higher than our average, and too many that are lower, and a couple even that are [in lock] So as we work on those value chains and then leverage the volume, that's where the 50-basis point comes from to the extent where we're at or around the high end of our sales growth range, then that soaks up some of that advantage on a basis point perspective. So, we did grow much more quickly in the past, because we were starting from a lower level. But when we look at the various things that we're working on and the leverage we can get from the volume, certainly offset by still a good share of investment-type spending, that's how we get down to the -- or net out to the 50 basis points.

Great, thanks.

Can I add one thing to that too? An interesting thing that relates to this is, this is indirect selling. We're not only working with the customer, but also, how do you get that sales force active and out there? And we know to have the right balance of some high quality, yet low net-per-unit products generally gets your sales force more active. It gets at a party, we'll start looking at some of these lower price products that, oh, my goodness, everybody at a party buys one of these. So you have to have that healthy balance of these two things, of the $140 products, but also the $8 and $10 products. For example, one of the great unit movers -- unit movement is huge in direct selling, because it gets her out there. It gets her wanting to share this with a customer. And when we introduced this half-liter water bottle and the liter water bottle, which replaces the PET bottle, and it's guaranteed for life. Mike, I don't even know what the number is right now. 40 million was the last one I saw. But it, it's a product that, wow, does it get your sales force active out there. So that's why we're mindful of don't get those operating margins also too high, or you'll end up paying the price on lower activity in your sales force.

Your next question comes from Dara Mohsenian with Morgan Stanley.

Rick, can you give us an update on any potential impact on your business, either in the quarter, going forward in Europe from slower macros? And then also, the Fuller improvement in the quarter, it sounded like the competitive environment's still tough. I'm just wondering, is it better execution on your side, or are you in fact seeing the competitive environment ease a bit down there?

Yes, well, Dara, I'll first hit the Mexico situation. I don't know what their -- we've heard that their gross margins are really investing in gross margin there, but when you do this discounting, you get yourself into the same situation they have in Brazil. Brazil has overtaken the US as their most profitable market, and yet their -- you're going into the face of this emerging middle class that wants to buy [Detura], so it's a game you don't want to play. I always have kidded with Muhammad Ali always won because he would float like a butterfly, sting like a bee. And the first time he stood in the center, flat footed, punching it out with Joe Frasier, he lost. Our strategy in Mexico, I can't -- we can't make any decisions on what they are going to do. I will tell you what we're doing.

We're sitting there taking the Company that was Fuller, and we're evolving that Company into prestige brands. Our most prestigious brand there is Armand Dupree, and that started as a fragrance brand. But now, we're making that the marquis brand in skin care as well. So you're going to see that Company evolve to more and more larger Armand Dupree, better, stronger price points led by fragrance and led by skin care, so that it's going to be aspirational to the middle class there. And over time, a five-year period of time, it may be that our Company name there is Armand Dupree. So we're basically moving up with middle class, but you don't do that one step -- some of you might remember Hertz used to have Hertz rent-a-truck, then Penske bought it, and it said Hertz-Penske, but it was still yellow. Then all of a sudden within three years, it was Penske, and the trucks weren't even yellow anymore. So the play in Mexico is a brand play in Mexico. It's not to sit there and discount, or you're dead long-term.

So turning to Europe, I will tell you, I've been with a lot of Germans, French, and others here this week who were fairly well connected. I feel good about the improving macroeconomic environment in Europe, but it's going to be very tell tale what happens in these French elections, because they are abandoning this social contract that they had in France and Germany, because the government simply couldn't afford it, and we see that lesson in Greece. I was pleased to see the margins, Sarkozy's margins get to 1% with socialists there, because that will show, is there public support? Can somebody who wants to balance the budget, can they win? Five years ago, you wouldn't even have had an election this close. But the biggest thing I'm seeing in Europe now is the realization by people, oh, my goodness, I got to do this myself. And the younger ones, they want to be entrepreneurs. The younger ones I'm seeing here that we have from France, Germany, they are hot shots, college-educated, and the reason they like this is they're not tied to the clock. They say, my goodness gracious, I can build a business out of this. There's going to be a lot of noise in the next couple of years in Europe, but I'm more confident that they are doing the right things than we are in the US.

Okay. That's helpful. And then can you give us an update on your long-term return on sales outlook? You've obviously seen pretty healthy expansion over the last few years here. Is there a level where you think that margin expansion starts to moderate a bit, a peak margin level eventually?

Yes, I think it's going to come -- Mike, you handle part B of this. Firstly, we have, this is to an earlier question too, if we can get a couple of our leaders that either have not been contributing to top line growth, flattish like the Japan, or those that have been in a decline like Australia, where we still have the power to get this. We can get those drag markets back. All of a sudden, you move the established markets from a 1% to a 3% or 5%, because we're learning, our biggest Tupperware market in the world has been Germany and many people never thought we could get to that.

Very interesting how we're getting to that one contributing thing we didn't talk about today. They learned from our South African business that to put in a sub-management level, what we call team leader, so Germany, as I joined the Company, had 165 distributors. And these are these mega distributors. And what we're finding is now, they have 150 distributors in Germany, but a huge number of team leaders. Team leader is a full-time position, and somebody could make $35,000 to, well, in some cases, $100,000 a year as a team leader and a team leader still is under a distributor. So for example, we have one-third the number of distributors in -- it's roughly in Brazil that we do in Russia, but they are huge. They are huge. Our top distributor in, had him on stage last night, $21 million in retail sales per year. That's $2 million a year in income. So we're learning. The lever we learned there was a combination of product, but a combination, too, of, oh, reengineer the distributor structure under it, so we're really learning how to do that more. Mike, anything else?

Well, Dara, I guess your question on where we're going on ROS, I think it comes back to our expectation that we can still see improvements in this 50-basis point range. You're right, that we've made a heck of a lot of progress, probably most significantly in South America. We were losing money in that segment five, six, seven years ago, and now we're up into the last year, 18% range. So that's been volume leverage and cleaning up some of the value chain. But, that said, there's still Argentina, where we even lost money last year. So we ought to be able to obviously do better than that. Rick talked about, a bit about Asia and he highlighted Japan. That's a business that operates right now around break even. So even though last year, we were at a 21% ROS for the whole segment, we ought to -- obviously, we should be able to make money in Japan. So it's things like that.

Our lowest, as you can see, ROS segment right now is beauty North America. Last year at right around 10%. And we invested, as we know, significantly at Fuller, Mexico, and that should rationalize over time. But we've said our ROS this year for the full year should be around even, is the update that we gave in the release today. But over time, we ought to be able to do better. So clearly, we don't want to overdo it. To Rick's point about having the right mix of product offerings and keeping the sales force and the consumers excited about our business, but there's many places where we can do better. So we need to balance those things over time, and still, we'll look to get the 50-basis points per year at this point in time.

Your next question comes from Sofya Tsinis with JPMorgan.

My question has to do on beauty North America. You just touched on it a little bit, but I wanted to dig a little deeper into it. I think last year, margins were down 500 basis points. This year, as you just said, you're guiding for them to be roughly flat. Can we ever see that business return to the margins that they had in previous years? And what does that mean for BeautiControl? Do you need to get the business to breakeven in order to achieve those margins, or is it all the leverage from Fuller, Mexico? Thanks.

Mike?

Well, we certainly expect our sales to make money at BeautiControl in all of our units. The team there is focused on the right things that we need to do to be moving the top line, the sales force KPIs and the top line, as well as working on the back end. Clearly, we can make money there. We've been as high as probably the mid-teens, or close to that at BeautiControl in the past, several years ago. Fuller Mexico has generally operated at a much higher rate than it is now. Over time, both those markets should do better from an ROS point of view than they are now. Either one of them making progress would obviously help the total.

So do you think that you could get back to 15% margins in that business over the next -- understanding that this year it's not happening, but maybe two, three years?

Over time, yes.

Okay, and then just to touch on France.

Yes, let me, let me add on that, too. Firstly, with the Mexican business, we always had a 22% ROS on it. That's what traditional levels are. And, Mike, I don't know what we have in the plan this year, but that's a 20%-plus business. And I think we ought to be able to -- that's the way -- we can make the right investments and a lot of profits. Going down the strategy I mentioned earlier, the Armand Dupree, back to BeautiControl, again, that business was doing $50 million, $55 million when we bought it. It's still twice the size of it. But we had it almost up to triple the size. All the mistakes at BeautiControl were self-inflicted. We made a couple bad management decisions. Good people, but with the wrong strategies or the wrong skill set there. And what they really did was allow the business to -- from a real selling of skin care, highly trained sales force, to a bunch of customer representatives again. And we lost about four years' momentum on this.

And I took one of my strongest people, she worked for me in the past, Daisy Chin-Lor, she worked in Hong Kong. And I had all Asia-Pacific in another life. We brought her into Tupperware. She ran our Korean business. She's a New York-American of Chinese heritage, and she is good at beauty. They love her at BeautiControl. And what we've said to Daisy, don't by closing the recruiting gap by getting less committed people who are more customer representatives. Let's take a couple years. Let's do this thing right. Let's get it more of skin care treatment products.

As a matter of fact, to tell you what's really working, they launched a $95 skin care product in January and it had a four-time oversale. They were out of stock for six weeks of it. Never could we have done it and it's a signal they are going in the right direction. I think your question's important, and I think the bogey of 15% is just around the corner. Now, I don't know whether the corner's 2013 or '14. But I do know we're headed toward the profit place again. And then once you leverage that on sales growth, then you get over 10% pretty quick.

Thanks. And just a follow-up on France, I think you said that it was up, but slightly below expectations. Can you quantify that?

Yes, no, we weren't up in France in the quarter. So it was a little bit worse than we thought. There, Rick talked about it a bit. The thing that we've heard is really that it's, the population is dealing with the election and the uncertainty around that. And we've seen this reaction in previous general election cycles, that there's just less -- that uncertainty, somehow it disturbs people more than in some other places is what we've seen.

Okay. Interesting, what Mike's saying, the banks -- the savings rate in France over the last 90 days has gone up to rates that they have not seen since the Nazi occupation. The market stood still. This really is going to be an epiphany moment of what they are going to have, what kind of France is ahead. Do they re-elect Sarkozy who is trying to build this country -- because, you remember, companies like us were in many with closed factories in France, 35-hour work weeks, just the rigor to do business in France. He's tried to change all of that, has been fairly aggressive, and got unpopular as a result of it. So it's going to be tell-tale, it's going to be in the next month.

Your next question comes from Bill Chappell with SunTrust.

First on the FX guidance for the remainder of the year, can you maybe just give us some color in the delta versus your forecast? I assume it's mainly Latin America. And then understanding what cushion you have left or what you've seen in recent weeks to give you comfort there?

Well, the way, Bill, the way that we do FX is we use, of course, the actual for anything that's already happened. And then we use the current rate for the forward period.

Sure.

We're really not cushioning it or anything like that. When we look at where we are versus -- you're asking versus the February guidance?

Exactly.

Yes, the real is down about 7.5% when you look at the two different rates, so that is the biggest impact. The A dollar, Aussie dollar, Mexican peso, Indonesian rupiah are all down 1.5% to 2% plus, so that's really where it comes from mainly.

And then from a financial standpoint, on the share repurchase, what you're saying you'll do $75 million in the first half and $125 million in the back half, any reason why it's a little more back-end loaded, or just timing of when cash comes in?

Yes, we generate a bigger share of our cash as we move through the year. And also, when we look at where we are today in terms of our leverage ratio, we talk about a target over time of 1.5 times debt-to-EBITDA. As they define it in our credit agreement, we were at that 1.5 as we ended the first quarter, the four quarters ended. So we put that together, and that's why we're taking the pattern that we are.

And then one last one, Rick, just going back to your comments on France, since it is a meaningful market. Have the political aspects been a detriment to your business so far, and do you look at this election as a seminal event for your business going forward? Is that something we should be more concerned about? Or will it work through, your business will decouple at some point?

No, but that's a really important question. I think I would use as a case in point, Venezuela. In spite of Chavez, we are up such high double -- what was it, Mike, in the quarter?

It's in the 40% range.

Yes. You could-- it's even strong double digits, when you take out currency. No, the only issue in France is short-term issue. If France goes back to the Mitterand years our business will be fine. But what you've had is a momentary freeze by consumers, but the French -- well, most Western Europeans are very, very resilient. I have yet to see any political situation that is more than a short-term. When I mean short-term, month disruption. As a matter of fact, I had for lunch yesterday, our Tunisians. And they took us through the situation there, where the beginning of this whole Arab spring, they had a two-week pause during it, and all-time sales records starting the third week of it. So no, it's a resilient business model out there. Not the same for retail out there. And I think the most important thing on your question is, we are not a pull business. This is a push business. And it's driven by, number one, the people, the earning opportunity that they have and they want and their connection of who they sell it to, to their friends, neighbors and relatives.

Your next question comes from Linda Bolton-Weiser with Caris.

Can you just say again about Russia, I don't know if I missed the exact number. I assume it was a little less down. And also, I think you had alluded, Rick, to some early signs of improvement, the early factors there. Can you be more specific about what you're seeing that is giving you a little confidence there? And then Austria, you haven't mentioned in a while. It' used to be a pretty good growth country, and I assume it was down since you didn't mention it. What's going on there? Thanks.

Mike, would you comment on both? And guys, I have got to catch a plane, so I'm turning the rest of these questions over to Mike.

Yes, sure, Linda. On CIS, when we look at the sales comparison on a run rate, we were down 7%. That's the same as we were in the fourth quarter, so we didn't see a lot of progress there. We did see some good, or better comparisons on the front-end KPIs. In terms of the total sales force side comparison and the actives during the quarter, we made some significant progress there. So that's why we say, we saw some decent improvement there on the front end, because that clearly is the precursor to being able to get sales growth.

When we look at Austria, it's one of our midsized markets in Europe and you're right, we did have several good years of growth there. And it's been a little choppier lately. In the first quarter, we were down just slightly on a run rate basis in sales there, which is actually better than it's been in some of the recent quarters. So we're hopeful that the things that we have in place there are going to start to kick in and give us some positive comparisons going forward.

Your next question comes from Lee -- I'm sorry. Next question comes from Gregg Hillman with First Wilshire.

Michael, couple of questions. First of all, could you get into talk about return on invested capital by region? If you can't give me the actual percentage, what regions ranked highest, rank the regions around the world in terms of return on invested capital?

Yes, I don't have that by segment or, honestly, I don't focus on it even by total that often. But clearly, the capital spending and the capital base we have around the world is fairly comparable in the sense that we have plants not only in Europe, but in the other regions as well. So I would think that if we were to do that breakout, that we would see it go in line with our segment profit return on sales. So we were at 21% last year in terms of the segment profit return on sales. In Asia, that was our best. Then we were in the, between 16% and 18% in Europe. Tupperware North America and South America, and then at the 10%, we talked about a little bit beauty in North America. So I would expect that the ROIC follows that same pattern. When we look at what we have in terms of capital, we've got $500 million plus in terms of shareholders equity and $600 million plus in terms of debt. So on that $1.2 billion or so of capital, last year, we made $270 million, as you saw, in net income in total. So what is that, 23% perhaps? But I'm doing that in my head.

That's really good. And the Mike, moving on to the CapEx, the $90 million you said for this year, could you talk about elements within that, and also talk about normalized CapEx, where it will normalize a couple years from now.

Yes, the progression, which I'm sure you've seen, is to having been in the $50 million to $55 million range most years to $75 million, $70 million, $75 million in 2011 and the $90 million forecast for this year. Some of those things that are more unusual this year were expanding our warehouse capability in Indonesia. We're starting to work on a plant relocation in China. So those are a couple of the bigger items. Where will we see that over time? We'll have to see. I think if we're able to continue to get the volume growth we're seeing, I wouldn't expect that we would get back down into that $50 million to $55 million range. We'll see if $90 million's the right number, or if it's something in between.

Okay. And, Mike, can you give me the sales increases for Indonesia for the quarter? What the percentage was I guess in local currency?

They were both 38% in local currency.

They were both exactly that number, 38%?

Yes. That's right.

Okay.

Each.

Okay. And then finally, I didn't quite catch the acronym. KPI, what does that stand for?

Sorry. Key performance indicator. For us, the key, non-financial metrics that we look at are the total sales force size comparison for the quarter versus prior year. And then the number of active sellers, which is a measurement of how often people order. And we look at that on a full-quarter by full-quarter year-over-year basis.

So exactly what's the ratio, again? Or what's KPI, one more time? What does it stand for?

It stands for key performance indicator.

Key performance indicator. Okay. And it's related to the sales force?

Those are the ones that are most important for us, yes.

(Operator Instructions) You do have a follow-up from Linda Bolton-Weiser with Caris.

When you look at your total global active sales force growth, it's okay; it's positive. I guess it was 1% in the quarter, and if you look back at the four quarters of 2011, it was mostly positive, slightly with some declines in some quarters. So you're getting obviously some very good productivity. Can you explain, is that just pricing, or are you actually getting meaningful productivity, sales productivity apart from pricing that's driving the sales to be higher than the active sales force growth?

There's some of both, Linda. From a pricing point of view, the biggest impact is in South America. This particular quarter is something like half of the increase was from pricing, and that's most significantly in Venezuela and in Argentina, which are the highest inflation places. The other one that's got a fairly big gap in this particular quarter is in Europe where you can see the run rate sales were up 3, but the active sales force was down 5. There, some of the elements, first we don't have Swiss Guard anymore, which was one of the beauty businesses in South Africa that we sold towards the end of last year. And that had a 3-point negative impact on the comparison, so it's 3 out of the 5 points there in Europe, the minus 5 in Europe.

We also did see some good productivity gained in Turkey, and so that is not -- there might be a little bit of pricing in there, but that's because of higher standards for the sales force during awards and things. And then there also is a bit of a mix shift in the established markets that have higher average order sizes. So if you look down the page there that's attached to the press release, we were up 6 on a run rate sales in Europe established markets on 3 more in active sales force. And that was also a bigger share, because we were down in run rate sales in the emerging markets in Europe. So those, those are the biggest factors in what shows through as productivity right now.

(Operator Instructions) At this time, there are no further questions.

Okay. Well, thank you, everybody, for your time today and for following our Company. We're pleased with our first quarter and the run rate sales of 8% and pleased that we were able to confirm our full-year guidance up in the 20% range in terms of EPS, even with head winds that we've seen versus before with both our FX and resin costs. And so we'll look to continue to deliver. Thank you very much.

This does conclude today's conference call. You may now disconnect.