Q3 2013 Earnings Call Transcript

Transcript Call Date 10/23/2013

Yet some didn't perform well, the emerging markets of Europe, Africa and Middle East in the quarter. Tupperware South Africa was down 11%. However, I want to get a little more granular there. Under the top line, we see some very positive strengthening. We have – beginning this year, really moved in with stricter standards for the sales force to remain active. We focused on growing new leadership levels.

Probably the best news I've seen there is we always wondered that in this low per capita GDP market, particularly with black South Africa, could we sell higher price products? We launched in the third quarter some very high-priced products, including more than $100 MicroGourmet steamer, plus other high-priced products and new colors there, very positively received. So qualitatively, the South African business is moving in the direction we want to see.

Turning to some of the most established markets of Europe, really, the results were mixed. On the cost side Italy, which is kind of midsized and the established markets of Portugal, Austria, Belgium, they were all up in the quarter and that's really good news. I'm particularly pleased to see this momentum continue in Italy.

We've never had a great business in Italy. It's a large population. They love our way of selling. It's a cooking culture. There, we've got a dynamic leadership team in place. I'm expecting in the future, when we talk about Europe and the dynamic big markets there to not only be talking about Germany and France, but including Italy in that group.

Germany didn't perform well in the quarter, and let me explain. Germany was down 20%. The year there was all about momentum and the die was cast in January where there was a promotion that was not well received. We can do almost 50% of our sales in January in Germany and in many parts of Western Europe, and it's kind of artificial. We worked toward a 100% activity and we called really big weeks there, but it sets the tone because we recruit about half our sales force at parties.

The promotions were not well received. They came back with some fill-in promotions but then the bad weather hit, 18-year record snows in the first quarter, so they never got that momentum back, and then in the third quarter, they came up against the best promotion they've ever had in Germany in their history. We did an incredible coffee machine there in 2012, which broke all records.

I am pleased to see that under all of this, the trends that are getting better and that's the precursor is recruiting. Recruiting was off about 25% in Germany, the first half of this year. This turned positive. It was up modestly in the third quarter and double-digit in October.

So, I would believe that you're going to see sequential improvement in Germany moving forward, but what we really lost was the new sales force members that add so much energy to the business. I would say, in closing, on Germany, we have got a very strong management team there. Perhaps, the best group of regional that we have anywhere in the world. I have a lot of confidence that we'll reverse this trend. We still make a lot of money and have substantial operating margins.

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