Direct-selling firm Tupperware (NYSE:TUP) reported anemic sales growth during its first quarter, but a very solid earnings increase. Its business model of going direct to consumers continues to have huge potential in emerging markets. It also believes the developed countries will increasingly embrace its direct focus.

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First Quarter Recap
Reported sales eked out 0.5% growth to $639.5 million. Growth was strongest in South America and jumped 24%. The Asia Pacific region was the next best performer with growth of 11%. Europe fell 6% while America fell 3%, and Beauty sales in North America, which competes with embattled rival Avon Products (NYSE:AVP) as well as traditional retail providers such as Elizabeth Arden (Nasdaq:RDEN) and Estee Lauder (NYSE:EL), struggled with a 13% decline in sales.

By region, both Europe and Asia grew profits by 21%. The next best performer was Tupperware North America, which grew segment profit 9%. Europe and Beauty in North America lagged, with profit declines of nine and 16%, respectively.

Gross profit growth was a little better at 1.1% to $426.4 million and due to moderate sales cost growth. Cost controls on the operating and administrative side helped send operating income ahead 6.7% to $58.3 million. Share buybacks pushed earnings growth ahead by 15.9% to $1.02 per diluted share.

SEE: A Breakdown Of Stock Buybacks

Outlook and Valuation

Analysts project modest full year sales growth below 3% and total sales of almost $2.7 billion. They expect earnings of $5.05 per share, which represents reported profit growth of nearly 42%. Based on the current share price of about $62.73, the forward P/E currently stands at 11.14.

The Bottom Line
During the earnings conference call, Tupperware detailed that its namesake food storage products get it into the party, but it is also defined by the "table top, kitchen prep, cookware, cutlery, cook books, micro steamers," as well a beauty products, it now sells across the world. Its direct model also works great in emerging markets, where retail infrastructure, including Wal-Mart's (NYSE:WMT) dominance, is less built out, but also believes that developed markets including the U.S. and Europe will see more entrepreneurial spirit now that growth trends are more difficult. This means more contract workers and a growing army of sales professionals, all at a low cost point.

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At the time of writing, Ryan C. Fuhrmann did not own shares in any of the companies mentioned in this article.

Tickers in this Article: TUP, AVP, RDEN, EL, WMT

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