Citi downgrades Tupperware, says it 'stayed too long' at the party

Published Thu, May 5 20226:49 AM EDT

Tupperware Brands ' pandemic boom is unraveling as the company faces a troublesome macroenvironment, Citi said. Analyst Wendy Nicholson downgraded the stock to neutral from buy, saying in a note to clients that Tupperware is seeing its pandemic growth "unwind" amid growing pressures from the conflict in Ukraine and lockdowns in China. "As a result, TUP not only withdrew its 2022 guidance and pushed out the timeline for its transformation plan, but also announced a new CFO," she wrote. "All in, we see too many uncertainties about the trajectory of the business to remain positive on the stock, despite yesterday's sharp sell-off." The downgrade from Citi came after Tupperware withdrew earlier this week its full-year forecast and shared first-quarter results that missed on the top and bottom lines as it faces ongoing macro uncertainties. Nicholson said the walk-back in Tupperware's guidance signals that the company expects conditions to worsen before they improve. Tupperware benefited during the early days of the pandemic as consumers sheltered and shopped at home, and the bank had previously bet big on the company, viewing the stock as inexpensive as it saw "encouraging progress" in its transformation plan. Now, the bank has "stayed too long at this Tupperware party," Nicholson wrote. Nicholson also expects the company's direct selling business to take a hit even as in-person events hosted by Tupperware return. The company is raising prices which can help offset some dips in volume, but it may not be enough to help the struggling brand. "With TUP planning to be more aggressive with regard to raising price in coming quarters, we also worry about elasticities given that the company's price points tend to be higher than many of its competitors," she said. Citi halved its price target on the stock to $13 from $26, representing a near 7% upside from Wednesday's close price. Shares of Tupperware have fallen 20.5% this year and 30.9% this week. — CNBC's Michael Bloom contributed reporting

An employee of Tupperware Brands Corporation is at work on the production line at the group's plant in Joue-les-Tours, centre France, on the day of its 40th anniversary. AFP PHOTO / JEAN-FRANCOIS MONIER (Photo credit should read JEAN-FRANCOIS MONIER/AFP/Getty Images)

Jean-Francois Monier | AFP | Getty Images

Tupperware Brands' pandemic boom is unraveling as the company faces a troublesome macroenvironment, Citi said.