Tupperware Brands Corporation (NYSE: TUP) Third Quarter 2022 Results Conference Call November 2, 2022 08:30 AMm. ET
Participating companies
Doug Lane – Vice President of Investor Relations and Strategy
Miguel Fernández – President and CEO
Mariela Matute – Chief Financial Officer and Chief Operating Officer
Conference Call Participants
Anthony Lebiedzinski – Sidoti
Jason Binder – Citigroup
Linda Bolton Weiser – District Attorney Davidson
Operator
Good morning and welcome to Tupperware Brands Corporation’s third quarter 2022 earnings convention call. Please note that today’s convention is recorded. All lines have been muted to any background noise. After the speakers’ comments, there will be a question and answer session. Instructions]
At this point, I turn the floor over to Doug Lane, Vice President of Investor and Estrategia. Sr Relations. Lane, you would possibly proceed.
Doug Lane
Good morning and welcome to Tupperware Brands’ First Quarter 22nd Earnings Call Convention. With me today are Miguel Fernández, President and CEO; and Mariela Matute, Chief Financial Officer. We will all be available for questions and answers, after our prepared comments.
This morning, we issued a press release announcing our monetary effects for the third quarter of 2022, which is available on our Investor Relations website.
Let me remind you that the following discussion and our answers to your questions reflect management’s outlook to date, November 2, 2022, and may come with forward-looking statements. The actual effects may differ materially from these statements. Additional item data on which our currency effects are also included in our Form 10-Q for the third quarter of 2022, upcoming SEC filings and in our press release filed this morning. Please see the forward-looking statements disclosure on page 3 today. Press Release.
Note that all references are made on a consistent currency basis, reflecting the application of the replacement rate of the existing era to all purposes of the past era, allowing comparisons, excluding the effect of replacement rate fluctuations. In addition, in the third quarter of 2021, the Company made an accounting update to classify our good-looking, non-public care businesses sold and held for sale as discontinued operations in line with our strategy to fix our core business. Please also note that all referrals, unless otherwise stated, are made on an ongoing operational basis.
During this call, we’ll talk about certain non-GAAP measures, adding what we call standardized measures. Additional data related to those non-GAAP measures, adding explanations and reconciliations of those measures to comparable maximum GAAP measures, will be found in today’s press release. Finally, a replay of this call will be available on our online investor relations page later today.
With that, let me pass you, Miguel.
Miguel Fernandez
Thank you Doug. Hello everyone and welcome to our third quarter call. This morning we released the third quarter results, which were below our expectations. We believe we deserve to be. While [indistinguishable] in the third quarter was in line with trends in the early part of 2022, we expected an improvement over much less difficult comparisons. The ongoing COVID quarantines in China are having an effect on customer habit in this vital market, and geopolitical tensions as well as inflationary considerations in Europe continue to have an effect on customer confidence there.
In addition, the moves we took internally as a component of our response time also affected sales. For example, we make pricing decisions to protect our margins. In North America, payment plan adjustments and IT operations created service issues that negatively impacted sales. . Fortunately, the improvement in the South American region helped offset some of the decline. Currency headwinds intensified in the third quarter and resulted in a six-hundred-basis-point decline in our overall reported sales, and a $0. 13 decline in EPS as the dollar continues to rise. opposite to the maximum primary currencies.
Our operating margins have been impacted by continued inflationary pressures related to weaker-than-expected sales, partially offset by value increases that we continue to implement to mitigate higher input costs. We ended the third quarter with average value increases of 11%. globally, an average value increase of 7% in the current quarter. Keep in mind that many of our major markets, such as the United States and Germany, have not made forced value increases of this magnitude in decades. The smart news is that our gross margin has remained in the 60% range, just 90 foundation issues less than a year ago, far greater than the 400 year-over-year foundation issuance decline we experienced in the current quarter.
And we expect gross margins to improve year-over-year in the fourth quarter of 2022 due to the numerous ongoing projects. However, to improve our operating margins, we want to take additional steps to reduce our selling, general and administrative expenses, which have a significant constant charge component. We expect to address this factor over the next two quarters. But rest assured that we remain very focused on the right duration of our business and placing mandatory investments to help long-term growth.
At the beginning of the fourth quarter, we began promoting our products in 1,900 Target retail stores across the U. S. U. S. This is a vital step in re-engaging today’s shoppers, especially Gen Z and millennials, and wealthier consumers who probably never attended the Tupperware Party. . We are imperative to succeed in younger, more affluent consumers and integrate them into our ecosystem. We that once they have the opportunity to more smoothly access our logo and notice the quality and design of our products, they will request more. In addition, it is vital for us to inform consumers that there is only one original Tupperware logo.
Once consumers are in our ecosystem, they can turn to Tupperware. com or any member of our independent sales force to access our full diversity of products. It’s vital for us to leverage what’s unique to Tupperware as we open up new channels. First, the name of our logo; secondly, our quality; thirdly, the ease of use and capability of our products; and last but not least, our independent sales force that has the ability to demonstrate products and offer the full diversity of Tupperware products. We have 8500 functional designs and application patents for kitchen and home products, from our classic garage food container to pressure cookers. , and designed for microwave paints.
In two or three years, we need to be in many more categories where consumers allow us to operate. Our purpose is simple; We need to be in each and every room of the house. After two and a half years without meetings, we resumed holding in-person sales events in many markets around the world in the third quarter for the first time since 2019. Although this had an effect on our SG expense comparison
These face-to-face meetings, events, and promotional venues are expected to be a recurring activity of prospects in our sales force and retention efforts going forward. But like I said, since I arrived in 2020, the Tupperware logo has gone beyond direct promotion. The purpose is to take advantage of the popularity of this fair logo and expand the success of our products outside the direct sales distribution channel. Let’s face it, according to WFDSA, direct promotion generated $186 billion in retail sales last year, which is minuscule compared to the $96 trillion global economy. For perspective, Walmart earned $568 billion in sales last fiscal year and Amazon earned $407 billion last year.
Direct promotion has built the logo with millions of microentrepreneurs worldwide for more than seven decades, and will continue to be a vital component of creating a competitive product ecosystem. But long-term expansion in peak global markets will come from expanding Tupperware’s access to a wider customer base through omnichannel distribution and the shift of social promotion from analog to digital.
Now let’s review our third-quarter results, starting with our four major markets. In the United States and Canada, sales fell 15% in the quarter. Product line adjustments coupled with the momentary circular increase in value in September resulted in a 34% decrease. in the active sales force. Despite the value increases, segment profitability was impacted by lower-than-expected unit volumes, higher discounts and promotions, and an unfavorable product mix as we focused on promoting excess accessory inventory and other prices related to the return to the industry. Person meetings the quarter.
Mexico experienced a 19% decline primarily due to service issues that began in the previous year and were exacerbated due to the software update failure in the third quarter. These ongoing service issues continue to result in a relief in the number of active sales force members. it will take some time to strengthen our sales force in Mexico over the next two quarters. In addition, we have weaker B2B sales, which accounted for six hundred fundamental things from the fall. The accumulation of prices in others also reduced sales force activity, but helped protect profits, with segment margins improving through more than three hundred fundamental things in the quarter, thanks to an accumulation in gross margin. Mexico is a vital source of liquidity for us, so protecting profits is a priority.
In Brazil, sales fell 5% in the quarter due to declining activity rates, reflecting weakness in this market, higher inflation and political and macroeconomic uncertainty, mainly in customer spending. While this is a slowdown from the trends of the current quarter, we are ahead of our peers in non-cosmetic direct selling, reflecting the strength of our logo and the preference of our products to help reduce food costs. Gross margin took a step forward thanks to favorable costs from a comparable product mix of around 9%. However, the accumulation of SG expenditure
As for Asia, China is down 28% from last year. An immediate accumulation of COVID cases over the summer led to continued strict quarantines and posed demanding logistical situations in many parts of the country. Overall, economic activity remains weak despite ancient Chinese standards. , and customer spending has remained weak. Despite the closures, we continued to invest in them to improve the appearance of our virtual studios, which were about the same amount as last year, modernize our outlets, open our first party in downtown Guangzhou in December, and start looking for an e-commerce opportunity. We also had several new product offerings during the quarter that filled our sales force with enthusiasm and attracted new customers.
Excluding China, our Asia-Pacific business fell 20%, with Australia, Indonesia and Malaysia gently down 20%, 30% or more. Given the weakness we have noticed in these markets, mainly due to external problems and an adjustment in the payment plan. The bright spot in this region remains Korea, where sales increased 16% in the quarter, with a 9% expansion in fundamental direct sales, plus another 700 core issues in B2B sales, adding direct response TV ads. force in Australia, Indonesia and Malaysia when we know it has worked in Korea.
Another first reading of our smart fortune of our omnichannel technology is in Belgium, where we are launching nationally the largest retailer of the moment, [indiscernible], during the summer. This fall, during the two working weeks, direct promotion activity grew by up to 4% despite the widespread availability of our product in retail. While still in its infancy, we are encouraged to see that our omnichannel technique is, in fact, expanding the Tupperware ecosystem to succeed in more consumers, in a different way. I wouldn’t have done it. But we’re also broadening our sales force’s perspective to create a relationship with new consumers who sell or buy our products retail. We also just released our most recent ESG report. We are making smart progress towards meeting our commitment for 2025 and 2030.
We know that ESG is vital for our shareholders to assess investment rates, for lenders to provide capital, for companies involved in the guilty sourcing and for consumers, namely GenZ, to assess who they want to do business with and who they work for. we are on track to reduce waste generation and water intake at our production facilities, reduce greenhouse fuel emissions in our single-use plastic packaging and production facilities, by expanding our use of [indistinguishable] non-fossil products, and exploring the option of employing Tupperware Product Return.
In fact, our sponsorship of the National Park Foundation is to upgrade single-use plastic bottles with our reusable products. Finally, since we established the change plan for this company two and a half years ago, the strategy has been the same to build a corporate as big as the Tupperware brand. This meant changing our mindset to put the customer in the middle, making sure we had the right trading methods in our trusted markets to talk to the customer in the respective market.
Our organizational design for 2020 was put in position to stabilize the layer and simplify our classic direct promotion market position and take them where they are in a position to grow. channels in market positions where consumers give us permission to do so. As we enter 2023, we will enter a new bankruptcy into our turnaround plan by creating an exclusive product ecosystem in market position across the channel, with consistent product diversity and pricing strategy as key.
And we will have to organize accordingly. I am pleased to say that Héctor Lezama has been promoted to Chief Commercial Officer to comprehensively oversee our efforts to achieve sustainable expansion and profitability. You will be guilty of guiding all our business activities around the world. Our omnichannel strategy is an inclusive strategy. The more our logo is available, the more opportunities we have to attract new consumers, either as consumers or as members of the sales force.
We see this succeeding in many markets around the world where, when our sales force embraces change, we see the tide rising for everyone. If you haven’t already, read and share my article on LinkedIn where I provide more data on strategy and it means for this company and for all our channels in which we do business. As you can see, Doug Lane recently joined our team as Vice President of Investor Relations and Strategy. Doug covered Tupperware for many years as a sales analyst. I was writing our notes when the company joined Target about 20 years ago. Unfortunately, our presence at Target was short-lived due to decisions made through the previous administration.
Now I’ll pass the call on to Doug, who must explain to investors why our current technique is so different. Doug?
Doug Lane
Thank you, Miguel, and good morning to all. Investors have a long memory and are never more skeptical of any explanation that at first, this time is different. Yes, in the fourth quarter of 2001, Tupperware expanded to 62 Super Target retail stores as part of its Integrated Direct Access or IDA projects that included outdoor direct selling channels, primarily more kiosks at the time. These IDA projects accounted for $15 million in activity in 2001 in North America.
After moving to Super Target’s 62 retail outlets in late 2001, IDA projects grew nearly 60% in 2022 to approximately $25 million. The North American segment as a whole generated $268 million in segment sales and $30 million in segment revenue in 2002. Then, on the fourth of 2002, the company expanded to Target’s 1100 retail outlets in the country at the time. Party cancellations multiplied as 2003 progressed and the sales force began to decline.
2003 annual sales in North America had fallen 18% and segment profit had collapsed to a loss of $22 million from last year’s $30 million profit. The active sales force in the fourth quarter of 2003 decreased by 24%. this had an effect on its direct promotion business, the company exiting all Target outlets in the current part of 2003. And the North American segment only returned to profitability in 2026. At the time, he firmly believed the challenge was that when outlets were open, an independent sales representative had to be in-store to do demonstrations and ask Target consumers to become its non-public consumers.
There are two things I can think of that are suspect with this approach. First, shoppers are likely interested in participating in a discussion about a product while walking through Target; and second, the independent sales representative, especially those who paint part-time, probably weren’t interested in camping out at Target retail outlets calling shoppers bloodlessly. own schedule. As a result, many began to leave the system.
This time, the sales force’s habit in our omnichannel technique deserves not to be affected. The ecosystem we are creating will focus on the following. First, logo construction and positioning; secondly, higher sales taking market share from our competitors; and finally, the generation of leads for our sales force. When the visitor purchases a retail product, they will be encouraged to scan a QR code to register their products for lifetime warranty. And in this process, we will be informed about who buys our products and offer them a consultation to follow up on the experience with our sales force. Our expansion into omnichannel will indeed take advantage of the uniqueness of the Tupperware logo and incorporate Target brand information more than 20 years ago.
I will now pass the word to Mariela, who will provide a more detailed policy of our functionality in the third quarter.
Mariela Matute
Thanks Doug. As Miguel mentioned, sales fell short of expectations. Net sales for the quarter were $303 million, down 20% year-over-year, due to continued lockdowns in China, as well as microeconomic pressures in Europe, a slowdown in North America. , offset by continued strength in South America. Excluding coins, sales fell 14%, in line with protest trends.
Net sales in Asia Pacific fell 19%, net sales in China fell 28% in the quarter, hard hit by strict lockdowns and declining customer confidence. While third-quarter GDP of 3. 9% recovered from 0. 4% in the current quarter, customer spending remained subdued in the high-end segments. Excluding China, net sales in the rest of Asia-Pacific decreased by 20% due to declining sales force activity in Indonesia, Malaysia and Australia.
A bright spot in this region is Korea, which, although small, is becoming increasingly important. The market grew by 16% in the quarter, with both the direct promotion channel and the B2B channel contributing to growth. In the third quarter, Korea overtook Indonesia in terms of sales contribution and is now definitive in Malaysia as the largest market of the moment in the Asia-Pacific region. In Europe, net sales declined by 24%, mainly due to weak customer confidence, emerging inflation and energy costs.
In addition, a scheduling replacement on one of our B2B systems in Germany from the third quarter to the fourth quarter resulted in a decrease of 400 basis points. We have a new control in Germany and will consolidate it with other markets to scale the company and streamline the product offering. We are reviewing the incentive systems and sales force promotional plan to revitalize and re-engage the sales force.
Consumer confidence is very low given emerging inflation, especially energy prices, as well as considerations about imaginable energy shortages and the shock in Ukraine. Like other regions, Europe is resuming its recommendation on the user with a new edition in Germany and Nigeria in the first quarter. for the first time in more than two years.
Moving to the Americas; Net sales in North America decreased 16% in the quarter, primarily due to lower sales force engagement and productivity, lower unit volumes due to value increases and service delays in Mexico due to an IT upgrade that moved the last two weeks of orders to Q4.
In the U. S. In the U. S. and Canada, net sales decreased 15% due to declining sales force share, partially offset by improved service levels, previous payment plan adjustments in the year, and a time of safe value increase in September negatively impacted sales force activity. Profitability suffered the quarter despite value increases due to higher promotional and discounted items, higher B2B sales and one-time pricing related to the closure of a third-party logistics provider.
Net sales in Mexico decreased 19% as service issues, value increases and inflation led to a significant drop in sales force share. We increased early promotions in the third quarter to re-engage the sales force. And we’re already seeing sales activity increase in strength. We do not anticipate that the service problems we experienced in Mexico in 2022 will be repeated in the coming years. Despite those challenges, Mexico remains one of our most successful markets with a higher loose money conversion rate.
In South America, net sales increased 7% in the third quarter, driven by Argentina’s strength in continuing to leverage social media in its successful recruitment effort and in business building. Brazil, one of our largest markets, reported a 5% decline in sales in the quarter. Order in [indistinguishable] in the direct promotion industry slowed the quarter, cutting 14% for the first time, more than the rest of the non-cosmetic sales that excelled in the market. 9% in Brazil and strong profit expansion in Argentina building the segment’s profitability in South America through 90 basis points.
Going from P
As pricing continues to be taken during the third quarter, we expect their effect to be felt throughout the year. Throughout the year, we expect costs to increase by 15% on average after departure. the 3rd quarter at 11%. Continue on the P
Adjusted EBITDA for the third quarter was $29 million or 10% of net sales. This is a sharp drop from last year’s $78 million, due to declining volumes and margins. The changes for the quarter included approximately $4 million in engineering expenses similar to optimizing the production footprint to reduce constant pricing and distribution. Our adjusted operating tax rate in the third quarter was 64%, compared to a tax advantage of $12 million in the same quarter last year and 46% in the current quarter of this year.
The current inconsistent tax rate was driven by an unfavorable composition of profits by country, which added to the absence of tax advantages for the entity’s really extensive losses in countries such as the United States. Along with recent organizational adjustments and market volatility, we will continue to refine our chain of sources and methods of tax making plans to achieve a lower overall tax rate. I also note that for the year as a whole, we expect taxes on money to be lower than last year.
And finally, adjusted earnings consistent with the consistent percentage were $0. 14 in the 3rd quarter, to $1. 19 last year, due to all the points discussed above, adding up to about $0. 13 of unfavorable changes to inflation in foreign currencies.
With respect to cash flow, as reported, year-to-date operating cash flows, net of invested operations, were an outflow of $88 million, to negative $7. 4 million last year, due to declining earnings and higher current capital in preparation. for our omnichannel expansion and excess stock by volume. Decrease in expected sales.
We are placing more emphasis on money management, i. e. with respect to our production footprint and operating capital management. We also recently implemented our credit facility to provide greater flexibility in anticipation of current market volatility and the timing of our recovery plan. We ended the quarter with a consolidated net leverage ratio of 4. 17, with our third quarter debt arrangement up to 4. 5. Cash balances at the end of the quarter were $103 million, compared to $267 million at the end of 2021. Total debt of $704 million, up from $685 million a year ago. The recent amendment to the company’s credit agreement created a maximum leverage ratio of 4. 1 in the third quarter to 4. 25 in the following two quarters.
While the business is currently in compliance with restrictive covenants, we are taking a proactive approach and have entered into discussions with banks to create more flexibility as we continue to scale the business based on our existing earnings trends and drive our re-engineering actions. Given the global economic outlook in which we operate and current customer sentiment, we want to actively manage money and liquidity. As you know, we’ve been here before. As a reminder, in 2020 we removed over $150 million in pricing and currently plan to remove over $100 million in ongoing pricing over the next 3 years, expecting a reinvestable return.
In summary, net sales in the third quarter declined year-over-year and operating margins were lower than expected. We recognize the prospect of continued near-term volatility as we continue to face internal demanding situations and external headwinds. We are also aware that these external headwinds are affecting our ability to execute our recovery plan and as temporarily as we would like. You can rest assured that we will continue to look for other tactics to scale the business and develop our money-making functions to increase our capital. base. We will double our reengineering efforts in the fourth quarter and further optimize our global production footprint.
And now, with that, let’s take some questions.
Q&A session
Operator
[Operator Instructions] The first comes from Anthony Lebiedzinski’s lineage with Sidoti.
Antonio Lebiedzinski
Yes, good morning, and thank you for answering queries. So first of all, in terms of the conversations you’ve had with your lenders about their restrictive covenants, can you share more main points about when those conversations started?And then, I know, a two-part query here, so I guess, then he communicated about the rationalization of stocks, what were the inventories because it was not disclosed on the balance sheet because he only had a consolidated balance sheet, so if you can just communicate about the current status of your inventories and plans , In the future, to decrease inventories?
Mariela Matute
Hello, Antoine. Here Mariela. Thanks for the question. And yes, we’re constantly talking to our banking partners because we have a number of reengineering moves to make Tupperware sustainable for the next 50 years. The next settlement circular began in September, and we are proactively crafting a five-year plan to ensure we have the flexibility to continue with our recovery plan. You will see the degrees of actions in our 10-Q that will be published. We also introduced a number of systems to globally circulate our dropouts [Ph]. And this program includes manufacturing optimization, quick sales and promotions across multiple channels, as well as SKU optimization.
Antonio Lebiedzinski
I get it, and thank you for that. And then, in terms of the new systems with Target and Amazon, can you give us a first reading of them and what has been the reaction of your direct sellers and how they deal with channel conflicts?
Miguel Fernandez
So, Anthony, hi, I’m Miguel. So, let me tell you about Target in one sentence. The purpose is only 4 weeks in the company and exceeds our expectations. This way we are more efficient. We only have to go through with a very limited number of SKUs in Target stores. And our direct sales staff has access to many, many other SKUs. So, obviously, there is a wallet of other people who are a little worried. however, for the most part, our big sales managers, in this case in the United States, perceive the strategy. And some of them have already reported more activity in their own business just because it’s a lopass activation effort we do. also.
So, obviously, consumers will see our logo at Target, search for other products, and touch their sales rep. So it was great. And as I mentioned in my previous comments, we have, in Belgium, as the best ecosystem we are already in, operating in one of the largest retail outlets in the country, and we have a strong direct sales penetration. , and either is growing. Those are smart signs for us; Obviously, at the beginning of the game, there was a lot to do. The softness we saw in the U. S. The U. S. was similar to some of the trade-offs or changes we made, but not similar to our Target initiative. The smart thing about Target is that we’re now moving on to the moment stage, which includes the maximum limits of the holiday season. So, in 3 months, we’ll publish our first full quarter of earnings on Target.
Antonio Lebiedzinski
Ok, I get it. Thank you for that. And in terms of, just my last query here, in terms of elasticity or inelasticity of value, I mean that just in reaction to increases in its value, it seemed that it was having a greater negative effect on volumes and only with the slowdown in the economy, it turns out everywhere, does it deserve that we worry about more updates that put pressure on gross margins?
Mariela Matute
We did a series of value increases throughout the year, and we played with two models, small incremental monthly increases or quarterly double-digit increases. And we’re learning, as a company, because in many countries this is the first time we’ve had to make worthwhile constructions in a decade. So we graph the knowledge to perceive the elasticity of the program. For the record, we’ve noticed that the month we do double-digits worth accumulating, we see a sharp drop in volume returning over time. Therefore, we continue to think that the value-added program is the right action to protect the business economy because we are not alone in this inflation. Most direct sellers, competitors, and CTGs have increased their values this year in peak markets.
Antonio Lebiedzinski
VeryArray thank you and good luck.
Mariela Matute
Thank you.
Miguel Fernandez
Thank you, Antonio.
Operator
The next one comes from Jason Binder’s line with Citigroup.
Jason binder
Great, hello. Thank you for answering the question. Returning to the leverage clause, I perceive that it is still very early and that they have only been discussing it for two months. But can you simply communicate your confidence in your ability to replace your conditions?And assuming it makes a dent, what do we expect in terms of next steps and your ability to work from there?Thank you.
Mariela Matute
Hi, I’m Mariela. Thanks for the question. And we have a very supportive organization of banks. And it’s a capital allocation exercise. Our priority as a company is to generate money and our current capital. And we have symptoms that Q4 will be greater than Q3, with the movements we started in Q2 for stock control and cargo control. Therefore, we have posed a number of scenarios and dangers in the forecast given the volatility of the macroeconomic environment and customer sentiment. And we have flexibility in both debt control and EBITDA production. So we’re working with the banks and hopefully have, through the fourth quarter, a new deal that will be sustainable and facilitate the restructuring plans that we have for the next two years.
Miguel Fernandez
So, let me upload just a little comment, Jason. So, as you know, in our recent history, we’ve been there before. the skills. And we already know how to scale the business, how to have liquidity and, obviously, we give confidence to the banks and everyone, and that we will meet many of our obligations. So this is a path we’ve taken before, and we know how to build the business with limited risk.
Jason binder
Super. Et fair compared to all the investments made to expand the functions to drive the omnichannel aspect of the business, given its position relative to the leverage ratio in the macro environment, only the overall business trends expect you to have to withdraw some of those investments, at least in the short term, to manage your liquidity?
Miguel Fernandez
Yes, the short answer is yes. We may simply remove some, we may retain others. The strategy remains the same; We think it’s the right one. Obviously, we face execution issues and a very low sense of acceptance around the world. And we’re actively managing this business, it’s true. And if we see that there is a market that reacts favorably, we will invest in that market. But the short answer to your query is yes, we do.
Mariela Matute
And at the same time, if I could add, we are quoting sequentially. So, we already have a plan to get another $10 million in the fourth quarter, which will help continue to scale this business and make Tupperware a very sustainable and successful company. Business for the future. It is vital to extend the company well and prepare for growth. And, in some cases, we will make the compensation we invest before growth.
Jason binder
Gotcha. Thank you for that. And then, just shifting gears, one of the things he discussed in terms of the kind of catalytic promotion in the direct promotion aspect of the company, the return of live events. Since hosting those events, have you seen any updates on the activity?of sales force members who have participated compared to those who have not?And can you just tell us what you see and your expectations?Thank you.
Miguel Fernandez
Yes, let me share with you a little percentage, I’ll call it sales force analysis. So basically, what we’ve noticed is that in other people who have been with us longer, I’ll call it two, 3 years, they stay with us. Sometimes they are less productive because, obviously, customer acceptance as true is low and they don’t have as many customers, but they are still engaged with us. Where we’ve struggled is to attract and remain new, right?And I’m talking about other people with less than two years of experience with us. And that has a similar correlation that has never been in an in-person meeting, so they didn’t really perceive what our DNA as a company was.
So they lacked that, and that’s why we’re struggling to hold them, exercise them, etc. So now, with those new generations of people, we expect, obviously, that retention or engagement and recurring efforts will start to increase. We have good news in some of our major markets, but it’s too early to say it’s gaining ground, as we’ve just experienced those occasions very recently.
Jason binder
I understood, thank you for this color. I will prevent here and pass for now. Thank you.
Operator
His next comes from Linda Bolton Weiser’s lineage with D. A. Davidson.
Linda BoltonWeiser
Yes, hello. So, I wonder if the charge relief initiative, I take on the new moves that are made, if there’s any money fee related to any of those moves, like severance packages and things like that, can you quantify that?
Mariela Matute
Yes, Linda, and that is precisely why we are in talks with the banks. As you probably know, leaving some of the regions we operate in today and scaling our distribution, supply chain and production footprint can be costly in terms of compensation; Absolutely the right thing for the next 20 years. And we compared each situation with proper functionality and NPV research. And then the discussion with the bank is to help us accelerate those restructuring plans for this company to a capacity that our EBITDA production can accept. And then have a smart liquidity ratio in terms of debt to EBITDA and interest coverage. Therefore, we are collaborating with banks and many of our money advisors to establish the speed of those reengineering movements over the next 3 years. And to date, we have an estimate that the purpose will be on the order of $100 million.
Linda BoltonWeiser
I am sorry; Could you repeat this in terms of tariffs, quantity?
Mariela Matute
Of course. Yes, then we expect to have an additional $100 million in restructuring over the next 3 years with an investable return, of course.
Linda BoltonWeiser
And what of that $100 million is cash, approximately?
Mariela Matute
Yes. So the $100 million in cash, yes.
Linda BoltonWeiser
And is it a pre-tax or after-tax number?
Mariela Matute
It will be a pre-tax number.
Linda BoltonWeiser
It is ok. And then, can you just communicate about. . . well, I mean, so for Target stores, even such a small amount of bias is a considerable amount of stores?quantify channel sales shipments?
Miguel Fernandez
Yes, there is Array and it costs less than a million dollars. But what we’re seeing right now is the reorganization model, and there are biases that have far exceeded our expectations.
Mariela Matute
And Linda, if I can upload a biased selection, it’s like, again, there’s not enough knowledge to validate that with knowledge, yet some of the sets we’ve put on Target that are very expensive and twice the festival are the most sensible sellers. So, because this is the first time in many years that consumers can test, on the site, the quality of products containing Tupperware. And then validate the price, and consumers see quality for price.
Linda BoltonWeiser
It is ok. And then, just in terms of this retail initiative, I know he talked about having stockpiles, infrastructure to ship to stores, etc. ?
Miguel Fernandez
Therefore, it depends on the country, but for the larger ones, most of the investments are in a position there. In the United States, they are in a position there. Therefore, we are in a position to pass at least the first big customers. Obviously, we would possibly want more as we expand our presence in more regions, our partnership with more retailers.
Linda BoltonWeiser
And just to finish, I mean, obviously, you’re in. The purpose would be to expand to more retailers, I guess. Do you think the overall stability of the company and its monetary scenario will inhibit other partnerships with other retailers??
Miguel Fernandez
No, I don’t think so. I think obviously it takes a lot of time to accentuate the programming, and it’s a preparatory year. So we’re putting ourselves in a position for it. So I don’t see any threat in it. And in addition, the money we generate beyond our obligations will be allocated to the product and omnichannel because as you know this is the company’s strategy. And we see it very fashionable in the long plazo. de our business, but also for the direct promotion workforce, because that’s how we’re going to attract a lot more consumers to all Tupperware products, not just the ones we offer retail.
Linda BoltonWeiser
Okay, thank you very much.
Miguel Fernandez
thank y
Operator
[Operator Instructions] There are no additional questions at this time. I will now give the floor to Miguel Fernández for any final comments.
Miguel Fernandez
In conclusion, although we are not happy with the results of the third quarter, our omnichannel expansion plan is still underway and we look forward to long-term penetration in retail channels later this year. . But this quarter marks incremental progress toward our purpose of making this company as wonderful as our iconic brand. We will continue to build from here, step by step. Thank you for your time today. We look forward to speaking with you soon.
Operator
Thank you for participating. This concludes today’s call. You can now log out at this point.