Pandora Shares Gain 3.2% on Rosy Outlook

Shares in Pandora gained 3.2 percent in late afternoon trading on Tuesday after the Danish jeweler revised revenue guidance upward for the second time this year.

In the Face of Luxury Slowdown, Copenhagen Fashion Week Brands Plow On

The jeweler now expects organic growth to come in between 9 and 12 percent, versus a previous forecast of 8 to 10 percent.

“We feel very good about the last quarter,” Alexander Lacik, president and chief executive officer of Pandora , told a conference call to discuss the company’s performance in the three months ended June 30. “It’s not an easy market context, so I’m pleased with how our strategy is delivering.”

On the back of high store traffic and brand momentum, revenues in the quarter gained 15 percent to 6.77 billion Danish kronor, or $991.7 million at current exchange, while earnings before interest and taxes improved 12.6 percent to 1.34 billion Danish kronor, or $196 million.

The company noted trading in Q3 “remains healthy” with like-for-like growth tracking at mid-single-digit levels.

The brand has kept a double-digit organic pace for the last four quarters.

In Q2, its core charms business delivered 1 percent like-for-like growth, while noncharms increased 31 percent, according to tallies by Citi.

Analysts peppered Lacik with questions about Pandora’s new Essence collection, which took the brand into new esthetic territory – organic, natural and fluid – which it reckons constitutes 17 percent of the global jewelry market.

The executive cited an “encouraging response,” particularly styles with gold and freshwater pearls, but cautioned “it’s early days” since the range was launched in the middle of the quarter.

Most of the call was dominated by Pandora’s EBIT margin, which came in at 19.8 percent in Q2, down only 40 basis points from the year-ago quarter.

Despite steep increases in the price of silver and currency headwinds, Pandora said it is maintaining its target for EBIT margins of 25 to 26 percent by 2026, which it plans to achieve via cost containment and modest price increases in the range of 1 to 2 percent, the possible impact studied extensively before implementation.

“Price is not a revenue driver,” Lacik stressed. “This is a volume business.”

Network expansion accounted for 8 percent of the Q2 gains, and Pandora expects to add 150 to 225 net openings in 2024.

“We believe the store experience is key to elevating the brand,” Lacik said.

In June, Pandora opened its first global flagship store in Copenhagen, a 5,400-square-foot unit on Strøget, the city’s main pedestrian street. It offers a range of bespoke services, with selling ceremonies centered on Pandora’s ethos of “ jewelry with a meaning.”

Lacik said the brand is considering similar units in key capitals, though he cautioned it’s not an easy feat finding the real estate.

Pandora Maintains Double-digit Pace in Q2

Performance by market varied widely in Q2, with Germany logging 65 percent like-for-like growth on the back of high store traffic and conversion rates, and China sinking 23 percent, a performance Lacik deemed “disappointing,” even if the country represents only about 2 percent of the total Pandora business.

Europe was also contrasted, with the U.K. notching up 1 percent like-for-like growth amid “dampened consumer sentiment,” Italy slipping 6 percent given its “sustained economic challenges,” and France flat due to a drag from the wholesale channel.

Lacik told analysts the Paris 2024 Olympic Games, which wound up Aug. 11, had no major impact on its fortunes in France.

But in an interview with WWD, he allowed that the jewelry worn by athletes, particularly women in track and field events, could have an influence on consumers in the future.

“There’s a reason why Nike and these guys pay what they pay to be present at this type of event,” he said.

As for the United States, Pandora’s biggest market, organic growth came in at 14 percent.

“That is a stellar number in the U.S. That’s by far ahead of a Signet or Tiffany or any of these other guys,” the CEO said in the interview. “So we are very, very pleased with our performance in the U.S.”

According to Lacik’s calculations, the overall U.S. jewelry market is “on a good day flat, but I think it’s maybe 2 or 3 percent negative.”

He said the sequential slowing of the jewelry market there stems back to the pandemic-era stimulus checks that goosed consumer spending in the category by 50 percent in one year, “which is unheard of.”

“So in that context, we are building a lot of market share every quarter in the U.S.,” he said, noting that its lab-grown diamond range, up 88 percent in Q2, is attracting new customers.

Overall, Pandora is investing in building its brand equity with campaigns like its multi-season “Be Love” spots featuring the likes of Selma Blair, and sisters Chloe and Halle Bailey and several model couples.

Lacik said he’s building Pandora via brand affinity, and not merely the product proposition.

In a recent research note, HSBC highlighted how the Danish jeweler is outpacing even the mighty luxury sector.

“Pandora’s position in the affordable jewelry segment has helped organic growth outperform luxury peers’ by 7 percent on average in the past three quarters,” said HSBC, which had projected 12 percent organic growth for Pandora in the second quarter versus negative 1 percent for the luxury firms it covers.

“We seem to be quite resilient in this economic cycle,” Lacik said in the interview, stressing that Pandora’s target is the “average income household customer” who continues to spend on jewerly. “People don’t stop gifting just because we are going through a little bit of hard times. That’s a fact.”

Kamala Harris Recycles Lilac Suit and Irene Neuwirth Pearls for Las Vegas Campaign Rally