Pandora necklace

Pandora CEO Talks Affordable Luxury and the Price of Money

Even during hard timesmany people are turning to jewelry – as a retail category it has continued to outperform others throughout a global pandemic and, now, war in Europe and inflation.

Despite a slight drop in sales in the United States, Pandora (PANDY) recently announced its third straight quarter of revenue last week. The Danish jeweler’s sales reached 5.66 billion Danish kroner or 771.8 million US dollars.

“A lot of analysts are telling us ‘why don’t you close all your stores and go online?'” Pandora CEO Alexander Lacik told TheStreet in an exclusive interview. ‘we could but it’s a very bad idea.’ 60% of my customers are men who buy jewelry and, I’m sorry, they need help.”

Lacik spoke to TheStreet about everything from jewelry trends and the price of silver to brick and mortar investing. The interview has been edited for length and clarity.

The street: Why do major world events rarely seem to hurt jewelry sales?

Lacik: Jewelry is a discretionary category. It’s not something you need, no matter how much we insist you do. In any discretionary category, it is up to [the brand] to convince people that you have something interesting. When the pandemic hit, a number of businesses halted their marketing efforts, reduced their in-store presence, and essentially went into hibernation mode. In this category, it’s almost like signaling to the client that you’re not as interesting as the opposition.

We continued to launch new initiatives, we continued to invest in our stores and increased our investments in marketing. We continued to motivate people to come to Pandora and so even though you had all that macro noise, we were still able to drive growth.

The street: During the pandemic, some have postponed their trips and invested in jewelry. Others are currently reducing their discretionary spending due to inflation. How do you navigate different customer bases saving more or less money?

We consider ourselves affordable luxury. If you look at the jewelry market, you have what you call costume jewelry or stuff that you buy from H&M (HNNMY) . At the other end you have the Cartiers and the Tiffanys which are both very exclusive. We play for the mass consumer and that’s why we’re the biggest jewelry company in the world.

Since the 2008-2009 crisis, this category [jewelry] outpaced GDP growth by a factor of two globally. It’s a very healthy category and it’s even more pronounced in the eastern parts of the world where you play in the middle of the market and have that kind of middle income growth. As more people move out of poverty and move up the ranks, the macro trends for jewelry are very positive.

The street: Do buying trends differ in different global markets?

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When you look at what we sell and how much of the assortment changes, it’s very similar. These are not major changes. A typical debate we have is “oh, it’s a gold market so you can’t do that here”. Every market Pandora entered was a gold market, but if you yearn to buy gold, it’s much more expensive. Gold is 100 times the price of silver and so if you want to have an affordable game, you just can’t function.

We have a small assortment of gold but it’s tiny. We tackle – this is another technique that we can use while keeping the price reasonable. It’s very popular around the world.

Earrings as a category are much larger in the United States than anywhere else in the world. Some lines and collaborations, like Harry Potter, have been very popular around the world while others have not. Star Wars sold well with a very niche customer but on the other hand they were super loyal.

Diamond consumption in the United States is also much higher due to the culture around engagement. If you get engaged or married in the United States, it always has to be a diamond. This is not at all the case in Europe.

The street: How are inflation and supply chain disruptions affecting this industry?

We carefully monitor the price of silver. When the interest rate goes up, the price of money goes down, which is a strange plus for us. Silver also has a very low melting point, so the amount of energy you need to form jewelry is very low/

We transport everything by plane because the weight of the volume is minimal. So all the problems you’ve had around containerized freight have increased tenfold, we haven’t had much of it. they have not increased. If anything, we tried to negotiate them or get some relief. So far, personnel costs have also been more or less at historical averages.

With lab-created diamonds, we also focus on CO2 emissions. It’s part of the overall burden we have as a business. Our goal is to be carbon neutral by 2040 and to eliminate half of all CO2 by 2030. Much of this must now come from working with recycled silver and gold.

The street: What is behind the decision to invest so much in physical locations?

Many analysts tell us “why don’t you close all your stores and go online?” And I say “we could but it’s really a bad idea”. 60% of my customers are guys who buy jewelry and, I’m sorry, they need help. I can safely say that. The other 40% are women who really like to touch and see if they liked the style. The other factor is that when playing in the mass market, distribution and brand access is critically important.

Our stores aren’t huge and they don’t have a lot of stuff, but people who come are looking for that experience. That’s why I always say that the people who work at Pandora are not salespeople, but salespeople.

I strongly believe in the brick and mortar aspect of what we do and indeed we are looking to expand our global footprint in the years to come.