PARIS – Driven by a continued solid performance in the United States and a slight increase in Europe, Pandora continues to rebound.
The Danish jewelry maker reported organic sales growth of 9% in the three months to September 30, compared to the same period in 2019, and 14% from the third quarter of 2020.
Based on this – and signs that growth is continuing in the US despite a weaker effect from the stimulus measures that boosted growth in the first half of the year – the company has updated its guidance for the full year, now anticipating organic sales gains of between 18 and 20 percent, compared to previous forecasts of 16 to 18 percent, and an EBIT margin of 24 to 24.5 percent, from 23 to 24 percent.
“The US jewelry market has continued to grow at an unusually high rate, supported by stimulus programs,” said Alexander Lacik, CEO of Pandora, in a conference call with analysts Wednesday morning. “It is however important to note that Pandora continues to grow at an even higher rate, as we have done over the past two quarters. On this basis, we continue to believe that we are gaining market share.”
In the United States, its largest market, the company reported discontinued sales growth of 59% for the third quarter, compared to the three-month period of 2019. On a reported basis, sales in the States United States rose 48.9% to DKK 1.43 billion, or $ 222.8 million at the current exchange rate, compared to the same period a year ago.
“Let’s see how the United States behaves; we still have the big weeks ahead of us. Even though we are a third in the fourth quarter, we still have 85% of the trade in the quarter ahead, ”said Executive Vice President and CFO Anders Boyer.
“The stimulus checks are now gone, and at some point we expect that to happen one way or another, but when is that a question, and October still stands.”
Commenting on the overall performance of the company, RBC Capital Markets analyst Piral Dadhania wrote in a research note: capabilities, brand positioning, which has improved a lot since its relaunch in September 2019, and a clear go-to-market strategy in its objectives. We also report a more difficult baseline and the removal of government stimulus, which we believe will test the business model and management resolve. “
Nonetheless, Lacik was optimistic. “Competitive activity picks up as market conditions stabilize. Despite this, we are delivering strong growth, our model is working, ”he said.
Along with its strong gains in the United States, the company also saw sales rebound in Europe after continued declines in the first six months of the year, with exhausted sales growth of 11% compared to the same quarter there. is two years old.
“It’s especially nice because it was done with a lot less price promotions,” Lacik said. Pandora has made reducing promotional activity a key part of its turnaround efforts.
By comparison, European sales fell 6 percent in the second quarter and 17 percent in the first three months of the year.
For the three months ending September, sales in the UK, Pandora’s second largest market, increased 3.2% to DKK 637 million, or $ 99.25 million, compared to the same period a year ago, on a published basis. Its sales growth compared to the same period in 2019 was 12%. In Italy the sales growth compared to 2019 was 10% and in Germany it was 30%. Sales in France were down 6% compared to the same period in 2019, sold out, hampered by less promotional activity and the reluctance of consumers to shop in malls where a vaccine pass is mandatory .
On another negative note, performance in Asia-Pacific remained weak and was heavily impacted by COVID-19, the company said, particularly in China and Australia, the company’s largest markets in the region.
In China, which accounted for 5% of Pandora’s sales for the quarter and which is the key to its new Phoenix growth plan presented in September, sales were down 45% from the third quarter of 2019, negatively impacted by July typhoons followed by COVID-19 outbreaks, with in-store traffic down 70% for the quarter and online sales not offsetting the drop.
On a reported basis, the company’s Chinese revenue fell 33% to 233 million Danish kroner, or $ 36.3 million.
The company expects the country to continue to weigh on its overall performance for the remainder of the year.
“We came out of June and activity 6.18 quite confident,” Lacik said. “We had a very good execution and we had planned a pretty heavy additional investment for the second half, then the typhoons and COVID-19 were a complete game changer.”
As Pandora remains on track with its repositioning plans in China in the second half of the year, it has said it will postpone its planned media investment of DKK 200 million – or $ 31.2 million – to 2022, halving the amount it will invest this year. “A 70% drop in physical store traffic is not a particularly viable place to start overinvesting in marketing because we don’t get the traffic that goes through the doors,” explained Lacik.
He said that while in the current context, the ambition to triple Pandora’s sales in China in the medium term seems more difficult than it was just a few months ago, the market is also showing positive signs; it became the number one fashion jewelry brand on Tmall in the third quarter and a business before the all-important 11.11 [Singles’ Day] sales period “looks very promising,” Lacik said.
Globally, the company’s e-commerce sales jumped 94% organically from Q3 2019 and 2% from a year ago, and accounted for 18% of revenue. business of the period. “As stores reopen and consumers return online revenue share is starting to normalize, but it is encouraging to see online revenue stay at a high level,” the company said.
On a reported basis, Pandora saw total sales growth of 16% from the third quarter of last year, to DKK 4.73 billion, or $ 737 million. Its operating profit rose 104.9% to DKK 957 million, or $ 149.1 million.
Its largest platform, Moments, saw sales growth of 11% compared to the same period in 2019. Its performance in the third quarter was supported by the launch of new wearable devices such as key chains and tags. bag holders, re-engaging existing consumers with the brand, the company said, and creating a halo effect for other products.
While the third quarter gross margin was hampered by one-time costs in Thailand related to the pandemic – the company had to hire temporary staff to ensure supply while the permanent staff were in self-isolation, including – and higher silver prices, Lacik asked to reassure the market about securing short-term supply. “Despite COVID-19, our production in Thailand and our ability to meet demand has not been significantly affected,” he said.
Going forward, among other initiatives announced as part of Phoenix, the company has high hopes for its Pandora Me line for young consumers, which was relaunched in late September, and confirmed its intention to roll out Pandora Brilliance, her collection of lab-created diamond jewelry, starting next year.
Launched in the UK in May, the collection – priced significantly higher than Pandora’s main offering – accounted for 2% of sales in that market in the third quarter. “If the UK is any indication, we got 3 to 4 percentage points in the best stores in the first two months,” said Lacik. Specific launch plans will be revealed at a later date, he said.