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Financial Reporting

Pandora sales flat, announces exchange program


Copenhagen, Denmark--Pandora has announced a program that will allow retailers to swap out discontinued merchandise for “best-sellers” on a one-for-one basis, a move that will be a drag on sales throughout 2012.

Pandora said Tuesday the global stock-balancing campaign will take place primarily during the first and second quarters of the year. The idea behind the program is to stimulate sales and address low turn at certain Pandora retailers.

The announcement of the program was made in tandem with the company’s financial results for 2011, which showed that revenue was flat for the year at $1.19 billion. Reported net profit rose 9 percent, while gross margin increased slightly, from 71 percent to 73 percent.

Sales in the Americas increased 8 percent while declining 8 percent and 0.2 percent in Europe and the Asia-Pacific region, respectively.

In the fourth quarter, total revenue decreased by 15 percent, from $409.5 million to $347.6 million. Reported net profit was down 10 percent. Gross margin rose from 70 percent to 73 percent.

Revenue in the Americas fell 12 percent in the period, with sales in the United States declining 15 percent.

The company notes, however, that $50 million in fall releases were shipped in the third quarter 2011, as compared to the third quarter 2010, when this delivery was split between the third and fourth quarter. Adjusting for the earlier delivery, U.S. sales rose 2 percent in the fourth quarter.

Same-store sales for the brand’s U.S. concept stores that have been open for 12 months or more were up 17 percent. Pandora noted that branded stores, which include both concept stores and shop-in-shops, perform better than unbranded locations. “Therefore, we will continue opening new branded stores and upgrading existing and relevant unbranded stores whilst reducing the number of less-productive stores per market wherever appropriate,” the company said.

Fourth-quarter sales in Europe fell 19 percent and decreased by 15 percent in the Asia-Pacific region.

Looking ahead to 2012, Pandora forecasts revenue to grow in the mid-single digits and gross margin to fall into the 60-percent range due to rising commodities costs and a reduction in prices. Pandora announced in January that it was reducing prices on select SKUs, particularly in the entry-level price range. The average price point of the spring/summer 2012 collection is $152 versus $343 for spring/summer 2011.

The brand has discontinued the “Love Pods” and “Liquid Silver” collection, with a number of fast-selling items from these lines integrated into the general product assortment.

Pandora also announced plans to launch an e-commerce site in an undisclosed test market as well as a customer relationship marketing (CRM) program in the fourth quarter.

“Our goal is to offer transactional capabilities online whilst developing an effective CRM program focused on generating stronger online and in-store sales for our loyal Pandora Club customers,” the company said.