Pandora Posts Strong Q1 But Warns of US Slowdown Ahead
The company said the “affordable” jewelry market in the U.S. is growing slower than the overall market.
Still, the company remains cautious about its fiscal future, noting the war in Ukraine, COVID-19, inflation, and higher interest rates could all negatively impact consumer demand.
“We are very pleased with the strong start to the year delivering record revenue for a first quarter,” said CEO Alexander Lacik. “All of our product platforms support the growth in Q1, as our ability to continuously offer new innovation pays off.”
Here are five key takeaways from the Danish jewelry company’s quarterly results.
Pandora’s quarterly revenue climbed double-digits.
First-quarter revenue was up 26 percent year-over-year to 5.7 billion Danish kroner ($805.4 million) compared with 4.5 billion Danish kroner ($637.1 million) in the first quarter last year.
It reported organic sales growth of 21 percent year-over-year.
Its sell-out growth (sales in Pandora-owned and -operated stores) was 17 percent year-over-year.
The company had a strong Valentine’s Day, with sales up about 30 percent year-over-year.
By sales channel, Pandora-owned retail stores, including the online store, brought in 3.9 billion Danish kroner ($555.7 million) in the first quarter, up 33 percent from the previous year.
Wholesale sales in the first quarter were up 15 percent to 1.6 billion Danish kroner ($221.8 million).
Pandora said its online sales performed well compared with 2019 levels, but were down compared with the previous first quarter, when COVID-19 lockdowns were in place.
Online organic growth was around 155 percent compared with the first quarter of 2019 and was the main contributor of growth from a channel perspective compared with 2019, said Pandora.
Given its strong first quarter, Pandora has upped its fiscal guidance for the year ahead.
It now expects organic revenue growth of 4 to 6 percent, up from its prior guidance of 3 to 6 percent. Its EBIT margin of 25 to 25.5 percent remains unchanged.
The U.S. market remains strong, but Pandora predicts a slowdown ahead.
In the United States, Pandora’s largest market accounting for 29 percent of total revenue, sales were up 19 percent in the first quarter.
Quarterly revenue in the U.S. totaled 1.7 billion Danish kroner ($233.6 million), up 19 percent year-over-year.
The U.S. market saw organic growth of 62 percent compared with Q1 2019 and has performed in line with Pandora’s expectations, the company said.
The Marvel collection did especially well in the U.S.
However, Pandora said it expects to see a “slowdown” in the U.S. market in 2022, noting the stimulus checks distributed in March 2021 boosted sales, making for tough year-over-year comparisons in Q2 2022.
“Data indicates that the overall U.S. jewelry market has grown 11 to 18 percent in Q1 2022 and thereby above Pandora US. However, data also suggest that the affordable jewelry market has been growing much slower than the overall jewelry market,” said Pandora.
Pandora has been growing its footprint in North America.
In January, Ben Bridge Jeweler announced it was returning 37 Pandora stores, including 32 in the U.S. and 5 in Canada, to Pandora, looking to concentrate on its core business.
Pandora’s presence has grown especially strong on the West Coast, as 20 of the acquired Ben Bridge stores are located in California.
The acquisition is expected to give Pandora 170 million Danish kroner ($24.1 million) in incremental revenue for the full year, converting wholesale revenue to retail revenue.
The company also announced plans in February to open 28 shop-in-shops in Macy’s as it looks to increase its U.S. market share.
“The long-term aim is to double the U.S. business vs. 2019 and 62 percent organic growth vs. 2019 this quarter is an encouraging path toward this goal,” said Pandora.
“Pandora Me” and Marvel collections were top performers.
Pandora broke down its sales into “global business units,” or collections.
The “Pandora Me” collection saw revenue more than double, up 144 percent for the quarter.
Revenue from its “Collabs” collection, meaning collaborations, climbed 54 percent.
The company launched a Marvel collection in February, drawing jewelry inspiration from Avengers characters like Iron Man, Black Panther, The Hulk, and Captain America.
“The Marvel collaboration is building on Pandora’s strong relationship with Disney and proved an imminent success in the quarter. Marvel alone accounted for 3 percent share of business and has so far been outperforming the initial launch of both Star Wars and Harry Potter,” said Pandora.
Sales of the “Pandora Moments” collection grew 26 percent.
The “Pandora Brilliance” collection, which includes its lab-grown diamond jewelry, saw sales up 9 percent.
It was tested in the U.K to a positive reception and the company plans to roll it out this year, but said no new tests were conducted in the first quarter.
The company did test out a new loyalty program, My Pandora, in France, with plans to introduce it to more markets in 2023.
The test launch was conducted online and in 20 stores, with 50,000 consumers signed up in the first four weeks.
“My Pandora will further improve Pandora’s access to quality consumer data and with the new loyalty program, Pandora will be able to target the consumers directly with content of their interest,” the company.
Pandora is also creating a digital hub in London to attract digital and marketing talent.
Pandora has taken a strong stance against Russian goods.
Pandora made headlines last month when it announced it was leaving the Responsible Jewellery Council, citing the organization’s refusal to cut ties with Russian companies.
It was one of the first to do so, alongside Richemont, and followed by Kering, Watches of Switzerland, and others.
Pandora said it didn’t see any “major impact” on performance due to the war but has suspended business with Russia and Belarus.
Russia, Belarus and Ukraine combined accounted for about 1 percent of revenue in 2021, said Pandora.
“The 153 concept stores and 66 other points of sale in those markets are no longer considered part of Pandora,” said the company.
Pandora operates 2,432 concept stores as of the end of the first quarter, down 227 from the previous first quarter.
Pandora is planning to continue to increase its store network, expecting to open a net 50 to 100 concept stores worldwide.
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