Pandora Cuts Guidance Again After Poor Q3, Weak Start to Q4

FinancialsNov 07, 2018

Pandora Cuts Guidance Again After Poor Q3, Weak Start to Q4

U.S. sales were down 12 percent, with strong sales online not enough to offset the company’s in-store performance.

Pandora introduced “Reflexions” in October, a mesh-style collection that features its first new bracelet in five years. The company said Tuesday amid poor third quarter results that Reflexions “has been very well received by the consumers.”

Copenhagen, Denmark—Pandora reported Tuesday that U.S. sales dropped alongside worldwide sales in Q3, causing the company to cut its fiscal guidance for the year again.

Total sales of Pandora jewelry in the United States fell 12 percent year-over-year in the third quarter to DKK 1 billion ($153.2 million).

Like-for-like sales rose 4 percent due to online sales, though the company noted that the performance of its e-commerce site was not enough to override slow in-store sales and the changing in the timing of shipments. The Christmas collection was in stores already in the third quarter 2017 but won’t ship until the fourth quarter this year.

Globally, Pandora saw revenue decrease 3 percent in local currency to DKK 5 billion ($765.8 million). Like-for-like sales growth also slipped 3 percent.

Gross margin fell from 74.2 percent to 72.3 percent, and EBITDA was DKK 1.4 billion ($214.4 million) down from DKK 2.0 billion ($306.3 million) in the third quarter 2017.

Revenue from Pandora-owned stores was up 34 percent in local currency, but that was due mainly to new store openings; like-for-like growth only increased 1 percent.

E-store sales grew 52 percent and now account for 8 percent of total revenue, up from 5 percent a year ago.

Revenue from the company’s wholesale channel fell 27 percent, impacted by Pandora buying back franchise stores over the past year and closing more accounts at independent jewelers, and wholesalers cutting back on inventory due to poor sales.

Following what Chief Financial Officer Anders Boyers called an “unsatisfactory” third quarter and a “weak” start to the fourth, the company lowered its expectations for the year.

It said it now expects full-year revenue growth of 2 to 4 percent, down from the 7 to 10 percent predicted at the beginning of the year and the revised forecast of 5 to 7 percent sales growth delivered in the second quarter.

Pandora also announced Tuesday it was launching a turnaround plan that includes buying back fewer franchise stores, opening new stores only in markets that are not oversaturated like China, India and Latin America, focusing on omnichannel and cutting costs companywide.

After laying out an ambitious plan that included aggressive store growth and branching out from its core beads and charm bracelets into new jewelry like plated karat gold pieces, the Copenhagen-headquartered company finds itself in a state of disarray.

Sales continue to disappoint and Pandora is searching for a new CEO; it

will be the company’s sixth leader since going public in 2010.

The last CEO, Anders Colding Friis, stepped down at the end of August after less than four years on the job. Boyers and Chief Operating Officer Jeremy Schwartz are running the company together until a replacement is found.

Following Friis’ departure, rumors began to swirl that a private equity firm will acquire Pandora and take it private.
Michelle Graffis the editor-in-chief at National Jeweler, directing the publication’s coverage both online and in print.

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