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Nov 5, 2019
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Jeweller Pandora's bid to regain shine hit by weak consumer demand, Hong Kong unrest

Reuters API
Nov 5, 2019

Attempts to turn around struggling jewellery maker Pandora by the company's new CEO are being hampered by political unrest in Hong Kong and subdued consumer spending in key markets.

Photo: Pandora

The company's shares fell as much as 13% on Tuesday after it warned of a steeper-than-expected fall in sales this year, just months after a high-profile relaunch of the brand.

Pandora's sales increased more than 10-fold in the decade to 2017 as it found a niche between cheaper accessories in stores like H&M and more expensive jewellery on offer from Tiffany & Co.

But more recently a lack of innovation and overstretching itself at the top and bottom end of the market kept both shoppers and investors at bay.

In a bid to win back customers the world's largest jewellery maker by production capacity doubled down on efforts to refresh its image but costs related to the revamp, including reduction of inventories and promotions, weighed on the quarter.

"This brand has been heavily promoted in the past and Q3 is the quarter where we’ve taken the axe the hardest this year," chief executive Alexander Lacik, who took the reins in April, told Reuters.

The firm, which sold 280,000 pieces of jewellery per day in 2018, hired Lacik, previously CEO of British childcare products maker Britax, after former CEO Anders Colding Friis was ousted last year after several profit warnings.

"Pandora missed expectations on both topline and EBIT. With (full-year 2019) guidance now lowered, the market will question the timing and success of the brand turnaround plan, unlikely to be sooner than expected," Citi analysts said in a note.

By 0915 GMT Pandora's shares were down 11.9% at 299.5 per share, a far cry from a 2016 peak of more than 1,000 crowns.


The number of promotional days was reduced by more than 40% in the quarter which had a negative impact on like-for-like sales which dropped 10% overall. In Hong Kong sales halved as protests disrupted traffic at its stores.

"We are being very prudent on closing the shops in order not to jeopardise the staff's safety and that has led to essentially a lot of closed hours," Lacik said, adding that he expected this to continue.

Pandora now sees sales falling 7-9% this year, down from a previous forecast of a 3-7% drop and an operating profit margin excluding restructuring costs of 26-27%, down from 26-28% previously.

A weaker economy pressured consumer spending in some of its biggest markets, including the United States, Britain and mainland China.

Third-quarter earnings before interest tax (EBIT) and excluding restructuring costs fell 25% to 891 million Danish crowns ($132.71 million), below the 986 million crowns expected by analysts in a company-compiled poll.

Speculation about consolidation in the jewellery sector was stirred last week after LVMH offered to buy Tiffany & Co, known for its engagement rings and ties to Hollywood glamour, with the owner of Louis Vuitton and Bulgari seeking to expand in one of the fastest-growing parts of the luxury goods market.


On Monday, Pandora also proposed Peter A. Ruzicka, who recently resigned as president and CEO of Orkla, one of Norway’s largest companies, as its next chairman.

The decision, if approved by shareholders at an extraordinary general meeting on 4 December, will complete a management overhaul at one of Europe’s largest and most affordable jewellery brands.

Peter A. Ruzicka is a strong candidate for the chairman role. During his five years as CEO of Oslo-listed Orkla ASA, he led the business in the transition from an industrial conglomerate to a focused branded consumer goods company with approximately 75% of its sales outside Norway.

Prior to that, he was managing director of several large retail companies, primarily within the consumer goods sector, in the Czech Republic, Slovakia and the Baltics.  

Pandora also highlighted his vast operational experience within strategy, transformation execution, brand building and retail optimisation. 

Peder Tuborgh, outgoing chairman, said: “We are progressing quickly with Programme NOW to reenergize our brand and restore growth. Now, the time is right for me and for Pandora to bring in a new chair to realize the long-term potential of our company together with the Executive Leadership Team, and I am pleased that Peter A. Ruzicka has accepted the nomination.”

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