Pandora has tough year, Q4 improves but challenges remain

By

Sandra Halliday

Published
Feb 5, 2020

Times were tough for Danish jewellery giant Pandora last year as China proved to be a difficult market on multiple fronts and some improvement in its final quarter failed to push the full-year numbers into positive territory.

For the year, revenue fell 8% to DKK21.9 billion (€2.93bn/US$3.38bn) and it fell 6% in local currencies. Earnings before interest and tax (EBIT) dropped to DKK5.9 billion from DKK6.4 billion and net profit dropped to DKK2.9 billion from DKK5 billion a year earlier. 

And its business doesn’t look likely to grow in the current year with the firm expecting a sales fall of between 3% and 6%. However, that would be an improvement after the bigger fall in 2019.

It’s also predicting an operating profit margin (excluding restructuring costs) of above 23%, which would be down from the 26.8% in 2019. But the projected 2020 figure excludes any coronavirus impact.

China really has been a big issue for the firm with around 10% of its sales happening in Hong Kong and mainland China. Aside from the ongoing issues in Hong Kong, the company has had to close around a third of its Chinese stores due to the coronavirus with CEO Alexander Lacik saying business there had “ground to a halt” and even those stores that are open are seeing minimal footfall.

But while it has closed some of its stores temporarily, most of its sales challenges in the year were focused on wholesale accounts. Sales through its own stores actually rose 9.9% to DKK14 million in the year but wholesale was down 22.1% to DKK6.725 billion.

In Q4, total revenue fell 1% to DKK7.9 billion (down 4% like-for-like), which was better than the full-year numbers and shows that despite the problems in China, the company’s turnaround is moving ahead. More than half of the year’s profit came from the Christmas quarter, with Black Friday giving it a big boost, especially in the US and UK.

CEO Alexander Lacik, who only took the helm last April, is a turnaround specialist. He said the brand saw more customers globally during the quarter.

The company is progressing with its restructuring plan, called Programme Now, that it launched back in November 2018 and that involves massive marketing investment, as well as new collections and celebrity collabs.

And while Lacik has admitted that Chinese customers need to be targeted with clearer marketing to communicate the brand’s point of difference, elsewhere, customers are getting it. He said Italy, France and Germany performed well, as well as the aforementioned good performances in Britain and the US, in Q4.

“With 2019 behind us, we have completed the first year of our two-year turnaround,” he said. “We have made significant changes in a very short time, and the results in the fourth quarter give us confidence."