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Pandora Sees Record Revenue for Q2 Despite U.S. and China Headwinds

·5 min read

PARIS — Pandora continued to grow in the second quarter of 2022 despite headwinds from the U.S. and China.

The Danish jeweler saw its “third straight quarter of record revenue,” with sales in the three-month period hitting 5.66 billion Danish kronor, or $771.8 million.

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This amounted to a 3 percent increase compared to the corresponding period 2021, in line with consensus estimates. Revenue was 17 percent higher than in 2019, before the COVID-19 pandemic struck.

Chief executive officer Alexander Lacik said he was pleased with the results given fresh uncertainties brought by the war in Ukraine and store closures related to China’s zero-COVID-19 policy.

In an interview, he said the second-quarter results were in line “with how we expected the year to pan out.” He said the U.S. government’s stimulus checks amounted to “the best marketing plan ever,” but they were a one-off boost.

During the three-month period, the U.S. saw a 12 percent decrease compared with the second quarter of 2021 against tough comparisons with the previous year. Sales were 59 percent higher than 2019’s figures.

Performance in China continued to be impacted by the country’s strict zero-COVID-19 policy, as lockdowns impacted stores as well as Pandora’s Shanghai online distribution, resulting in an overall 58 percent slump in the second quarter.

Europe is where Pandora saw the most growth, with double-digit leaps across its key markets in the U.K., Italy, Germany and France, where the launch of the My Pandora loyalty program supported a 13 percent growth despite weak Mother’s Day sales.

In the rest of the world, growth was strong, amounting to 26 percent overall. Mexico led the charge with a 50 percent jump at 210 million Danish kronor, or $28.68 million, while Spain was described as having “revenue the size of France” and grew 32 percent.

The second quarter was also affected by the ceasing of business in Russia and Belarus, where most of the impact was seen in wholesale distribution, and amounted to a 1 percent decrease on the quarter’s overall figures, and lower revenue from online freight.

On the whole, EBIT margin during the three months “remained strong” at 22.1 percent, Pandora said. Consensus estimates ranged from 21 percent to 24.3 percent.

The company maintained its EBIT margin guidance at 25 percent to 25.5 percent, but it added that the macroeconomic outlook “is associated with elevated uncertainty.”

With COVID-19 restrictions easing across the board, except for China, consumers have returned to physical stores in force, and bolstering growth in the channel.

In the three months, wholesale distribution took a hit, shrinking 13 percent, particularly given the prominence of the U.S. in its market mix.

Third-party distribution decreased 8 percent following Pandora’s takeover of a number of wholesale accounts. The company said the consequences of Russia’s war in Ukraine could not be entirely offset by “strong performance in some of the Asian markets.”

Lacik said Pandora was on track with 100 to 150 planned openings, and the company is accelerating expansion in the U.S. and Latin America in order to offset current difficulties in China, where the focus has been on relocations rather than new stores.

Pandora’s online channel has continued to grow, and has doubled compared to 2019. Despite a return to physical shopping, there is “greater acceptance of the online store as a path to purchase” across most markets, the company noted.

Lacik cautioned against putting too much weight on the battle between online and offline.

“We have the luxury of not worrying where the final transaction happens,” said the executive, adding that the company was “agnostic” with regard to sales channels. He added that online “will grow naturally” due to incoming consumer cohorts, including a generation of digital natives.

“The right question to ask is how good is the experience that we offer regardless of [where] our customers engage with us,” he continued, pointing out traffic and conversion rates as reference metrics.

He said that all touch points were important given that “many of our customers and consumers aren’t the same person,” with around 60 percent of the former being men seeking a gift for a female consumer.

Physical retail represents a more “efficient, interesting and engaging” experience than the “flat, self-select” online environment, he added.

Pandora Me, relaunched in late 2021, leapt 72 percent and took a 3 percent share of revenue in the quarter, thanks to good traction in continental Europe.

The Moments product platform and the ongoing collaboration with Marvel continued to be successful, especially with strong Mother’s Day trading. The latter accounted for 2 percent of the business in the quarter. Newly introduced Pixar designs were also a hit.

In the second half, a key launch will be the Diamonds by Pandora category, which hinges on lab-grown diamonds and recycled silver and gold, which is launching in the U.S. and Canada on Aug. 25.

Communication assets and in-store materials have been revamped to “give a diamond feel” to the experience, the executive said, while putting the accent on the “quite unique proposition” in terms of sustainable credentials and accessible price points.

Lacik demurred on sharing further developments for the category, but said that Pandora was gearing toward adding more collections under this new category.

Separately on Tuesday, Pandora announced the appointment of Mary Carmen Gasco-Buisson as chief marketing officer, starting this fall.

Formerly a global vice president at Unilever, the new executive was previously consumer health chief executive officer at P&G Ventures; and global marketing and innovations director for Hugo Boss Fragrances. She also held executive role at the venture capital firm M13.