Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Pandora A/S (PNDZF, Financial) reported strong broad-based growth across its collections, indicating successful brand perception as a full jewelry brand.
- Gross margins expanded to record highs, reflecting structural efficiencies and effective pricing strategies.
- Significant investments across the value chain, including marketing, have been made while maintaining a solid EBIT margin.
- The company raised its full-year growth guidance to 9% to 12% organic growth, showing confidence in its strategic initiatives.
- Pandora A/S (PNDZF) continues to demonstrate high returns with low leverage, maintaining a strong financial position.
Negative Points
- The consumer environment remains challenging, which could impact future performance.
- Performance in China was disappointing with a 23% decline in like-for-like sales, indicating ongoing struggles in that market.
- The macroeconomic backdrop is highly uncertain, which could affect the lower end of the growth guidance.
- The company faces high promotional pressure in key trading moments, which could impact profitability.
- There is a potential headwind from higher silver prices, which could affect the EBIT margin target for 2026.
Q & A Highlights
Q: Can you provide more details on the July trading commentary and the mid-single digit like-for-like growth?
A: No major changes by region versus what we've seen year-to-date. Trends are consistent, with no significant regional deviations.
Q: How are you offsetting the commodity pressures, particularly the 140 basis point headwind from silver prices?
A: The majority of the mitigating actions are on the pricing side, with additional cost efficiencies in areas like point of sales materials, labor costs, and procurement.
Q: What should we expect for 2025 EBIT margins given the backend-loaded target for 2026?
A: Think of next year as flattish compared to this year, considering the headwind from silver and gold prices starting in Q1.
Q: Any initial learnings from the Essence collection launch?
A: It's early days, but the response has been positive with no major surprises. We will provide more details next quarter.
Q: Can you elaborate on the decision to accelerate investment in Japan and Korea?
A: The focus in Japan is on shoring up the network and gradually increasing marketing. In Korea, we've sorted out distribution and are investing within the expected budget.
Q: What are the main reasons for the gross margin gap between core and "Pure with More" collections?
A: The gap is primarily due to product mix and average selling price. We expect this gap to be sustainable as we shift towards becoming a full jewelry brand.
Q: How is the Evoke 2.0 store concept performing compared to other stores?
A: Evoke 2.0 stores show a small pickup in like-for-like sales, as planned. The existing format is already highly efficient, so the uplift is modest but positive.
Q: Can you comment on the performance of Mexico and Turkey?
A: Turkey's growth is moderating due to efforts to curb hyperinflation. Mexico saw a slight decline due to intense promotional competition, which we did not fully match.
Q: What gives you confidence that customers will absorb consistent price increases?
A: We pre-test pricing changes to understand elasticities. Our model is volume-driven, and we are careful not to rely on price increases as a primary revenue driver.
Q: How has the Be Love campaign impacted new customer acquisition and brand metrics?
A: The campaign has positively impacted key brand metrics like unaided brand awareness, brand penetration, and customer acquisition. All metrics are moving in a positive direction.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
