PARIS — Pandora continues to work its charms in a continuously challenging economic environment.
The Copenhagen-based jewelry firm, best known for its charm bracelets, beat analyst expectations on Tuesday by posting higher-than-expected growth in the first quarter, driven by strong momentum in Asia-Pacific as well as continued network expansion.
Net profit more than tripled to 1.35 billion Danish kronor, or $199 million, versus 383 million Danish kronor, or $57.8 million, in the same year-ago period.
The results also came on the back of weak comparables as the first quarter of 2015 was negatively impacted by an additional tax expense of 364 million Danish kronor, or $54.1 million, along with higher financial costs.
Operating profit or EBIT, meanwhile, which stood at 1.6 billion Danish kronor, or $237 million, was up 33 percent compared to Q1 2015, resulting in an EBIT margin of 34.7 percent, the brand said.
“We have had a very strong start to the year, with all geographic regions, as well as all product categories delivering double-digit growth rates. And we continue our momentum in Q2,” commented Pandora’s chief executive officer Anders Colding Friis.
Speaking with WWD, Friis said what makes Pandora unique is that the group exercises full control over its value chain — “from manufacturing to the time we meet our costumers. It’s what makes Pandora stand out.”
The executive added how revenue growth was driven by growth in existing stores, especially in EMEA and Asia-Pacific, as well as continued expansion of the concept store network across all regions. “Furthermore, we improved our profitability for the quarter, resulting in a continuing strong cash flow,” he said.
Pandora expects to add more than 275 new concept stores in 2016, versus more than 250 stores, as previously expected.
A net of between 200 and 300 concept stores is to be added annually until 2018, of which approximately 60 percent are expected to open in the EMEA region and 20 percent in the Americas and in Asia-Pacific, respectively.
Following the results, the company raised its revenue guidance for 2016 to more than 20 billion Danish kronor, or $2.9 billion, up from 19 billion Danish kronor, or $2.8 billion, previously. In contrast to other jewelry brands such as Tiffany’s, which had to lower its projections for 2016 after a drop in earnings, Friis said Pandora’s concept of “affordable luxury” was enjoying strong momentum. “I can’t speak for others, but what we do is we offer high-quality silver and gold pieces in an affordable price range.”
The brand’s jewelry, which retails between $25 and $620 for a charm item, is now sold in more than 100 countries through approximately 9,000 points of sale.
Although the company’s revenue growth slowed down slightly from 40 percent in 2015, sales still advanced 34 percent, or 35 percent in local currency, to 4.7 billion Danish kronor, or $695 million, in the three months ended March 31, thanks to an increase in volumes.
Friis said as the brand is getting bigger, revenues are projected to grow at a more moderate pace. “It’s the natural course of things. But there is still opportunity product-wise,” he observed, singling out earrings as a category the group is eager to develop, as well as in terms of geography, he noted, congratulating his team on “a remarkable job” viewing that 2015 was also helped by positive currency effects and therefore made comparisons tougher.
In Q1, the company upped its presence in the Asia-Pacific region, its fastest-growing region, following the acquisition of its store network in Singapore and Macau from its previous distributor Norbreeze Group, which resulted in the addition of 15 Pandora-owned concept stores and 5 shops-in-shops in the two markets.
The net effect of converting distributor and wholesale revenue from the franchisee stores to retail revenue was approximately 150 million Danish kronor, or $22.1 million, for the quarter, the company noted. Revenue from Pandora-owned stores, including its 14 online shops, increased by 100 percent to 1.4 billion Danish kronor, or $206 million, and corresponded to 30 percent of total revenue compared with 20 percent in the first quarter of 2015.
By category, sales of bracelets grew the fastest, logging a 70 percent increase. Together with charms, Pandora’s signature category, which advanced 23 percent in the period, they represented 81 percent of total revenue.
Pandora credited new styles that were introduced in the quarter as well as promotions in selected markets for the gain. Roughly half of the group’s sales are achieved with products launched in the last 12 months. Friis said: “We are doing well, because we continue developing our collections. Don’t forget we refresh our stores with new product seven times a year,” he noted. In Q1, both the Valentine’s Day and the spring collection were very well-received in all markets, according to the executive. The Pandora Rose collection, which has seen a strong performance in the U.S. and U.K., meanwhile is to launch globally in September.
The gross margin increased to 74.6 percent in the first three months of the year, compared with 71.1 percent in the same year-ago period.
Dollar figures are converted at average exchange rates for the period in question.