PARIS — Pandora is eager to apply its momentum to the largest jewelry market in the world: China.
The Copenhagen-based company on Tuesday reported strong growth in fourth-quarter sales and said it signed an agreement with Hong Kong-based Oracle Investment Ltd. for the joint distribution of the brand in China, whose jewelry market is estimated to be worth 705.5 billion Hong Kong dollars, or $90.9 billion.
Effective July 1 and running through the end of 2018, the deal will enable Pandora to accelerate its store rollout and make significant marketing investments in the Chinese market, where jewelry grew at a compound annual rate of 21.5 percent between 2008 and 2013.
“Our product has never been more relevant, fashionable and affordable,” Pandora’s chief executive officer Allan Leighton said during a conference call with analysts, who, one by one, took the opportunity to congratulate the company on the positive results.
Leighton said China is “a huge opportunity for Pandora.”
“It is the largest jewelry market in the world, and our business there today is tiny. With this new collaboration with Oracle, we gain direct access to and control over this highly attractive market, which will enable us to ramp up our presence there significantly over the next few years,” he explained.
The ceo said more than 300 new stores were in the pipeline for 2015, of which between 15 and 20 units would open in China in the second half of this year.
“We spent the last 18 months understanding how to do business in China. And what we’ve learned is that our product is hugely acceptable there,” Leighton noted, listing minor differences in size and color to be considered. “We will focus on the east coast for a couple of years and start with tier-one and tier-two cities, then move more central and west,” he noted.
The brand currently has 30 boutiques and 19 shops-in-shop in the region.
The jewelry-maker reported net profit climbed 36 percent to 1 billion Danish kroner, or $167 million, in the three months ended Dec. 31 as group revenue rose 35 percent to 3.96 billion Danish kroner, or $664 million.
For the full year, net profit rose 39.5 percent to 3.1 billion Danish kroner, or $552 million, while group revenue was up 32.5 percent to 11.9 billion Danish kroner, or $2.1 billion.
Dollar figures are converted at average exchange rates for the periods in question.
Leighton touted the performance in the fourth quarter as “our strongest ever,” which resulted in 2014 being “a very successful year for Pandora. Again, we increased our top line to record high levels, driven by strong growth across all geographies and product groups. Revenue from charms and bracelets increased more than 25 percent, while revenue from rings increased to more than DKK 1 billion.”
He noted that the company’s store count reached 1,400 as it focuses on increasing the share of revenue from directly operated retail, which now accounts for 56 percent of the brand’s revenue, up 51 percent compared with the year-ago period.
Pandora had a particularly good run in the Asia-Pacific region, where Australia spiked 30 percent in local currency, driven by strong ring sales. In the Americas, Canada posted a 64 percent jump in sales, mostly from rings, while the U.S. reported the highest quarterly revenue ever, up 20 percent in local currency.
Leighton said it was the brand’s new Disney collection, launched in November 2014, that buoyed performance in the region, noting that in general, “half of our sales come from new products.”
The brand’s fastest-growing category was rings, soaring more than 110 percent in both the fourth quarter and for the full year. Rings represent roughly 10 percent of the group’s total revenue. The lion’s share still came from charms, accounting for about 67 percent of revenue.
The U.K. remained a key growth region despite a saturated market, up 28 percent, as expansion of the store network and e-commerce gave business a healthy boost.
Major changes are under way in Germany, following the agreement with DHG GmbH to take over up to 78 store leases in prime locations, currently trading under the Biba name, a German clothing brand for women, earlier this year. “Germany is in a transitional period and revenue will continue to be volatile,” warned Leighton, referring to the country’s growth of 3 percent in the fourth quarter.
The executive was upbeat about Russia, where he cited “good demand” despite the challenges of a weak ruble and tightening sanctions. “We continue to grow there, which is pretty unique. We are still investing. Everybody else is pricing up big-time in the market. We are just riding it out. This is a good market for us mid- and long-term,” he said, adding that the company “split the pain” from the depreciation of the ruble with its Russian partner, which will cost the brand 0.5 percentage points of earnings before interest, taxes, depreciation and amortization margin in the first quarter of 2015.
Pandora nevertheless implemented “slight price increases” on 25 percent of the brand’s range there.
Leighton assured the group’s prospects for growth remained positive for 2015. Fueled by store openings and continued focus to drive like-for-like growth in existing stores, he expects total revenue to increase to more than 14 billion Danish kroner, or $2.3 billion.
Pandora shares closed up 16.9 percent on the Copenhagen Stock Exchange, following the news.