Earrings by Pandora

PARIS  Copenhagen-based jewelry firm Pandora will bolster its assortment of products this year while curtailing price-slashing measures, the company said Tuesday as it reported a decline in annual profit.

“We need to update our assortment,” Pandora chief executive officer Anders Colding Friis said in a telephone interview. The company plans to increase its number of new designs to 650 this year compared to 450 last year, he explained. This includes two new product lines this year, including one called Shine, scheduled to reach stores in March.

“We can see we have gotten a little too repetitive,” he added, describing the reasoning behind the emphasis on new items, including the Shine launch, which he billed as an affordable gold collection of pieces with a silver core covered in gold plating. The company updated its design team midway through 2016, adding staff in Milan in addition to the group in Denmark.

In a conference call with analysts, company executives said they planned fewer promotions in 2018, particularly toward the end of the year.

Unfavorable currency rates and higher tax expenses weighed on net profit for the year, which declined 4.3 percent to 5.77 billion Danish kronor, or $966 million. The contemporary jeweler cautioned that sales in the first quarter this year will likely fall a tad below its guidance of 7 to 10 percent growth as new products are gradually brought to market. The company also expects currency headwinds in the first three months of the year to reduce sales by 5 percentage points.

“The market will likely view the [first-quarter] revenue guidance cautiously, with the company suggesting this will be lower than the [full-year] range, as product newness is incrementally introduced into stores throughout the year,” said Piral Dadhania, an analyst with RBC Europe, in a research note to clients.

Revenue for the year grew 12 percent to 22.78 billion kronor, with growth led by Pandora’s own network, which the company continues to expand by opening stores and buying up franchise stores. Last year, the firm added 376 stores, including 200 franchise units. The proportion of revenue coming from stores Pandora owns reached 43 percent in 2017.

The company plans to open 200 new concept stores this year, roughly half in Europe, the Middle East and Africa, and a quarter each in the Americas and Asia-Pacific. Two-thirds of the openings will be owned and operated by Pandora, a focus that, in addition to ramping up new products, will lead to slightly lower margins this year compared to 2017, the jeweler said.

Sales grew over the fourth quarter in all regions except Australia, where they dipped 3 percent at constant currencies to 590 million kronor, a performance weighed down by the decline in purchases by Chinese consumers, Pandora said. Executives attributed the decline to a shift of Chinese buying elsewhere, noting the company had drummed up business in China with more promotion activity there.

The jeweler also continues to work toward shortening lead times for new products, Colding Friis said, which it has recently reduced by two weeks to reach six weeks. The plan is to reduce it even further, to four weeks in 2019.

Offering new products to American consumers is key in a market challenged by the drop in mall traffic, he explained.

“It’s well-known that the U.S. market is difficult, we see that we have opportunities to strengthen our business in that difficult market,” the ceo said, noting that sales at the group’s own stores and on the Internet grew in 2017.

“U.S. consumers are very focused on new products, and newness, so the fact that we increased our product offering and are launching a lot of products in the coming weeks, we expect this is something that will go down well with the American people,” he added.

The U.S. is the biggest online market for jewelry, according to Colding Friis: “There’s a big market for e-commerce in the U.S. in jewelry and we should be a little bit bigger than we are today — so that’s an area where we can grow, should grow and we have plans for growing.”

Over the fourth quarter, the U.S. market accounted for the highest proportion of company Internet sales, reaching 10 percent, he said, describing an increase of online purchases by men, under the guidance of their wives and girlfriends.

Pandora aims for an online proportion of worldwide sales of between 10 and 15 percent as part of its 2022 strategy.

The firm named Anders Boyer chief financial officer. He will take up his position before August this year, when Peter Vekslund steps down. Noting the cash generative nature of its business, Vekslund said the company is launching a 4 billion kronor share buyback program that will run from March this year to March 2019.

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