PARIS — Pandora took some investors by surprise on Tuesday.
The Copenhagen-based jewelry brand reported a 39.6 percent jump in operating profit in the first three months to March 31, exceeding analyst expectations, but said the group’s net income slid 45.6 percent in the period.
This was mostly due to additional tax expenses of 364 million kronor, or $55.2 million, following a settlement with the Danish Tax Authorities on May 7, as well as high finance costs, which rose 35.4 percent to 2.3 million kronor, or $348,680.
As a consequence, the group’s first-quarter net profit diminished from 704 million kronor, or $129.3 million, to 383 million kronor, or $58.1 million.
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Dollar figures have been converted at average exchange rates for the period to which they refer unless otherwise indicated.
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In total, Pandora is set to pay a sum this year of 995 million kronor, or $144.5 million at current exchange, covering income tax and interests to Danish Tax Authorities for the period between 2009 and 2014.
Fielding an analyst question about the group’s tax issues, Peter Vekslund, Pandora’s chief financial officer, replied: “As an international company operating in many countries, you always have ongoing tax investigations and discussions. But I can inform you that we have no other cases of similar magnitude for the time being.”
Nevertheless, the group raised its revenue guidance for 2015 on Tuesday to more than 15 billion kronor, or $2.8 billion, from more than 14 billion kronor, or $2.6 billion, primarily as a consequence of exchange-rate changes, it explained.
Pandora sales in the first quarter jumped 36.8 percent to 3.5 billion kronor, or $530 million, buoyed by strong double-digit growth across all geographies, with the Asia-Pacific region leading the pack, up 34.9 percent in local currencies.
In Australia, where the group opened 12 new concept stores in the last 12 months, the ring category drove sales by 58 percent in the period, while in Hong Kong, which added eight new doors, total sales shot up 100 percent.
“This year, we plan to increase our focus in the two largest markets in the region: Japan in China,” said Anders Colding Friis, who took over as Pandora chief executive officer on March 1. He noted that this would include the rollout of new stores as well as increased marketing spending.
In the Americas, the group’s strategy to focus on network expansion drove sales in Brazil and the U.S., where the jewelry brand also launched an e-shop in April.
Pandora said total revenues from owned and operated stores, including all of its e-stores, more than doubled and corresponded to 20 percent of total sales compared to around 13 percent in first-quarter 2014.
The only trouble was observed in Canada, where sales slipped 8 percent in local currencies, and Russia, where revenues were down 75 percent. The company said both declines were primarily due to slowing sales into the shops, but noted that like-for-like sales out of the shops were up in Canada and flat in Russia, despite a challenging economic environment in the region, and that it did not expect the negative trend to continue in upcoming quarters.
Friis, who joined Pandora from Scandinavian Tobacco Group, lauded the company’s performance and future prospects.
“Once again we are off to a strong start to the year, with all geographic regions, as well as all product categories, generating double-digit growth rates,” he said. “My strategy will be to continue the good work. We are looking at quite a number of opportunities.”