PARIS — Beleaguered high-street jeweler Pandora said sales and profit declined in the fourth quarter, but flagged improvement in a number of key, mature markets.
“Across the board, we see that our actions have improved the health of the business. It is encouraging that we have brought mature markets back to growth” in the fourth quarter, said chief executive officer Alexander Lacik.
The Copenhagen-based fashion jeweler, which has been struggling with declining foot traffic in malls, is undergoing a broad restructuring and brand reboot under Lacik, who joined last year.
Pandora has been bulking up marketing spending while buying back wholesale inventory, revisiting its store network and reducing discounts. Marketing expenses for the year stood at 12.3 percent of revenue, compared with 9.4 percent in 2018.
Halfway into a two-year turnaround, the company reported sales for the period of 7.95 billion Danish kroner, or $1.18 billion, with positive like-for-like sales in Italy, France and Germany and improvement in the U.S. and the U.K. Sales declined 4 percent on a like-for-like basis over the fourth quarter, an improvement from previous quarters and net profit came to 1.74 billion Danish kroner.
Revenue from wholesale channels and third-party distributors dragged on quarterly sales, down 10 percent, compared to a flat performance from Pandora-owned retail outlets.
Pandora projects organic growth at 3 percent to 6 percent lower, with earnings before interest and taxes margin, excluding restructuring costs above 23 percent — financial guidance that excludes the potential impact from disruption to business due to coronavirus.
The guidance was in line with expectations, said Piral Dadhania, analyst with RBC.
Executives flagged the need for improvement in China, noting the brand’s performance deteriorated over the quarter and they are assessing the brand’s position. Executives said their emotion-driven focus for relaunch initiatives are failing to ignite with the country’s fashion-focused audience, and against a backdrop of competition in trendy jewelry from high-end fashion brands. Adding to its troubles in China, disruption to business from the coronavirus has prompted a number of store closures and the situation is highly unpredictable, executives added.
Focusing on more data-driven content for marketing, Pandora late last year recruited a former Bulgari marketing executive, Carla Liuni, to spearhead efforts to build a “creative and data-driven foundation for Pandora’s brand relevance,” which will include product development.
The company has focused brand relaunch activities around a tag line “Something about you,” which includes partnerships with celebrities and influencers. Over the first quarter of the current year, the brand will focus on newness, launching hundreds of new designs organized around a quarterly theme rather than a series of “drops.” The upcoming theme, built around the all-important shopping holiday Valentine’s Day, will be “Love and commitment.”
Bulking up digital activities, the company has established a new digital center with 80 technology experts. They will start with Pandora’s web site, which could be a simple way to improve revenue, suggested executives, by making it faster, easier to use and increasing the amount of content integrated with social media.
The brand will also turn to loyalty programs as it seeks to offer more personalized messages, while partnerships and activation events will be forged to “keep the brand exciting,” executives said.
As for stores, the company unveiled a new concept in the U.S. in November, taking jewelry out from behind glass cases so that customers can touch and feel the options, mixing and matching products in a “Charm Bar” concept, and introducing engraving services.
The company will likely continue to tinker with the format as it rolls it out in boutiques around the world, Lacik said.
Pandora plans to continue opening stores in places such as Latin America and China, but will be likely close stores and relocate them elsewhere around the world. When it comes to selling the label in multibrand stores, executives will rein in the number of retailers, focusing on higher quality channels.
As for the ownership structure, it will continue partnerships with franchises but review them continuously with an eye to local market conditions.