PARIS — Copenhagen-based jewelry firm Pandora Tuesday posted a 12 percent rise in second-quarter sales, noting an improvement in its business in the U.S. despite an ongoing decline in mall traffic there.
Administrative costs weighed on profits, and the company’s operating margin stood at 33 percent for the quarter, missing analysts’ expectations, noted Citigroup.
Pandora nonetheless sounded an upbeat note for the rest of the year, expressing confidence it will meet the annual revenue target of between 23 billion and 24 billion Danish kroner, or $3.65 billion to $3.81 billion, with an operating margin of around 38 percent.
“The nature of Pandora is that our second half is quite a bit stronger — this year will be no exception,” chief executive officer Anders Colding Friis told WWD.
“We believe the scenario of a sharp acceleration…is realistic,” said Citigroup in a research note, referring to expectations for second-half retail sales and earnings growth.
The retail environment in the U.S. over the second quarter was challenging given a drop of around 5 percent in mall traffic, the company said. Still, it managed to improve the performance of its concept store network there, said Colding Friis. It helped that the company’s U.S. stores are based mainly in “high-quality malls less affected by declines in footfall,” the company noted in a statement.
As consumers show an increasing reluctance to spend time in shopping centers, Pandora has trained efforts on getting products out more quickly and adjusting the timing of campaigns in the U.S., Colding Friis said. In addition to improvements in distribution, a second manufacturing site that opened in Thailand this year is helping the company cut lead times, he said.
Pandora spotted new product ideas in February and was able to get them to stores by the end of the second quarter, said Colding Friss. “That’s a lot faster than the normal eleven months we had from designing to consumers.” He called the progress a “new ability we have acquired…to be more in trend with the market.”
A back-to-school campaign in the U.S. will also be introduced a bit earlier, he said, as part of an attempt to zero in on times when larger numbers of people actually visit the stores.
Sales over the quarter totaled 4.8 billion Danish kroner, or $766 million, lifted by brisk business in Asia, particularly Australia and China, where revenue jumped 35 percent.
The company highlighted a progression in its strategy of branching out from charm bracelets, citing a 23 percent increase in revenue from other types of jewelry like rings, earrings and necklaces.
While Pandora seeks to grow the other categories, sales of charms and charm bracelets account for the bulk of revenues, and are thus scrutinized by markets for any signs of weakness.
“We want to continue developing our core, which is charms and bracelets, and then on top of that, build the other categories,” said Colding Friis, highlighting the company’s intent to “protect our base business.” Pandora has not set a figure on how the business should be balanced in the future.
The company plans to sell 50 new Disney products in the charms and bracelets category in Europe over the fourth quarter this year. It has cooperated closely with Disney for several years in the U.S., extending the collection to Asia last year.
Pandora has continued to shift its focus on stores it owns or operates itself, scaling back on distribution through multibrand stores that failed to provide “good brand representation,” according to Colding Friis. He said the company eliminated some 1,500 such points of sale in the past 12 months.
Pandora has also been pushing to increase its presence abroad and recently entered India, where it plans to open 50 stores over the next three years.
The jeweler said it plans to open 60 new concept stores in China this year, 10 more than previously expected. Sales in local currencies nearly doubled over the quarter in China, clocking a 91 percent rise in local currencies compared to the same period last year.