PARIS — Pandora has plans to rise once more.
The Danish jewelry firm, famed for its charms, has unveiled the detailed roadmap for its new growth strategy, dubbed Phoenix.
Its new ambitions include doubling revenues in the U.S. and tripling sales in China, based on 2019 levels, by improving conversion for core product lines thanks in part to a bigger focus on personalization and digital, as well as by recruiting younger consumers.
“We have vast untapped opportunities in our existing core business and they will drive long-term sustainable and profitable growth,” asserted Pandora president and chief executive officer Alexander Lacik ahead of the company’s Capital Markets Day Tuesday. “Our objective is to be the largest and most desirable brand in the affordable jewelry market. And we have a strong foundation to deliver on that objective.”
The company is targeting an organic compound annual growth rate of 5 to 7 percent between 2021 and 2023 and EBIT margin of between 25 and 27 percent by 2023, an increase of between 2 and 3 percentage points. Pandora completed its previous two-year turnaround plan in May, and has resumed growth in recent months. Its second-quarter revenues jumped 84 percent on the same period last year and 13 percent versus the three-month period in 2019, prompting the firm to raise its guidance for the year, as reported.
During the online investor event, chief financial officer Anders Boyer highlighted that if all of the company’s new initiatives prove successful, it could achieve higher sales gains than the conservative estimates, and it still sees plenty of opportunity for growth further down the line.
“When we started developing this strategy, it quickly became clear that we had more growth opportunities than we could handle,” he told investors and analysts. “It’s clearly a case of priorities,” he said, explaining that longer-term opportunities for the company include expansion in markets like India and Japan as well as potential M&A activity. “We’re only at the beginning of the growth journey we’re embarking on.”
The market rewarded the company’s announcements, sending Pandora shares up 6.8 percent on Tuesday to close at 855 Danish kronor.
Nevertheless, some analysts urged caution. “Pandora has demonstrated impressive resilience against a challenging COVID-19 economic backdrop with healthy channel shift into e-commerce. From here, we view its path to positive revenue growth as more challenging, and we remain cautious on its path towards sustainably positive retail [like-for-likes],” said Piral Dadhania, a luxury analyst at RBC, in a research note ahead of the event. “Easier wins under the turnaround program such as cost savings, closing a handful of unprofitable stores, range rationalization, developing a new branding and store concept and increasing marketing spend have largely been addressed and are in the early stages of deployment. We maintain our view that Pandora’s margins could come under pressure in a flat or negative retail LFL scenario.”
As well as targeting gains in the U.S., Pandora’s largest market, and China, where it has struggled to differentiate its positioning, recruiting young consumers, especially Gen Z and Millennials, will be a core part of the new strategy.
Ahead of the all-important holiday season, the brand will relaunch the Pandora Me range targeting Gen Z, with social media-first activation and collaborations with musicians and artists, for example. “We will talk in their language on the channels they are into,” said chief marketing officer Carla Liuni.
The company highlighted estimates from Bain and Altagamma that Gen Z and Millennial consumers are projected to account for a 60 percent share of global consumption of luxury goods by 2026, compared with 39 percent in 2019.
With this in mind, Pandora believes the Me franchise has the potential to become a new pillar, offering opportunity beyond the key Pandora Moments business, built around its collectible charms, which accounts for around 70 percent of its sales.
There is also the Pandora Brilliance lab-manufactured diamond product line, being piloted in the U.K. since May, for which the company has yet to decide on a global rollout, it said.
In order to build loyalty and improve personalized services, the company will build on learnings from its digital hub implemented in Copenhagen last year, using AI to deliver tailored communications to consumers and improving its consumer-facing interfaces online. It has already made progress here. “Our conversion rate in the last two weeks has more than doubled since 2019,” said David Walmsley, chief digital and technology officer.
A new global loyalty program will be introduced next year, following the introduction of a local scheme in China this spring, as well as clienteling services via WeChat that allow in-store staff to connect with their customers directly. “It’s a great learning base for the global platform that we’re looking at launching in 2022,” Walmsley said.
A new store concept is in the works, with three units set for the final quarter of the year and several for the first quarter of next year, with a first-wave of openings in China and Europe before an introduction in the U.S. In total, between 100 and 150 boutiques under the new concept are planned for the next two years. These are designed to meld digital and physical elements, for example by giving store associates access to customer preferences when they enter a store.
Another key element of the Phoenix plan is to increase manufacturing capacity by around 60 percent, investing 1 billion Danish kronor, or $158.7 million at current exchange, to secure future supply.
The majority of the new capacity will come from a facility to be built in Vietnam, for which the firm is in the process of selecting a site, to be confirmed early next year. The first part of the new plant is scheduled to come online in late 2024, and the plan is for it to produce 60 million pieces annually from 2026 onward. The remaining capacity extension will come from the firm’s existing facilities, in Thailand.
The new program also involves a range of sustainability initiatives Pandora trumpeted as “the most ambitious in the jewelry industry to date.” The company has committed to halving its greenhouse gas emissions from a 2019 baseline across its own operations and value chain by 2030, and intends to become a net zero carbon company by 2040.
Among further announcements, the company said it would increase its share buyback program, announced on Aug. 17, to repurchase shares for an aggregate maximum amount of 3.5 billion Danish kronor, or $555.2 million, compared with the previously announced 0.5 billion Danish kronor, or $79.3 million. The move is intended to increase cash distribution to shareholders, and will be completed by Feb. 4, 2022.