PARIS — Flagging encouraging signs in Germany, where retail activity just opened up, as well as the strengthening of its online business, Pandora said it is focusing on pandemic recovery preparations, even as it braces for the possibility store closures could last throughout the year.
“I think what’s encouraging is if we look at Germany which reopened just eight days ago, traffic there rebounded at a much faster clip than we what saw in China, for instance,” said Alexander Lacik, president and chief executive officer of the Copenhagen-based jeweler, speaking on a conference call.
The company reported a 14 percent drop in sales over the first three months of the year, to 4.17 billion Danish kronor, or $610 million, as the spread of the COVID-19 prompted stores closures first in China followed by Europe and the U.S. in March. Executives pointed to positive organic growth in January and February, as well as online growth in April in the triple digits, percentage-wise, as signs of underlying improvement in how they are running operations.
With markets in Europe gradually moving to reopen activity, executives are positioning the company to jump back into business when local authorities allow stores to reopen.
“If markets reopen now during the month of May, which is what we’re expecting, then we’’ll come very strong out of the gates, in order to capitalize on the momentum we built the last couple of months before COVID hit us,” added Lacik.
Lacik, who joined the jeweler a year ago, has been steering a broad overhaul of operations as part of a brand reboot — its sprawling network of stores have struggled with declining foot traffic in malls before COVID-19-related disruptions took hold. The executive has been focusing on bulking up marketing spending, buying back wholesale inventory, redesigning stores, streamlining the product assortments with an emphasis on charms, reducing discounts and shoring up its digital means — both beefing up its online services and investing in digital marketing.
As the global spread of the virus began to gain steam in March, the company cut a layer of regional management, wiping out 180 jobs, regrouping its more than 100 markets into regional clusters.
A number of new executives have been recruited, including a fast-fashion veteran with experience in North America, a luxury marketing executive with digital expertise, and, most recently a new director for operations in China, Jacques Roizen. The data-management specialist with extensive experience in China and experience in retail joined in March.
The Chinese market has proven challenging for the jeweler, which had seen a deterioration in its financial performance there amid fierce competition in trendy jewelry, even before COVID-19-related store closures.
“Pandora has built a quite large business in China over a short period however, the brand has not been clearly positioned and has not been nurtured in the right way,” noted Lacik, citing the recruitment of Roizen as key to turnaround efforts there.
The executive added that the recovery in traffic in physical stores has taken longer than online in the country. Traffic on Alibaba’s Tmall, for instance returned to last year’s levels around a month ago, they said, while it is taking longer for Pandora, where online business was still down around 30 percent in March.
In other markets, Pandora executives expressed confidence they are headed in the right direction, strategy-wise, stressing improved digital means and online marketing.
“The online business is firing on all cylinders and this is a resilient channel that we continue to push very hard,” said Lacik.
The company launched a new online site in August, with faster loading and higher-quality photos, while increasing media spend on digital marketing.
“Customers are engaging more with the site,” note Lacik, who stressed the importance of maintaining an online presence with consumers while stores are closed.
“You don’t turn a brand that’s kind of been, you know, out of fashion let’s say for a while, on a dime. This is something that you need to consistently communicate and consistently be top of mind of people and at one point, the penny drops and I think that’s kind of what we saw happening to a large degree in January, February,” said the executive.
“We are very confident that we know what the right levers are,” he added.
While the ongoing crisis continues to cast a cloud of uncertainty over business, however, the company has bulked up its credit lines in order to weather ongoing store closures — even in the case that they remain closed throughout this year.
Efforts to rein in costs and shore up the company’s cash position are meant to ensure the company will have the financial strength for a “strong commercial comeback” when demand returns, said executives.
Pandora has done away with financial forecasts for the year, but executives pointed to a likely difficult quarter ahead.
“I think [the second quarter] is just one we want to put behind us, to be honest,” said Lacik. “Making sure we don’t bleed cash and holding on to the wallet in a sense, I think, is the success, the question is more how quickly we can get the markets to come back,” he continued, noting he was looking more to the third quarter for this.
Moving to reassure markets on supplies, executives said they bolstered production in Thailand as the crisis spread, and have enough stocks in stores to last 25 weeks.
To weather the crisis, Pandora has been reining in costs and added 3 billion Danish kronor-worth of additional loan facilities with its banks. It also plans to sell 8 million treasury shares through an accelerated book-building process.
The quarterly revenue performance beat consensus expectations, said Piral Dadhania of RBC Europe. The analyst flagged online sales growth as encouraging. The sale of treasury shares, which will reverse some of the company’s share buy-backs, will likely weigh on the share price Tuesday, added Dadhania.