PARIS — Pandora kept its shine despite a year of uncertainties.
With 2022 ending on a high note, with profitability at the top of end of the yearly guidance and above expectations in organic growth, the Danish jeweler continues to be confident in its resilience for the coming year.
Pandora said Wednesday that organic sales could come in anywhere between a 3 percent contraction to a 3 percent gain, with an EBIT margin of 25 percent.
“That’s wider than what we would normally guide on,” due to “very, very high” macroeconomic uncertainties, Pandora president and chief executive officer Alexander Lacik told WWD.
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With current trading this year “solid with a good, broad-based pick-up in sell-out growth,” the company said it was “pleased” to continue in line with its fourth-quarter results.
Achieving the mid-range “flat-ish” figure would arrive on top of 2022, a record year for the jeweler, according to the executive, and would be a satisfactory outcome for 2023, he continued.
The key message of the guidance is that Pandora is preparing for “a difficult trading environment entirely driven by macro [factors],” said its executive vice president and chief financial officer Anders Boyer on a call with analysts.
Pandora reported fourth-quarter revenues gained 4 percent year-on-year, up 19 percent versus the same period in 2019, despite a 1 percent contraction in sell-out terms that included the impact of a fire at its European distribution center. The largest contributor to the performance was the network expansion, bringing in a 4 percent rise.
Growth in the quarter was driven by Pandora’s physical network, a combination of consumers returning to stores and network expansion.
Operating profit for the quarter grew 32.5 percent to 3.21 billion Danish kroner, or $464 million, while net profit was up to 2.37 billion Danish kroner, or $342.6 million.
The company also kept promotional activity in line with the previous year although it was “more intense” in the later months of 2022.
In the U.S., performance was in line with expectations of a decline due to the end of stimulus checks, improving by 2 percentage points over the third quarter but still showing a 7 percent year-on-year contraction.
Looking at the three-year stack, “U.S. performance was actually stellar,” despite the negative recorded figures, with a 38 percent leap against a 2019 baseline, Lacik said. These good results came despite the end of stimulus checks, and thanks to innovation and new store openings.
Europe rose 2 percent, with France and Italy showing signs of weaker consumer sentiment and Spain standing strong. The rest of the world showed 14 percent growth, with the company highlighting Mexico’s 34 percent leap against 2021’s figures.
The fourth quarter also showed “stable results” for the newly introduced Diamonds by Pandora, which brought in 81 million Danish kroner in revenue across North America’s 269 stores. The company estimates that around 50 percent of transaction came from new consumers and cited rings as the best performing category.
Its Moments platform performed best, staying flat in the quarter but contributing 5 percent sell-out growth for 2022, as consumers reacted well to its “one of a kind” storytelling proposition, the company said. Its collaborations, in particular Spiderman, enjoyed continued popularity.
By contrast, the stackable Signature subset of its Style beads-on-chains segment proved unsatisfactory, with new launches in the quarter falling short, it added.
In a research note, RBC analyst Piral Dadhania found the quarter’s trading performance “slightly better than expected,” the yearly guidance “broadly in-line with consensus” and the commentary “encouraging….However, given the strong recent share price performance…we may see some profit taking in the short term.”
As a whole, “nothing is changing” in its four-pronged strategy that includes investing in the brand, investing in products and collection improvement, driving the geographies and network expansion, and continued investment in personalized consumer journeys. “The formula is working so there’s no reason to change,” Lacik said.
Plans for the year include an expansion of its latest lab-grown Diamonds by Pandora in product assortment as well as international growth, although Lacik would not be drawn into naming its next moves.
The brand also plans to press ahead with its network development, adding 50 to 100 other points of sale, and the same number of corners, expected to bring a 2 to 3 percent organic growth. In 2022, it opened 88 concept stores and 130 shops-in-shop that it owns and operates.
Rolling out in the first half of the year will be a few instances of an updated “Evoke 2.0” retail concept, with Lacik noting that around 50 net openings had been mapped out, with additional ones being added if the year shapes up well.
Despite weakening consumer sentiment, inflation and higher interest rates, particularly in Europe, Pandora will continue with precautions to safeguard its profitability, its executives said.
While there are positive signs in China, Lacik doesn’t expect the country to be a “contributing factor” to Pandora’s growth for now. He visited Shanghai on Jan. 10 and came away with a “spurring optimism” but “nobody’s banking on it,” he said. In its 200 stores in the country, there is “sequential growth” albeit from a “very low base,” he continued.
There will be no “out of plan” investments in the market and reactivation plans would only be triggered when the consumers return to more usual patterns and it becomes clearer whether new coronavirus restrictions could be triggered, he continued.
The 4 percent price increase took effect in the fourth quarter, with a third of the assortment impacted while conserving its entry price point, as previously reported. The company said this was showing “promising” results and expects it to have “a positive impact on profitability.”
Beyond financial results, Lacik was keen to point out the company’s sustainability achievements of the year, as “when times are good, [sustainability] is a very hot topic. When times are squeezed, people somehow put this sideways.”
With a 6 percent reduction in CO2 emissions against 2019’s baseline, a 61 percent share of recycled silver and gold in products and 6 percentage point improvement in gender parity, Pandora is “walking the talk,” he said.
For the year as a whole, the jeweler met its margin guidance and surpassed it in sales, reporting 7 percent organic growth and an EBIT margin of 25.5 percent. Reported revenue were up 13 percent year-on-year to 26.46 billion Danish kroner, or $3.82 billion.
Operating profit stood at 6.74 billion Danish kroner, or $974.1 million, while net profit came in at 5.03 billion Danish kroner, or $726.9 million.
The year “very much demonstrates how [Pandora] is able to navigate uncertain times thanks to a combination of a strong brand and our diverse geographical footprint,” Lacik said on the call, highlighting highly profitable with gross and EBIT margins growing. “There are always opportunities when things are rough around the edges.”
Further signaling the Danish jeweler’s confidence and strength, thanks to “ample liquidity” and ability to “continue to generate good cash in 2023” outlined by Boyer, it revealed a distribution of up to 6.4 billion Danish kroner, or $924.1 million, representing 11 percent of current market cap.
The company separately on Wednesday revealed a new share buy-back program of 2.4 billion Danish kroner with a “clear ambition” of going up to a total of 5 billion Danish kronor during the next 12 months, depending on macro-economic conditions, continued the financial executive.
Results and the year-ahead messages were positively received by the markets. Shares were up 8.6 percent during midday trading at 635 Danish kroner, or $91.70.
Pandora’s next capitals market day will be held in London on Oct. 5.