Recovery signs boost jeweller Pandora despite profit drop

Smaller sales declines in key markets Britain and Italy and a step up in restructuring efforts helped to lift Danish jewellery maker Pandora’s beaten down shares on Tuesday, despite a drop in second-quarter earnings.

The shares, which had fallen about 10% this month, were up 6.5% at 248.30 Danish crowns at 0740 GMT.

Pandora, best known for its customisable silver charm bracelets, is struggling after new jewellery lines failed to entice shoppers, but is buying back older ranges from franchises and slimming down collections to try to improve its performance.

Sales from stores open more than a year fell 10% in the second quarter from the same period last year - the same as in the first quarter.

However, like-for-like sales in Britain and Italy were down 8% and 10% respectively, compared with first quarter slumps of 13% and 22%, after a pick up in marketing spending.

“We dialled up the volume on our media investments by a factor of two in order to try and see if we could move the needle on traffic. And that has been very successful,” newly appointed CEO, Alexander Lacik, told Reuters.

“We got a very strong return on investment,” he added, saying the initiative would be implemented across other key markets.

Pandora said restructuring costs were now likely to be “up to 2.0 billion” crowns, compared with a previous estimate of up to 1.5 billion crowns (183.89 million pounds).

“We’ve upped that bill because we’ve simply found more dead wood in the business,” Lacik said.
The company will also simplify its product portfolio.

“As an example we have, I think, 150 different variations of a heart on a charm. And when you speak to customers, they clearly don’t see the incremental value,” the CEO said.

Explaining Pandora’s share price rise, Sydbank analyst Soren Lontoft Hansen said: “I think that investors are reacting to the correct diagnosis of the challenges in the company.”

Pandora’s second-quarter earnings before interest, tax, depreciation and amortisation fell 13.7% to 1.29 billion crowns ($192 million), but the company kept its full-year guidance.