Story was updated 3 p.m. EST
PARIS — Silver is weighing on Pandora.
The recent surge in the precious metal’s price tarnished buoyant third-quarter results that saw the Danish jewelry behemoth lift its guidance after maintaining a double-digit growth pace for the fifth consecutive quarter.
For the three months ending Sept. 30, the company reported Wednesday that organic revenue grew 11 percent to 6.103 billion Danish kroner, or $879 million.
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The company now expects growth of between 11 and 12 percent, at the upper end of the 9 to 12 percent guidance range it updated in May.
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“We’ve delivered another strong quarter,” Pandora president and chief executive officer Alexander Lacik said on an analyst call. “I put that also in the context of a consumer backdrop, which continues to remain quite challenging.”
In the third quarter, Pandora said like-for-like growth was 7 percent, while network expansion was 5 percent. Phasing out the sell-in to partners and others took away 1 percent.
“The composition of this growth speaks to our full jewelry brand mission,” Lacik said.
He also credited Pandora’s value proposition and its focus on generating more brand penetration and traffic toward an accessible value proposition, rather than price increases, for bucking a slowdown in consumption.
In the first nine months of 2024, the company’s sales totaled 17.32 billion Danish kroner, or $2.49 billion.
Trading in October is “midsingle-digit levels, in line with the underlying trends witnessed since the start of the year,” the company said.
Lacik viewed the third-quarter growth and start of the fourth quarter as positives, particularly against a two-year stack.
With seven weeks to go in the key holiday trading season, Lacik told WWD that October’s figure was “just another sign of that normalization [in growth] to happen.”
But there are storm clouds brewing.
Analysts zeroed in on the rise in silver prices, which have surged to new highs due to a range of factors, including global economic uncertainties and mounting geopolitical crises.
The price of an ounce of silver, which generally follows trends for gold with more volatility, has risen from around $24 in October 2023 to around $33. This was compounded by adverse developments in gold and foreign exchanges, noted Pandora.
“Sales momentum intact and a promising future, but there’s no silver bullet in mitigating precious metals inflation in 2025,” Citi analyst Thomas Chauvet said in a research note.
Much of the call was dedicated to the EBIT margin and how the company plans to navigate commodity-driven headwinds, particularly the rising silver prices.
Gross margin in the quarter reached 80.1 percent, which the company attributed to a combination of its vertically integrated business model, price increases and cost efficiencies.
EBIT margin was 16.1 percent, “reflecting increased headwind from commodity prices and foreign exchange rates, among others,” Pandora said.
Some of these extra costs have already been passed on to consumers. A 5 percent price increase was effected in October, exceeding the usual 1 to 2 percent annual rise.
Pandora chief financial officer Anders Boyer said the company would take further mitigating actions in 2025 due to increasing silver prices, including price increases and group cost-cutting measures. He expected the effects of the latter to be seen in 2026 rather than 2025.
While Citi and HSBC maintained a buy rating, CFRA Research advised selling shares, citing the surge in silver prices as a medium-term risk to the 2026 EBIT margin target of 26 to 27 percent Pandora set out at its 2023 capital markets day.
This was reflected in the roller-coaster trading throughout the day, with the share price dipping by as much as 6 percent.
Separately, the jeweler revealed on Sept. 23 it had reached its target of 100 percent recycled gold and silver, a move Lacik described at the time as “a major step towards a more circular model.”
Product-wise, the brand’s core charms business increased 2 percent in like-for-like terms for the quarter, while its “Fuel for more” segment, which includes its lab-grown diamond business, was up 21 percent despite tough comparatives.
Launched in May, Pandora’s Essence collection continued to build pace, taking a 3 percent share of business for its first full quarter of sales, at 169 million Danish kroner, or $24.3 million.
“That’s quite a quick ramp up and quicker than our previous collection,” noted Lacik, adding that it helped enter a segment where Pandora previously had limited presence.
“Half of the growth has been incremental with new consumers coming into the brand for the first time, and that’s a great outcome by market and product category,” he added.
Collaborations, part of the company’s core offering, saw a 6 percent like-for-like contraction, which executives attributed to tough comparisons against the previous year’s results boosted by the “Disney 100” collection.
Lacik said its new range inspired by Netflix’s “Stranger Things,” launched on Oct. 24, seemed off to a good start and that the hit sci-fi series’ “strong and loyal following” was an interesting audience for the brand.
Across geographies, the strongest growth was in the “Rest of Pandora” grouping of markets outside the U.S. and Pandora’s four European markets of the U.K., France, Germany and Italy.
Accounting for 35 percent of the jeweler’s business, it grew 14 percent in like-for-like terms. Meanwhile, U.S. saw a “robust” 6 percent like-for-like rise.
Factoring in the addition of new stores in the country, the American market’s performance was 14 percent in organic terms, “even better in the current backdrop,” according to Lacik.
On key European markets’ 4 percent increase, he deemed the territory “relatively healthy” with a good outlook in the mid- to long-term.
Lacik said the American and European figures were “very, very good” and a sign of Pandora’s growing lead against its competition in light of a jewelry market in Europe and North America he described as “probably in the negative.”
As for China, where it logged a 33 percent slump in like-for-like sales, the CEO said the result was disappointing but he viewed it as “a future opportunity rather than a current headache” given its 1 percent share of the business.
With “work to do on the brand” there and an overall dismal macroeconomic outlook for the market, he did not expect immediate significant changes but reiterated Pandora’s commitment there.
Overall, Lacik said Pandora’s four growth pillars were delivering. Efforts on the distribution network were paying off, whether in physical stores or with e-commerce, which grew by 20 percent.
Personalization options such as on-the-spot engraving options were welcomed by consumers and will be available in some 1,450 stores by the end of 2024, he said.
With jewelry “a low purchase frequency category” and a discretionary one at that, the CEO said remaining top of mind was key, with strong messaging and media presence investments.
Boyer later said Pandora’s marketing spend for the third quarter was up 11 percent in absolute terms but remained in line with last year when it came to the proportion of revenue it represented.
The Danish company announced in October the nomination as chief marketing officer of Berta de Pablos-Barbier, a veteran of the luxury and consumer goods industries who most recently served as president and CEO of LVMH Moët Hennessy Louis Vuitton-owned Champagne brands Moët & Chandon, Dom Perignon and Mercier.
She succeeds Mary Carmen Gasco-Buisson, who left the company after a two-year tenure to become CEO of Unilever Prestige beauty in the U.K.
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