PARIS — Pandora continues to shine.
Bouncing off a year of strong growth in its largest market, the U.S., and continued improvements in its operating model, the Danish jewelry-maker is upbeat about the future.
Pandora said Wednesday that it anticipates total organic sales gains of between 3 and 6 percent this year — seen by analysts as cautious due to ongoing uncertainty over pandemic-related restrictions and an anticipated flattening of the U.S. — and raised its outlook for 2023 by 1.9 billion to 2.2 billion Danish kronor, or $291.5 million to $337.5 million, to between 27 billion and 28 billion kronor, or $4.1 billion and $4.3 billion.
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“This is testimony to the operational and commercial improvements we’ve made in the last couple of years,” Pandora president and chief executive officer Alexander Lacik told analysts during a conference call to discuss the company’s 2021 results. “Our model is clearly working and Pandora is well placed for future growth.”
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This year is off to a “solid” start, the firm said, with organic growth of 22 percent in January year-over-year, in part thanks to strong comparisons due to lockdowns a year ago.
“Current trading commentary is encouraging,” said RBC analyst Piral Dadhania in a research note. “However, the lower end of the…guidance range may disappoint the bulls on the name, which we believe reflects natural caution given the uncertain consumer outlook and cost of living squeeze, which could impact discretionary spending.”
He continued, “In 2022, it will face a more difficult base of comparison, and demand could be pressured by inflation and potential spend rotation into services as economies reopen post COVID-19 Omicron variant.”
“Essentially 2022 is going to have the same core ingredients as 2021,” Lacik told WWD.
Plans for the year include a rollout of the company’s new store concept, which was trialed in the fourth quarter in three locations in Italy, the U.K. and China. The brand plans to launch 10 more such boutiques during the first half, before a global rollout in the third quarter. Store refurbishments are also on the cards for the year, Lacik said, with a focus on North America and Latin America as well as China, providing the market context there improves.
Pandora will also begin the global “sequential” rollout of its Brilliance lab-grown diamonds offer, which was piloted in the U.K. last year, although Lacik would not be drawn on when and where the line would launch next.
A softening of the U.S. market is to be anticipated in the months to come, Lacik said. “Last year, we took note of the unusual market growth in the U.S., which was underpinned by stimulus measures,” he explained. “Last year, the market grew by 30 to 35 percent, which obviously is very unnatural, and we grew 50 percent, so we outperformed the growing market. I think it’s not unrealistic to expect that there’s going to be some correction.”
The company continues to hold off on its plans to relaunch in China, where its business was “unsatisfactory” in the tail end of 2021, although it continues to believe in its long-term potential in the country. Pandora’s fourth-quarter sell-out there fell 39 percent on a two-year stack. “The conditions are very unpredictable…the return on investment would be very risky,” Lacik told investors of plans for the relaunch, which includes campaigns shot locally, with local talent, and a tailored assortment. “Let’s hope that after the Olympics, these restrictions are going to ease a little bit,” the CEO said. “If that’s the case, then we would relatively quickly go to market with our plan.”
Overall, Pandora reported fourth-quarter sales up 12 percent in sell-out terms versus the same period in 2019, notably thanks to a 39 percent gain in the U.S. Sales were also strong across all of the company’s core markets, with the exception of China. In reported terms, total revenues gained 14 percent to 9.01 billion Danish kronor, or $1.38 billion at current exchange, on the prior-year quarter.
The company said its core Moments platform had performed well, and that the relaunch of the Pandora ME line, targeting Gen Z, had been well received, with around a third of products reaching their target market and others recruiting lapsed consumers. “We had a very good experience with the relaunch, it vastly outperformed the original launch period and it’s on a good trajectory,” Lacik said.
The franchise, which was relaunched in October two years after its original introduction, represented between 3 and 4 percent of sales in the fourth quarter, he said. He hopes it will hit 5 percent this year.
“For us to put additional platforms out there, they need as a minimum to become a 5 percent share of business. That will ensure they have sufficient critical mass to support themselves,” he explained. “It’s hitting the mark in most markets early on, so I think we’re now going to continue supporting this platform properly this year, and I expect that exiting this year we should be more around the 5 percent mark.”
Operating profit for the quarter grew 21 percent to 2.68 billion Danish kronor, or $411.1 million, while net profit was up 6.1 percent year-over-year to 1.9 billion Danish kronor, or $291.5 million.
For the year as a whole, the jewelry-maker surpassed its sales and margin guidance, reporting organic sales growth of 25 percent on 2020 and an EBIT margin of 25 percent. Reported revenues were up 23 percent year-over-year, to 23.39 billion Danish kronor, or $3.59 billion. Operating profit stood at 5.83 billion Danish kronor, or $894.3 million, a 117.5 percent gain. Net profit grew 114.7 percent to 4.16 billion Danish kronor, or $638.1 million.