Pandora reduces FY expectations amid ‘unsatisfactory Q3’

Pandora has reduced its full-year expectations after experiencing an “unsatisfactory” third quarter in 2018.

In Q3 group revenue decreased 3% in local currency due to “timing of shipments, change of inventory levels in the wholesale channel and negative total like-for-like”. Revenue from its estore increased 52% in local currency, up from 5% in Q3 2017, and revenue from wholesale decreased 27% in local currency.

EBITDA was reported as DKK 1,445 million (£169.3m) in Q3 2018 compared with DKK 1,965 million (£230m) in Q3 2017. EBITDA margin was 29.% (37.8% in Q3 2017) driven by several “one-off factors”, including timing of shipments and change of inventory levels in the wholesale channel.

Due to the performance of a “lower than expected tailwind” from forward integration, as well as a “weak start” to the fourth quarter, mean full year revenue growth is now expected to be 2-4% in local currency, compared with the 4-7% previously. Although, Pandora said EBITDA margin guidance remains unchanged at around 32%.

Following a health check of the business, the company has launched ‘Programme Now’. As a first step in the programme, acquisitions of franchisees will be significantly reduced, and the retailer will also open fewer stores focusing on selected key markets with white space areas.

The programme will focus on pursuing cost opportunities, reducing working capital, reigniting sustainable like-for-like driven revenue growth and “lifting Pandora to the next level of maturity”.

CFO Anders Boyer said: “The third quarter results were unsatisfactory and we adjust our full year guidance. We have reviewed our business and decided to launch a forceful programme with the aim to materially reduce costs across the company to free up resources to invest in sustainable like-for-like growth.

“At the same time, we have to lift Pandora to the next level of maturity operating as a more unified global company. We have taken the first major step in the programme today by changing our network expansion plan. We have confidence in a strong future for Pandora and will use 2018 and 2019 to re-set the business.”