Pandora Produces Charming Q3 Sales and Profit Gains

Danish jewelry company Pandora said Tuesday that third quarter revenue increased 14.3 percent, year-over-year, to DKK 1.79 billion ($308 million) with double-digit gains across all geographical markets. Net profit for the period increased by 11.4 percent to DKK 380 million ($65.2 million).

This is a strong turnaround when compared with second quarter results in which the company—best known for the manufacture, distribution and marketing of silver charm jewelry—said its sales fell by 9.5 percent to 1.26 billion DKK ($210.2 million) with profit during the same period down 89.9 percent to 63 million DKK ($10.5 million).

Pandora also said Tuesday that its stock balancing plan (replacing discontinued stock) is continuing as planned. In the third quarter, the company received returns of discontinued products with a wholesale value of DKK 86 million ($14.7 million), and replaced it with merchandising costing DKK 127 million ($21.8 million). In 2012 Pandora received returns of discontinued products valued at DKK 609 million ($104.6 million), and replaced DKK 599 million ($102.8 million).

Revenue by geographic region is as follows:

• Americas increased by 21.9 percent (9.5 percent in local currency), with U.S. sales up 15.8 percent (2.6 percent in local currency).
• Europe increased by 13.1 percent (11 percent in local currency).
• Asia Pacific decreased by 10.7 percent (17.3 percent in local currency).

Branded revenue as percentage of total revenue increased to 81.3 percent, compared with 73.6 percent in third quarter of 2011. Gross margin was 64.1 percent, compared with 73.6 percent in the third quarter of 2011.

EBITDA margin was 28 percent, compared with 34.2 percent in Q3 2011, a decrease of 6.2 percent to DKK 503 million ($86.3 million). EBIT margin was 25.8 percent compared with 32.2 percent in Q3 2011, an 8.5 percent drop to DKK 463 million ($79.5 million).

The company, which sells its jewelry through retail jewelers and its own branded retail stores, updated its outlook, saying it expects revenue for 2012 to be above DKK 6.3 billion ($1.08 billion), from its previous guidance above DKK 6 billion.

“I am happy to report that we continue to perform in line with our ‘18 months turn-around plan,’” said Björn Gulden, Pandora CEO. “Third quarter developed even a little better than we expected and we have, based on the tailwind from the currency development, decided to slightly upgrade our revenue guidance. One of our major initiatives ‘The stock balancing campaign’ was continued, mainly impacting the U.S. and third-party distribution, during Q3 2012. We have now largely concluded the campaign and it will, as communicated earlier, be finished by end of 2012.”

Gulden added its spring merchandise sold well and its fall merchandise had a strong start for the third quarter.

“The year is not yet finished,” he said. “We have our most important quarter to come, but we feel confident that our improved product, our lower prices and our other operational improvements will put us in the position of achieving our updated financial goals for the full year.”

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