Pandora’s Troubles Continue as Q2 Profit Falls 90% and Revenue Drops 9.5%

Pandora Group, home of the international silver jewelry brand that became famous for its charm jewelry, had another disappointing quarter.

The Danish company with manufacturing facilities in Thailand said that year-over-year sales for its Pandora branded jewelry fell by 9.5 percent to 1.26 billion Danish krone ($210.2 million) in the second quarter of 2012. Profit during the same period fell 89.9 percent to 63 million Danish krone ($10.5 million).

Pandora reported losses in every region it operates. The company noted that a stock rebalancing campaign launched in the first quarter is a major reason for the disappointing results, which the company said are in line with expectations. It said it received returns of discontinued products valued at 183 million krone ($30.5 million) and replaced it with 310 million Danish krone ($51.7 million) worth of new inventory.

Björn Gulden, Pandora CEO, said the company will continue with the stock rebalancing program and will cap it at 800 million krone ($133.5 million).

“The execution on the stock balancing campaign continued into Q2 2012 and was very well received by our retail partners across all our markets,” Gulden said. “Even though the stock balancing campaign, short-term, hurts our revenue, cost ratio and profitability in 2012, the campaign has proven to be the right action to help our retailers improve the quality of their stock.”

By region, revenue results are as follows:

* Americas decreased by 5.1 percent (14.6 percent decrease in local currency)

* Europe decreased by 16.6 percent (17.4 percent decrease in local currency)

* Asia Pacific decreased by 8.1 percent (14.1 percent decrease in local currency)

Branded revenue as percentage of total revenue increased to 75.3 percent in the second quarter of 2012, from 73.4 percent in Q2 2011; and gross margin was 67.9 percent in Q2 2012, compared to a gross margin of 74.4 percent in Q2 2011.

Pandora projects revenue for 2012 to be above 6 billion krone ($1 billion), down from 6.66 billion krone ($1.1 billion) in 2011.

“Feedback from our retailers on our Autumn/Winter 2012 collection has been very encouraging and with an additional 94 new Concept stores opened in H1 2012, we are on track to deliver on what we have promised the market in our financial guidance for the full year,” Gulden said.

Pandora also announced a number of organizational changes. Among them:

* Scott Burger, former COO of Pandora North America, was named president for Pandora North America, succeeding John White, who is taking up a position outside Pandora.

* Sten Daugaard, chief development officer, has been assigned to head Pandora's Asian headquarters in Hong Kong “in order to secure senior management attention to an important future region.”

* David Allen, former VP of Sales of Pandora Australia, has been named president of Pandora Australia with the responsibility for commercial operations in Australia, New Zealand and the Pacific, succeeding Karin Adcock, who retired as planned on July 1.

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