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Pandora braces for recession despite resilient demand
Global Banking & Finance Review®
Company
By Nikolaj Skydsgaard
COPENHAGEN (Reuters) -Danish jewellery maker Pandora reported third-quarter sales just above expectations on Tuesday and said it is braced for recession even though shopper demand has proven resilient in the face of soaring living costs.
“Despite macroeconomic and geopolitical uncertainty, the shopping patterns of our consumers are so far largely unchanged,” Chief Executive Alexander Lacik said in a statement.
Pandora still expects full-year organic growth between 4% and 6% and reaffirmed an outlook for an operating profit margin at 25-25.5%.
Shares in Pandora rose 6.5% when the Copenhagen blue-chip index opened on Tuesday.
“We are already taking precautionary measures to ensure profitability should circumstances change,” Lacik said.
The company has cut back on promotional activities and raised prices on a third of its products by 4% on average.
Retail data showed traffic in Pandora’s stores increased in the third quarter while the number of products bought by each customer also remained the same, Lacik told Reuters. Only Italy has shown signs of weakening demand.
The world’s largest jewellery maker by production capacity said sales in the United States, its biggest market, dipped by 3%. It attributed the expected decline to the end of the U.S. government’s stimulus payments to help citizens ride out the COVID-19 pandemic.
The company reported third-quarter sales of 5.26 billion Danish crowns ($712.64 million), slightly above an average of 5.16 billion crowns expected by analysts in a poll by the company.
Third-quarter results showed a “surprisingly resilient sales environment”, Jefferies analysts said in a note, adding that this looks promising for the holiday season in the fourth quarter.
Pandora also announced it would pay a total of 5.3 billion crowns to its shareholders this year, equating to about 13% of its market capitalisation. It has already paid out 4.3 billion in dividends and share buybacks.
($1 = 7.4371 Danish crowns)
(Reporting by Nikolaj SkydsgaardEditing by Stine Jacobsen and David Goodman)
Organic growth refers to the increase in a company's sales and revenue generated from its existing operations, without relying on mergers or acquisitions.
Market capitalisation is the total market value of a company's outstanding shares of stock, calculated by multiplying the share price by the total number of shares.
A financial crisis is a situation in which the value of financial institutions or assets drops significantly, often leading to widespread economic instability.
Consumer perception refers to the way consumers view and interpret a brand or product based on their experiences, beliefs, and feelings.
Retail trade involves the sale of goods and services to consumers for personal use, typically through stores or online platforms.
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