Pandora Q3 UK sales climb 35% to GBP43.7m

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Global revenue growth of 26% reported across all regions for brand.

Pandora has announced its Q3 2014 financial results today, with UK sales growing 35.1% compared to the same period last year, driven by increased store traffic, an improved product offer and new concept store openings.

The UK remains a strong market for the brand, with 37 concept store openings in the UK since Q3 2013, and like-for-like sales in the UK increasing 20.6%.

In terms of product lines, Pandora’s collection of rings continues to support like-for-like growth, with the category growing 50% in Q3 in the UK. More than 15% of revenue was generated by rings, confirming Pandora’s development into a rounded jewellery brand, with a shift away from purely offering charms and bracelets and growth in new categories.

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Nevertheless, Pandora’s charms remain its main product category, still growing significantly with a global increase of 22% in terms of cash flow from charms recorded in Q3 2013. Necklaces have also performed strongly for the brand, with revenue from the category increasing 50% during the period.

Pandora chief executive officer Allan Leighton said of the third quarter: “We are pleased with another strong performance, with our highest revenue and EBITDA in any quarter to date. All regions continued to perform well, driven by expansion of the store network, improving store execution, and continuously relevant products. In addition, the result of our focus on rings is particularly pleasing, with revenue for the category almost doubling in the quarter.”

GLOBAL FIGURES FOR Q3 
The Danish charm and jewellery brand continues on the strong trajectory reported throughout the year to date, with all regions driving a 26% increase in revenue in the third quarter and EBITDA increasing 33.8%.

Its global gross margin increased to 70.3% in Q3 2014, with a gross margin of 66.2% in Q3 2013. Net profit for the quarter was DKK725 million (£76m), compared with a net profit of DKK 612 million in Q3 2013 Pandora’s group revenue in Q3 2014 totalled DKK2.84 billion (£299m), an increase of 26.2% or 24.6% in local currency, compared with Q3 2013. In total, European revenue increased 30.4% (27.4% increase in local currency), while the Americas increased by 17.7% (17.8% increase in local currency).

In Europe, the number of branded stores in Europe increased by 101 stores in Q3 to a total of 2,735 stores, in line with Pandora’s overall strategy to increase branded sales. The total number of stores in Europe decreased with 266, as a consequence of 367 fewer unbranded stores compared to the end of Q2 2014, including the closure of 162 silver stores in Germany. Elsewhere, Asia Pacific sales increased by 43.2% (40.5% increase in local currency) and revenue from concept stores was 55.9% of revenue and increased 43.0%.

PRODUCT OFFER
The brand’s like-for-like growth in Q3 is said to have been driven, among other things, by the positive reception of two new collections launched during the quarter, Pre-autumn and Autumn. Of these collection, the Pre-autumn range was a considerably larger collection compared to the same collection last year, introducing 25 new products in 2014 versus five in 2013. 

For the quarter, around 50% of sales were generated by products launched within the last 12 months, which is similar to Q3 2013.

STORE OPENINGS
Pandora has continued its push of new store openings in the quarter, with net 93 new concept stores luanched, including 22 in the Americas, 58 in Europe and 13 in Asia Pacific.

During the quarter Pandora added 43 owned and operated concept stores to the network of which 22 were acquired by Pandora from US jeweller Hannoush at the end of the quarter. The remaining was opened mainly in Germany and Brazil.

Pandora has increased the branded store network by 448 points of sale since the end of Q3 2013.

It is in the process of closing underperforming unbranded stores, across all regions in a bid "to improve the quality of revenue and focus on branded store performance". The brand has closed 952 stores, with 388 white and silver stores closed in Q3, primarily in Germany, Netherlands and Italy.

At the end of Q3 2014, the total number of points of sale was 9,841 a decrease of 504 compared with Q3 2013.

OUTLOOK
Looking ahead, Pandora plans to expand the store network further, and now expects to add more than 300 new concept stores in 2014 compared to previously expected more than 275. A proportionally higher share of owned and operated (O&O) stores is expected to be opened in the fourth quarter, compared to the same period last year.

The brand’s new chief executive officer, Anders Colding Friis, was anounced on August 28 2014. He will succeed Allan Leighton in March 2015, after the brand reports its full-year results for 2014.

Peter Vekslund, currently Senior Vice President, Head of Finance, will succeed Henrik Holmark as CFO of Pandora on January 1 2015.

FINANCIAL GUIDANCE FOR 2014
Pandora continues to operate its share buyback scheme, with the brand buying back 1,944,341 own shares at a total value of DKK817 million (£86m) in Q3.

Based on the strong performance in the third quarter of the year, Pandora has now decided to increase revenue guidance for 2014 to more than DKK11.5 billion (£1.2bn), having previously guided more than DKK 11.0 billion for the full year. The EBITDA-margin is expected to be more than 35%, against previously guided approximately 35%.

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