Pandora’s Q1 sales and profits disappoint market

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Danish bead brand struggles in Germany, with Europe remaining slow.

Danish jewellery maker Pandora has missed its forecast of a 55 percent rise in first-quarter profit as price rises failed to match surging gold and silver costs, hitting its shares on Thursday.

The German market disappointed in the first quarter and Pandora’s heavy reliance on one product, charms and charm bracelets, remained a cause for concern, Reuters reports. Pandora, which makes jewellery in Thailand, said it had implemented price rise in most markets and was keeping its 2011 outlook intact, while its plans to open more than 250 new stores this year were unchanged, it said.

Pandora shares have fallen 15%, just above the lowest level since stock was sold at 220 Danich Crowns in an initial public offering ahead of its Copenhagen bourse debut in October.

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"Overall, the result is on the weak side" said brand analyst Michael Jorgensen. "They have a problem in Germany which is pulling them down today. Their exposure to charms has also gone in the wrong direction, and investors see a risk lying there. That is not exactly a positive development."

Pandora’s exposure to charms and charm bracelets in the first quarter rose, with sales of that product category now accounting for 84.3% of total sales, up from 79.6% in the fourth quarter of 2010.

Germany and Australia were the only two markets to record single-digit percentage revenue growth, while all other markets saw double-digit growth.

Within the Americas, Asia and Europe Pandora’s earnings before interest and tax rose to 637 million Danish crowns, missing a forecast for 674 million in a Reuters poll.

"We experienced strong underlying growth in the first quarter and implemented price increases in most markets to balance the impact of rising gold and silver prices," Pandora’s chief executive Mikkel Vendelin Olesen said.

"In general, there is some impact on volumes in the two to four months following a price increase, after which volumes gradually recover," he added.

Pandora said while feedback from customers had been cautiously positive overall regarding price increases, it had seen a moderate slowdown in some markets.

Performance in the Americas, including the United States which is Pandora’s largest market, and Asia was in line with first-quarter results, but some European markets have developed more moderately, the company said.

Pandora said it still expected 2011 revenue growth of at least 30%.

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