Pandora’s UK revenue soars 60% in Q2 2014 report

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Gross profit of GBP 191.7 million driven by 200% growth in ring sales.

Pandora has released its interim financial report for Q2 2014 citing a revenue increase of 31.7% compared to 2013, and gross profits of DKK 1.79 billion (£191.7m) driven by all regions, but particularly the UK, Other Europe and Asia Pacific.

Group revenue rose 31.7% (37.1% in local currency) to DKK 2.54bn (£270m), with overall gross profit soaring to DKK 1.798bn (£191.7m) corresponding to a gross margin of 70.7% compared to 66.0% in Q2 2013.

Additionally, EBITDA increased by 68.5% to DKK 893m (£95m) for the quarter, corresponding to an EBITDA margin of 35.1%, compared with an EBITDA margin of 27.4% in Q2 2013.

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Geographically, the European market showed the biggest increase of 65.7% (63.9% in local currency), compared to 50.5% growth in the Americas and 57% in Asia Pacific.

Net profit for the quarter was DKK 662m (£70.5m), compared with a net profit of DKK 431m (£45.9m) at the same point last year.

Free cash flow was DKK 547m (£58.3m) in Q2 2014 compared with DKK 102m (£10.8m) in Q2 2013, giving Pandora the opportunity to buy back 1,744,863 own shares at a total value of DKK 658m (£70.1m). 

REVENUE DEVELOPMENT
Sales volumes increased by 28.5% compared to Q2 2013, with an average sales price of DKK 138 (£14.7) compared to DKK 134 (£14.2) last year. This increase was primarily driven by a higher share of revenue from rings, which are sold at a higher average price and produce greater sales at Pandora’s owned and operated stores.

Growth was driven across all regions, but particularly by the UK, Other Europe and Asia Pacific with demand increasing across all product categories. Rings showed the biggest percentage growth with a 200% sales boom compared to Q2 2013.

Pandora’s interim report also highlights the stellar success of its Mother’s Day and High Summer collections, which both out-performed last year in terms of revenue.

Throughout Q2, around 50% of sales were generated by products launched within the last 12 months, which is similar to Q2 2013, showing that constantly updated collections do have a significant impact.

EUROPE AND UK SALES
In Q2 2014, 41.8% of revenue was generated in Europe compared to 33.2% in Q2 2013, reaching DKK 1.064bn (£113m) for the quarter. This growth has been attributed to Pandora’s new markets in Italy, France and Russia as well as continued “positive movement” in the UK.

Revenue in the second quarter in the UK was DKK 285m (£30.3m), an increase of 60.1% or 53.2% in local currency, compared to the same point last year. This is due to an expanded store network, including 29 new concept stores compared to Q2 2013, as well as the continued success of the Pandora e-store.

The UK market has also benefitted from a continued focus on the rings category, with sales increasing by more than 200%. Like-for-like sales increased by 26.2% year-on-year, with strong results down to constant stock updates and replenishment.

During Q2 2014, the number of branded Pandora stores in Europe increased by 59 stores to a total of 2,634 stores, in line with Pandora’s overall strategy to increase branded-only sales.

RETAIL EXPANSION
Revenue growth was further supported by the continued expansion of Pandora’s branded store network, which since Q2 2013 has increased by 265 concept stores and 121 shop-in-shops. In the same period 661 unbranded point of sale were closed.

Pandora owned and operated stores now account for a 15% share of total retail revenue, compared to around 10% a year ago.

In Q2 2014, Pandora opened 77 new concept stores, including 17 owned and operated stores, with 46 in Europe, 20 in the Americas and 11 in Asia Pacific.

Underperforming unbranded stores, across all regions, are being closed in order to improve the quality of revenue and focus on branded store performance. At the end of Q2 2014, the total number of points of sale was 10,046, a decrease of 291 compared with Q2 2013.

Revenue from concept stores increased 47.1% to DKK 1.37bn (£146m), and constituted 54.2% of revenue for the quarter compared to 48.5% in Q2 2013.

PRODUCT OFFER
All product categories continue to perform well, driven by continued newness, as well as tailor-made category promotions, primarily focused around charms, bracelets and rings.

Revenue from charms was DKK 1.7bn (£181m) for the quarter, showing an increase of 21.4% compared to the same period last year, while revenue from silver and gold charm bracelets increased by 29.1%. The two categories represent 77.4% of total revenue in Q2 2014 compared with 83.2% in Q2 2013.

Revenue from rings was DKK 273m (£29m), an increase of 200% compared with Q2 2013. The category continues to do very well, driven by the improved offering, as well as a greater emphasis on rings in staff training, improved in-store focus on rings, as well as tailor-made rings campaigns in several markets.

The rings category represented 10.7% of total revenue for the quarter compared with 4.7% in Q2 2013.

In Australia and the UK combined, which are some of the most developed markets in terms of rings, more than 20% of revenue was generated from rings in the quarter.

Revenue from other jewellery was DKK 304m (£32m), an increase of 30.5% compared with Q2 2013. The growth was driven by most subcategories, in particular revenue from earrings and necklaces, both increasing by more than 50% compared to the same quarter last year. Other jewellery represented 11.9% of total revenue in Q2 2014 compared with 12.1% in Q2 2013.

OUTLOOK
Based on the strong performance in the first half of the year, Pandora has decided to increase its revenue guidance for 2014 to more than DKK 11.0bn (£1.17bn) (previously guided at more than DKK 10.5bn). Additionally, Pandora plans to expand its store network and now expects to add more than 275 concept locations compared to 225 as previously predicted.

Pandora chief executive officer Allan Leighton commented: “We have had another exceptionally strong quarter with positive progress across all regions. The growth was primarily driven by our new markets in Europe and Asia as well as by the UK. The US is generally performing well except for the Northeast where our plan to refresh the network has begun. All product categories had good growth, and Rings particularly so, with revenue from that category increasing 200% in the quarter.”

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