Jewellery giant Pandora has launched a “forceful programme” to help the business bounce back from disappointing revenue.
Following an “unsatisfactory” third quarter, Pandora has adjusted its financial forecast for the year and taken immediate action to improve business and move into its next phase of maturity.
The company reports: “The new leadership of Pandorahas undertaken a health check of the business. Pandora continues to have a strong and superior business model including a leading brand position, global retail footprint, excellent creative and innovation capabilities, and an unrivalled production set-up with high craftsmanship, low cost and flexibility.
“But the health check also shows that there is a need to change how Pandora operates and that there are significant unexploited opportunities to improve efficiency.”
Against this backdrop, the following priorities have been identified:
- There is a need to redirect strategic focus towards driving like-for-like growth rather than total growth. There is also a need to pursue further initiatives to drive like-for-like growth
- Continued success requires more disciplined execution in all parts of the value chain as well as much closer coordination across the company. This implies for example a different cost efficiency and capital allocation mind-set and a significant change in retail execution excellence
In order to act swiftly on these conclusions, Pandora has commenced Programme NOW, which will focus on pursuing cost opportunities, reducing working capital, reigniting sustainable like-for-like driven revenue growth, and lifting Pandora to the next level of maturity, operating as a much more unified global company.
As a first step in the programme, acquisitions of franchisees will be significantly reduced.
With negative like-for-like growth in the physical stores, acquisitions of franchise stores are becoming less attractive. Furthermore, with significant growth in the eStore the company will focus on developing omni-channel in well-developed markets and open fewer new stores, focusing on markets with white space.
Net store openings during 2018-2022 are expected to be lower than the current guidance of 1,000 stores in total (of which around 250 stores are still expected to be opened in 2018). The number of net store openings will also be impacted by more store closings going forward as the eStore grows.
The revised network expansion strategy has impacted the expected FY 2018 tailwind from forward integration from DKK 1.4 billion to DKK 1.2 billion, equivalent to 1 percentage point of growth for FY 2018. In 2019, acquisitions made in 2018 and stores opened during 2018 are expected to generate additional revenue of close to DKK 1 billion.
Looking ahead, Pandora has made an initial review of all cost categories and identified significant opportunities to reduce costs in several categories.
Investigation into further initiatives to support like-for-like growth are currently being conducted. The initiatives include enhanced marketing, personalisation, digital and eCommerce capabilities as well as improving the consumer experience in the physical stores. Early analysis also shows that product promotions and mark-downs have a role, but can be reduced through a structured, data-driven approach with little or no impact on long-term profitable growth
The firm also says it needs to revisit how and where decisions are made, how the company operates and lift capabilities in a number of important areas.
Programme NOW will be further developed, and Pandora will provide a detailed update in connection with the full year announcement in February 2019.