Jewellery giant Pandora says its business transformation programme is making solid progress as its results for the first quarter are released.
As expected, Pandora’s Q1 2019 financials were weak and impacted by the commercial reset initiated as part of Programme NOW.
During Q1 2019, Pandora progressed well with Programme NOW – its business transformation programme that has comprehensive impact on the organisation, operations and culture.
As a foundation for its upcoming brand re-launch, Pandora initiated a commercial reset including fewer promotional activities, reduction of sell-in packages and improvement of inventory levels. The reduced sell-in packages and other wholesale inventory movements are estimated to have impacted organic growth by -5 percentage point in Q1 2019.
Total like-for-like sales-out growth (like-for-like) for the company decreased by 10% in Q1, driven by lower traffic in physical stores. The e-store cited a 7% increase in sales.
Organic growth ended at -12% reflecting the decrease of wholesalers’ inventory partly driven by the reduced sell-in packages.
During the quarter the firm says the UK market was negatively impacted by the general uncertainty related to Brexit. Traffic in physical stores was the driver of the negative like-for-like at -13% as the conversion rate in physical stores was stable. The revenue growth in the UK eStore was flat compared with Q1 2018.
As part of Programme NOW, the UK, China and the US have been defined as ‘Beacon’ countries where new initiatives and commercial pilots will be conducted at high pace with subsequent roll-out globally if the pilots prove successful. As such, Pandora will significantly increase marketing spend in the UK during Q2 2019.
While Programme NOW will mainly support revenue growth from late 2019, Pandora is currently testing a number of commercial initiatives as preparation for the brand re-launch. The firm says the initiatives show encouraging results and include pilots with celebrity and influencer collaborations.
According to Pandora, the most important test is the initiation of significant marketing investments in the UK, US and China, which are launching this month (May 2019). The investments are expected to demonstrate the potential to drive profitable revenue growth.
Programme NOW cost reduction initiatives tracked well in the first quarter. Pandora is rapidly changing the cost mind-set and performance culture and has made significant progress in several areas including productivity improvements in Thailand.
Chief Financial Officer, Anders Boyer, states: “Programme NOW is progressing rapidly and is creating a real transformation of our business, culture and organisation. As expected, the first quarter was characterised by continued weak like-for-like further burdened by our deliberate commercial reset. While the first quarter emphasises the need for our planned brand re-launch, it is encouraging to see that our initial commercial pilots and marketing tests to Reignite a Passion for Pandora show good results.”
Following its Q1 results, the company’s financial guidance for 2019 is unchanged.