Jewellery giant Pandora has seen an improvement in like-for-like following the brand relaunch, but the overall Q3 performance was burdened by the commercial reset.
Pandora initiated its brand relaunch at the end of August – the first important milestone in the journey to strengthen the brand’s relevance among today’s consumers.
The business says the early results of the initiatives are “encouraging”, with positive consumer response to the new visual identity, online stores as well as the pilot concept stores.
The effect on like-for-like from the brand initiatives and the increased media spend was offset however by a deliberate reduction of promotions.
For the business as a whole, Q3 organic growth was -14%, impacted by change of payment terms in Italy compared to last year (shift of revenue from Q3 to Q4 2019) and continued clean-up of wholesale inventory through inventory reduction.
In the UK market, Pandora generated like-for-like of -10% in Q3 2019 with similar performance in the online store and the physical stores. This represents a performance improvement in the physical stores compared to both Q1 and Q2 despite a weakening retail environment in August and September as Brexit uncertainty impacted general consumer demand.
Following the media investments in Q2, traffic into the physical stores in UK continued to develop well into Q3, indicating some halo effect. Q3 media investments were initiated mid-September 2019 with a similar spend as in Q2 2019. The growth in the UK online store deteriorated in Q3 compared to Q2 driven by less discounting – the share of revenue from the Sales Tab decreased from 29% in Q3 2018 to 11% in Q3 2019.
In the UK, the initial results from the new store concept, which has been rolled out in six locations across the globe, show a positive impact on traffic and sales, with the brand revealing consumers are spending more time in the new store format.
The new charms bar has been particularly well received, indicating a successful implementation of increased self-discovery and engagement
Five additional full-store refurbishments are planned for November and December
The new online store was successfully launched globally on August 29 and included the new visual identity, cleaner visuals, better product imagery and redesign of listing and product pages to optimise navigation and speed. There was a significant underlying performance improvement offsetting the negative impact from less promotional activity (hiding of the Sales Tab). The reduced use of the Sales Tab meant that the full-price unit sales ratio increased by 12% in Q3 2019 compared to Q3 2018.
Pandora says the underlying traffic trend supports the expectations of an improving performance during Q4 and a strong Christmas trading.
President and chief executive officer of Pandora, Alexander Lacik, comments: “Q3 was an important milestone for Pandora. Our brand initiatives that started in late August receive good feedback from consumers, and the early positive indications are supporting our expectations for solid Christmas trading.
“We continue to believe that we will see an improvement in like-for-like in Q4 although the exact magnitude is clearly subject to uncertainty. Q3 financial results were marked by our deliberate Commercial Reset, and we will continue to make any necessary decisions that support the long-term health of Pandora.”
The financial guidance for 2019 is unchanged for like-for-like, and the EBIT margin guidance is narrowed towards the lower half of the previously guided range.
To fully clean up inventories in the wholesale channel, sell-in to partners will temporarily be suppressed.
The 2019 organic growth is now expected to be “-7% to -9%”. The EBIT margin is expected to be “26 – 27%” reflecting the change of the organic growth guidance and partly offset by additional cost reductions.