- Forecast-beating Q4 profits
- Fresh DKK 4 billion buyback
- Growth to slow in 2025
Pandora (PNDORA:CPH) is something of a market darling, shares in the Danish jewellery giant having recently hit an all-time peak thanks to surging sales and management’s successful delivery against its ‘Phoenix’ growth strategy.
The Copenhagen-headquartered company delivered better-than-expected profits for the fourth quarter that included Christmas and also launched a fresh DKK 4 billion buyback.
Yet shares in the world’s biggest jewellery company by volume dulled 2% to DKK 1,346 on profit-taking after a stellar run, investors unnerved by a warning revenue growth and margins will be lower in 2025.
Management cautioned that the economic outlook ‘remains uncertain’, the charm bracelets-to-necklaces purveyor expects sluggish demand in Europe, while growth is likely to slow in Germany, where like-for-like sales surged 28% in last year’s final quarter.
DISCOUNTS DRAG
Operating profit for the fourth quarter to 31 December came in at DKK 4.15 billion.
That was up from DKK 3.67 billion a year earlier and ahead of the DKK 4.1 billion analysts were looking for, despite promotions around Black Friday driving ‘a slight drag on the gross margin’ according to the company.
Pandora said growth ‘remained solid’ through Q4, with the online channel performing exceptionally well.
Organic growth of 11% was driven by a sparkling performance in the US, but like-for-like growth in key markets in Europe was flat with France and Italy facing country-specific challenges.
The shining light was Germany, where strong Q4 growth of 28% will be tough to beat in this year.
Pandora continued to struggle in China, where like-for-like sales fell 10% in the final quarter, though the company said it ‘remains committed to build the brand in China and is currently considering the next steps on the journey’.
BRAND AWARENESS HARD TO BEAT
Led by CEO Alexander Lacik, Pandora is now guiding for organic growth of 7% to 8% for 2025, which would represent a slowdown on the 13% growth generated in 2024.
The jewellery brand also expects operating profit margins to come in at ‘around 24.5%’ this year, down from last year’s 25.2% return on sales.
Although growth looks set to slow near term, Pandora, whose global brand ambassadors include Halle and Chloe Bailey as well as Pamela Anderson, remains bullish about its long-term opportunity.
It holds the highest brand awareness in the industry and has growth left to go for in a highly fragmented jewellery market that has historically outpaced GDP growth.
Commenting on the results, Lacik said: ‘We are pleased with how we ended 2024, particularly given the challenging macroeconomic backdrop and a competitive holiday period. Execution of our Phoenix strategy continued to drive the brand forward throughout the entire year.’
Lacik added: ‘In 2025, we target another year of solid and profitable growth and we have all actions lined up to continue the strong development.’
Russ Mould, investment director at AJ Bell, observed: ‘For now, the US appears to be a strong market for luxury goods. Pandora’s above guidance organic growth was supported by robust sales across the Atlantic. The modest market reaction to the company’s optimistic tone likely reflects a previous strong run for the share price.’
Mould added: ‘Sales were flat in Europe and Pandora will be wary of being boxed in if the current strength in US spending begins to tail off.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Martin Gamble) own shares in AJ Bell.
