Pandora Earnings: Slow Development As Macroeconomic Headwinds Bite

We are maintaining our fair value estimate of DKK 930 for narrow-moat Pandora PNDORA as the company reported flat like-for-like sales and some margin pressure in the first quarter. The guidance for 2023 was increased slightly to negative 2% to 3% organic growth (negative 3% to 3% in former guidance) and the EBIT margin around 25%, unchanged from previous guidance. We view shares as attractive at current levels.

For the first quarter organic growth was 1%, with flat like-for-like 3% network expansion (but 2% offset by sales phasing). The operating margin came under pressure, despite price increases and less marketing spending, through business investments (for example in its new enterprise resource planning platform) and salary increases. A 4% reduction in marketing costs was linked by management to a media tender and is not expected to have a diminished advertising impact. It should still be 13%-15% of sales for the full year, notably as a brand relaunch in China is planned for the second half of the year. China contributed only 3% of revenue in the quarter, but holds significant potential for the group with the right investments into the positioning of the brand. Sales in the U.S., the company’s biggest market, were down 7% on a like-for-like basis unsurprisingly, following very strong growth in 2021, and supporting commentary from some luxury players, especially those exposed to less affluent customers.