Pandora’s U.S. Revenue Falls in Fourth Quarter

Results were impacted by the closure of hundreds of multibrand stores

Pandora’s U.S. revenue fell 5 percent in the fourth quarter of the year, because of the company’s thinning of its store network and a comp dip at its physical stores.

The company’s fourth-quarter revenue totaled DKK 1.377 billion (about $200 million), a 5 percent fall from the year before (6 percent in local currency). The company’s closure of hundreds of U.S. multibrand stores during the year hurt results, with the company estimating the impact at DKK 290 million (about $41 million). Excluding the closed stores, revenue grew 14 percent.

Despite the drop, Pandora CEO Anders Colding Friis said in a conference call following the release of the results that the dramatic measure was worth it, adding that the company expects to recapture the lost business “over time.”

“We think we needed to do a good cleanup in the U.S.,” he said. “What we would like to do is to have our concept stores in the U.S. and supplement that with shop-in-shops. If you look at what we did with Jared, where we transferred the gold dealers we had before and converted them to shop-in-shops, that is a good indication of what we plan to do with the multibrand dealers in the U.S.”

Comps at Pandora’s U.S. concept stores grew 2 percent in the fourth quarter when counting the company’s eStore, but dipped 2 percent when factoring only brick-and-mortar stores.

“Following more than 30 quarters of positive like-for-like growth at our physical stores in the U.S., it was inevitable we would see negative like-for-likes sooner or later,” Friis said, citing a decrease in mall traffic and the growing importance of online.

Friis said the company is trying to balance the growth of its online channel with the continued prominence of its physical stores.

“We believe strongly that the two channels work well together and balance each other,” he said. “We do believe…if you are a consumer and want to buy fine jewelry, as we are selling in our stores, it’s something that people still want to go to a physical store [to buy].”

Sales of its signature charms took a particularly strong dip in the United States in the fourth quarter, falling 20 percent, said chief financial officer Peter Vekslund. Excluding the store closures, charm sales fell single digits in the United States, but Vekslund noted that the company was up against tough comps.

Other newly introduced jewelry items, such as necklaces and a locket, are doing well, Friis said.

Overall, though, Pandora turned in strong numbers for the quarter, with revenue rising 16 percent to DKK 6.6 billion (about $950 million). For the year 2016, worldwide group revenue rose 21 percent to DKK 20.28 billion (about $2.9 billion).

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JCK News Director

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