Pandora: Sales in the Northeast US are lagging

Copenhagen, Denmark--To combat what it says are sluggish sales in the Northeast, Pandora said it will “refresh the network,” starting with the purchase of the Pandora stores owned and operated by Hannoush Jewelers. 

Pandora announced Tuesday that it is paying $29 million for Hannoush’s 27 stores, their inventory and other assets. It plans to sell five of the concept stores that are located outside the Northeast region to existing franchisees. 

Then the Danish jewelry brand will sink at least $6 million into the remaining 22 stores to upgrade them to the new “Evolution” store concept. 

While the acquisition is subject to certain conditions, Pandora said it plans to begin operating the stores late in the third or early in the fourth quarter. 

Hannoush was Pandora’s largest franchisee in the Northeast, accounting for 25 percent sales in the region. Norman Hannoush could not be reached for comment on the transaction late Tuesday. 

Pandora’s announcement was made Tuesday morning, in conjunction with the release of its second quarter sales results. 

Total U.S. sales rose 3 percent (8 percent in local currency) year-over-year during the period. Pandora said the expansion of its network and ring sales, which accounted for 10 percent of all U.S. sales in the second quarter, drove the local currency sales growth. 

Same-store sales at the company’s concept stores were up 2 percent.  

“The U.S. is generally performing well with its 23rd consecutive quarter of like-for-like sales growth,” Pandora CEO Allan Leighton said. “All regions in the U.S. are achieving good mid-single digit like-for-like sales-out growth, apart from the Northeast.” 

He said the Northeast is Pandora’s oldest region in the U.S., thus the need to “refresh the network,” which is beginning with the purchase of the stores operated by Hannoush. Pandora did not respond when asked if it plans to buy out other retailers that own and operate its concept stores.

Total global sales for Pandora hit $455.1 million, an increase of 32 percent (37 percent in local currency). 

Gross margin and profitability were up as well--gross margin rose from 66 to 70.7 percent, and net profit was up 54 percent, from $77.2 million to $118.7 million. 

The company raised its expectations for the fiscal year, projecting sales to hit 11 billion Danish krone ($2 billion) up from 10.5 billion Danish krone ($1.9 billion). 

Also on Tuesday, Pandora announced a new partnership with The Walt