Hurricanes, Sluggish Retail Hurt Pandora in the Americas

Copenhagen, Denmark--The retail environment in the United States remains challenging, particularly for physical stores, Pandora said in reporting its third quarter 2017 results Wednesday.

In the quarter ended Sept. 30, the Danish bead brand’s U.S. sales totaled $174.2 million, compared with $177.8 million in Q3 2016, a decline of 2 percent in Danish krone (DKK) but an increase of 4 percent in local currency.

Pandora said any growth in sales was driven primarily by the opening of new stores, including the franchise stores it acquired during the quarter.

For the first nine months of the year, revenue was down 3 percent in the U.S. in both DKK and the dollar.

The company described the retail environment in the United States as “challenging,” with its online store seeing sales growth but physical stores continuing to struggle, and noted that “affordable” jewelry brands are being “increasingly promotional.”

It also noted that it lost about $7.8 million due to the hurricanes that hit the United States and Puerto Rico in Q3 and expects that loss to grow to about $23.4 million for the year.

In recent years, Pandora has pulled its product out of jewelry stores--including hundreds of independents in the U.S.--while also buying back concept stores once controlled by franchisees and opening more company-owned stores in order to, it has said, have better control over the brand.

This year in the U.S., Pandora purchased 50 concept stores from franchisees between Jan. 1 and Sept. 30.

Globally, Pandora’s revenue was up 13 percent year-over-year in the third quarter to $809 million.

Gross margin slipped from 75.1 percent to 74.2 percent.

EBITDA (earnings before interest, taxes, depreciation and amortization) was $306 million, with an EBITDA margin of 37.8 percent, down from an EBITDA margin of 39.9 percent last year.

Pandora said the drop was mainly due to unfavorable currency fluctuations and higher marketing expenses.

The Asia-Pacific region is becoming an increasingly important market for Pandora. The company’s third quarter results show that in the first nine months of 2017, the Americas accounted for 32 percent of global revenue, down from 36 percent in the same period last year, while Asia Pacific was at 23 percent, up from 19 percent last year.

“The results in the third quarter were in line with our expectations, with the underlying development showing positives as well as negatives,” CEO Anders Colding Friis said. “Most of our major growth markets--Germany, Italy, Australia and China--continued to show strong performance