Pandora, China'S Business Stagnation, Opening Shop Shop Passenger Flow Is Almost Zero

In the annual performance report, Pandora A/S Pandora set a 3%-6% range for the expected decline in organic income in 2020, and the Danish jewellery's share price fell 2.5% on Tuesday.

In 2019, Pandora A/S Pandora's comparable sales and organic revenues fell by 8% compared to the same period last year, and the seven national markets were shrinking. The new CEO Alexander Lacik, who took office less than a year ago, stressed that the group has achieved some success in its business recovery. Three of the four major European markets have recovered comparable sales growth in the fourth quarter, and the overall sales decline in the four quarter has narrowed from 4% in the three quarter to 4%, and the decline in organic income has dropped from 14% to 1%.

However, the group's efforts to boost its performance are at risk of being destroyed by last year's fourth largest market, China's pneumonia epidemic. Alexander Lacik revealed at the analysts' conference that 70 of the 240 stores in China were shut down according to regulations. Most of the remaining shops were located in shopping malls, and the passenger flow was almost zero. He bluntly said that China's business was in a "static" state, and sales showed a "unprecedented" decline.

In 2019, Pandora A/S Pandora achieved 1 billion 970 million Danish kronor in China, organic income fell by 1% year-on-year, and the fourth quarter fell by 18%, the worst in seven markets. Last year, overseas consumption of mainland, Hongkong and Chinese tourists contributed 10% of the total revenue to the group, but the four quarter accounted for only 5.3% of the Chinese market.

Alexander Lacik acknowledges that the group's investment in the Chinese market is insufficient, and their brand positioning in the local market is not clear. Chinese consumers believe that Pandora Pandora is a fashion jewelry brand, so there is no sense of emotional leading brand restarting activities. Moreover, fashion luxury brands compete in the fourth quarter, especially the double eleven, which is a great pressure on Pandora Pandora as a luxury luxury jewellery brand.

Pandora A/S Pandora's fourth quarter adjusted EBIT rose 11% to 2 billion 806 million Danish kronor, which was better than the market's Danish kronor 2 billion 750 million ddk, which was roughly the same as that of the previous year. The adjusted EBIT decreased by 9% to 5 billion 854 million DKK throughout the year, and the income fell 4.1% to 21 billion 868 million dkrona.

Even if adjusted for the fourth quarter, the EBIT profit margin has improved for the first time since the three quarter of 2017, a sharp rise of 330 basis points to 35.3% over the same period of the previous year. The management still expects that the profit margin in the 2020 fiscal year will be reduced from 26.8% in the previous fiscal year to more than 23%.

Pandora A/S Pandora began restarting the brand from the end of August, bringing the largest promotional fund in the history of the brand innovation into new store design, celebrity endorsement and cooperation IP, and the flagship store such as self run shop and Tmall also showed a new look. Annual marketing expenses accounted for 12.3% of revenue, far higher than 9.4% in fiscal year 2018, and the group hired Carla Liuni, Bulgari Carla's former global marketing and communications vice president, as chief marketing officer.

Alexander Lacik told analysts in November that although the brand reboot has been effective, it has only slowed down in 2020. In addition, due to the unpredictable development of the new pneumonia epidemic, the current annual performance outlook does not cover the relevant impact. Alexander Lacik said it is not yet able to predict whether the overall sales growth will be resumed in 2021.

As of December 31st, Pandora A/S Pandora had 2770 concept stores worldwide, a total of 65 stores throughout the year, while other sales outlets decreased by 366 to 4657 stores.