Pandora A/S (PNDORA) Earnings Call Transcript & Summary

Hi and welcome to Pandora's Capital Markets Day, A New Chapter of Growth. We first announced the new strategy in May, and then we gave a high-level overview. Today, we'll have an opportunity to go a little bit deeper into the various sections of our strategy. You will also have an opportunity to meet my executive leadership team today, and they will take you through their respective parts. We will present a comprehensive picture of the choices we are making. But having said that, I wanted to highlight 4 things that I think could be useful to keep in the back of your head as you listen in today. The first one is that the new strategy is an evolution rather than a revolution. Second point is that our financial objective is to drive a balanced bottom and top line growth. Thirdly, we'll seek to leverage our core assets. And what we're thinking of here is the very strong brand awareness that we enjoy, the widespread distribution network that we have built and thirdly, the very strong capabilities we have created when it comes to our manufacturing capabilities. And finally, the fourth one is that we see strong potential within our core. With this, we mean both by playing in the jewelry market as well as in the countries where we have established strong operating units. Today, we would like to highlight both the ambition and the direction of our strategic choices. In some instances, we will also be able to share with you some concrete examples of what this opportunity can look like. The gross list of opportunities will exceed the financial forecast that Anders will share at the back end today. But as you know, forecasting is far from a perfect science. And what's important here is to note that we have made very clear choices on which opportunities we're going after and in which order. And in order to realize these growth levers, we'll be highly selective and only invest behind sustainable propositions. Furthermore, we will ensure that each big bet has sufficient resources to succeed and is well synchronized throughout the entire value chain. At the end of the day, we all know that excellence in execution is what truly matters. We have hundreds of people joining the call today. While we already know many of you, we also recognize that there's a few new faces in the audience. So for their benefit, allow me to give a brief overview of what Pandora is and where we play. Now let's start by looking at the universe in which we operate. The jewelry market is large. It offers high margins and has experienced strong growth, typically ahead of GDP in the last decade. Asia and in particular, China, has outpaced both Europe and North America. With the continued rise of the middle class, we expect that the affordable luxury segment will continue to be well positioned for good growth in the future. The market remains highly fragmented. Even though there has been some consolidation, it's still a smaller part of this market. Another important observation is that brands in the jewelry space seem to be driving the growth of the category. And this is similar to what we have seen in other luxury segments in the past. Our view is that branded jewelry will have an increasing role when it comes to driving growth in jewelry in the future. This leads me into Pandora. We have built the highest brand awareness. 8 out of 10 women around the globe are familiar with our brand. And we are the largest jewelry brand in volume terms. We expect to sell a staggering 100 million pieces of jewelry this year. This unprecedented scale is what enables us to generate a strong profit and cash generation. Scale clearly matters. Our foundation has been built on the Moments platform, which today constitutes roughly 70% of our business. We see continued good growth potential on this platform. There is also a strong potential to establish further Pandora-branded platforms. This is within the jewelry space, but we will speak more about that later today. Next, we believe the brand is really well positioned in a very attractive category going into the future. Now let's take a look at the unique advantages that Pandora has built over the last 20 years. Pandora occupies a very distinct and ownable brand position. Our mission is to democratize jewelry, therefore, placing us squarely in the middle of affordable luxury. Our global distribution network gives us access to the world's consumer. A major advantage is that we are a direct-to-consumer brand. Close to 75% of all our transactions today go direct. Our crafting setup is unique in a couple of critical aspects. The vertical integration allows us high quality control, which is important in this category. It drives a competitive conversion cost and enables fast product innovation. We would like to think that our people, regardless of where in the value chain they are, belong to the top teams in the category. Sustainability has always been in the Pandora DNA. In the next chapter, we will increase our ambition and we will want to be a more positive force for change in the luxury segment. Now let's have a quick look at the journey of Pandora. Looking back at our young history of our company, we can see 3 quite distinct phases, the first one where the founder established the Moments platform and focused a lot on product and production capabilities. The second phase was characterized by Pandora quickly establishing a wide and deep distribution network globally. And I should mention that is a very profitable network that we have established. Thirdly is the chapter that's about to be written. Here, we hope that we can unfold the true potential of the brand by focusing on our customer and on the brand experience. But before we dive into the third chapter, I'd like to briefly touch upon something we call Programme NOW. At the end of the second chapter, the company started declining. Therefore, we have spent the better half of the last 2 years to stabilize the company and also put some important foundations in place. Let me cover some of the highlights. We have revitalized the brand by much stronger understanding of who our core customer is and therefore, also developing communication that suits them much better. We have invested far more in driving awareness of the brand behind a new media model. And the pay off in increased engagement, traffic and like-for-like sales is undeniable. We have step-changed our digital capabilities, both in terms of digital marketing as well as our e-commerce, which is coming quite handy during the pandemic when traffic to stores have been very limited. Our product portfolio has been restructured and slimmed down, leading to better availability, amongst other things. And we have applied a much more analytical and databased approach when it comes to our merchandising efforts. Finally and certainly by no means least important, is the organizational change we made last year, where we moved to a flat and very agile organizational setup. This allows us to leverage our global scale. And today, we can generate and disseminate insights from one corner of the world quickly across the entire network. This is a new, very competitive advantage that we have crafted. Now let's turn our focus to the future. The strategy which we have launched is focused on further developing our existing core business, where we see significant opportunities to generate growth. Our initial ambition is to grow at least in line with the market growth. We don't need to pursue completely new business areas in order to create growth as we see plenty of opportunities closer to home, and this is also a lot less risky as a growth strategy. The gross list of opportunities is rich, which also means that we don't need to nail every single one of them in order to meet the financial forecast. The strategy which we have launched is focused on further developing our existing core business, where we see significant opportunities to generate growth. Our initial ambition is to grow at least in line with the market growth. We don't need to pursue completely new business areas in order to create growth as we see plenty of opportunities closer to home, and this is also a lot less risky as a growth strategy. The gross list of opportunities is rich, which also means that we don't need to nail every single one of them in order to meet the financial forecast. In the mid to long term, we see interesting opportunities for Pandora to enter M&A, even possibly new product segments, and even geographic expansion. But we've made a deliberate choice to focus on the existing plan before we entertain those. Now before we get into the strategic framework, I would like to remind ourselves the reason why Pandora plays such a unique role in people's lives. We said that the third chapter is going to be about the brand and focus on our customers. So let's hear what they have to say. [Presentation]

So what these customers are saying is really the essence of what Pandora is all about. We have built this brand to allow people to express themselves in a very personal and unique way. Pandora is a story about the lives of hundreds of millions of people. Every day, people express who they are, what matters to them through their Pandora jewelry. Our jewelry is a way to express these loves. That's our purpose. We give a voice to people's loves. And Pandora pursues this by creating affordable, hand-finished, branded jewelry for the many rather than the few. Now let's zoom into our strategic framework. With the purpose in mind, we have set an ambitious plan for our company. We want Pandora to become the largest and most desirable brand in the affordable jewelry market. I would like to stress that it's both about size and desirability, not one or the other. We play in a market that is discretionary in nature. So to ensure long-term viability of any brand, it must be propelled, first and foremost, by being desired. At the heart of Phoenix, we keep the reason why we exist. It's rooted in a human truth, something that matters deeply to our customers. We have chosen 4 distinct growth pillars. The starting point is to ensure that we delight our customers across all touch points with a personalized brand experience. Here, we have also called out some geographic priorities. It is obvious that you need a solid foundation when you try to build something. We have put in place a good foundation in the last 2 years. This means we have a strong starting point, but it doesn't stop there. We will continuously develop those with a particular focus on the 5 that we have picked up on this chart. Finally, we have recently launched a new set of core values. They have been codeveloped together with our employees, and they have been designed to support our growth journey. Now let's first have a quick look at some of the foundations, followed by some further thoughts on the growth pillars. I wanted to highlight 3 things on the foundations before diving into the growth pillars. Our most important asset is the 26,000 people we have employed all around the world. We will continue to invest in developing this talent as well as investing in leadership programs. The second point I wanted to touch upon is our sustainability agenda. Today, we will announce further strong commitments to driving sustainability. And thirdly, I wanted to highlight the transformation from a traditional analog business into a modern company with an aggressive digital agenda. We believe that this will be a competitive edge in particular in the category we play, but we'll hear more about these things shortly. We have defined 4 pillars that will be driving the growth, all within our core business. As I mentioned, they are rooted in deep understanding of who it is we want to interact with, what matters to these people and then developing inspiring solutions regardless in which touch point we interface. We thoroughly believe that knowing more and connecting better with our existing as well as our prospective customers is the key to unlock more and sustainable growth. Today, we welcome about 700 million customer visits annually. The opportunity to convert more of these visits into transaction is our greatest potential. The traffic is there. Our aim is to dramatically increase our knowledge about each customer in order to provide an even better and more personalized journey. Finally, we have ample room to drive growth within existing geographies, where we can leverage the brand and the position we have built through our distribution model, but more on that later. Now plans are obviously always great, but without strong leadership, nothing much happens, does it? When I joined Pandora, my first priority was to ensure that we had a top team, a world-class top team. You cannot venture into rough seas without a skilled, experienced and importantly, motivated leadership team. I have gathered a group of people that each belongs to the top crop within their respective field. They have a successful background in blue chip companies as well as a broad international background. But more importantly, they all joined this challenge because of a growth mindset. I am a firm believer that success starts by being hungry, hungry to achieve something big. Now let's have a quick look at the agenda of today. We will start by going through the foundations, then we'll have a short break and we'll dive deeper into the growth pillars. Once all of these things are clear, Anders will come on and talk about how it all makes sense from a numeric standpoint. And of course, at the back end, we will invite for a long Q&A session. So now let's turn it over to Erik Schmidt, our Chief Human Resource Officer. He's going to be talking to us about people and sustainability.

Thanks, Alexander. As Alexander said, Phoenix is based on really strong foundations, and 2 of the key foundations are our people and our sustainability agenda. So this afternoon, I'd like to take you through our ambitions, our plans and our KPIs in the people and sustainability space. But before I do that, I'd like to share a little bit with you about our network and our global footprint across the world. So as Alexander mentioned, we have 26,000 people who are going to be bringing Phoenix to life for the company and for our consumers. Those employees are based in 11 key locations around the world. We have employees on the ground in 40 countries and we trade in over 100. Some key locations I'd like to point out for you is, first of all, our global office here in Copenhagen; secondly, our crafting facilities in Thailand, where we have over 12,000 people in 2 key locations in the north and the south of the country; and thirdly, the headquarters for 2 of our key core markets. So first of all, North America headquartered in Baltimore; and secondly, Greater China headquartered in Shanghai. Now reflecting the vertically integrated nature of our business, our employee population is made up of 2 large groups. So we have a large retail population and a large production population. In addition, about 10% of our global numbers are white collar folks and roughly a further 1% in our DCs around the world. Given the retail mix in our business and our product, our total employee population skews female. And that same retail focus, combined with the transformation we've been through over the last couple of years, helps to explain our 10-year profile. Since the beginning of 2020, we've been radically restructuring the business to prepare ourselves for growth and to set ourselves up for success as part of Phoenix. And this restructuring was initially part of Programme NOW. And we did 4 large things over the last 18 months. So first of all, we set up 2 global business units. These are end-to-end value chain organizations for each of our 2 categories. The GBUs have leaders, and these leaders report to our Chief Marketing Officer, Carla. Secondly, we've flattened the organization. So we've removed the regional layer, which means that our global office in Copenhagen can now directly interface with the 9 trading regions that we have around the world. This has enabled Copenhagen to really step up into the strategy setting space. So the work you're hearing today about Phoenix and our values and many other things have been generated from our global office. But they're then cocreated from an implementation perspective together with our trading regions and our manufacturing base, who then are responsible for execution. And to make sure we have a really effective feedback loop in the organization, we have what we call an SLT, senior leadership team of our top 30 leaders who meet regularly to review progress on strategic issues. The third action we've taken is to establish a global matrix. So the global matrix is there specifically to drive global alignment and execution and consistency. We've also taken -- made changes in our supply chain organization, lined it up with the GBU organizations and taken some cost out. And then finally, to help drive the digitalization agenda, which you're going to hear more about from David shortly, we've established for the first time in our history a global digital hub here in Copenhagen. So of course, the restructuring for growth was a key component. But as we know, structure only takes us so far, and what's critical is we get in place the right talent and the right leadership to drive growth. And so it's fair to say, over the last 18 months, we've delivered the largest retooling ever in our corporate history with 1,800 hires and a few more still to go. We have blended art and science at scale with these appointments, pooling together the genius that is our design and crafting capability together with consumer insights that are very much data driven to set ourselves up for growth across the 2 categories. We've also had a massive refresh of our leadership group. So today, 40% of leaders are either new in role or new to Pandora since the beginning of last year. And that includes a number of key appointments in our executive leadership team, our Chief Marketing Officer, Carla; Martino, our Chief Commercial Officer; and Aussie here, you're going to be hearing from next, our Chief Supply Officer. We've also been very effective at attracting talent from many other organizations, both in our industry and further afield. So if we look in the jewelry sector, for example, we have key hires from Bulgari, Tiffany and also De Beers and then also from academy companies like P&G, like Diageo and like H&M. That makes us turn our attention to leadership and how we develop leaders in the company. And I'm pleased to say that for the first time, we've developed a simple model of leadership at Pandora. What does it take to lead successfully here? And we're going to use that model to drive our actions in the leadership space, not least to roll out the first ever global leadership development program in Pandora's history. And leadership effectiveness, or LES as we call it, leadership effectiveness score is going to be a key measure for the company. In fact, we've just baseline that measure based on employee feedback. So this is employees assessing managers, and the score they have given us as leaders is an 8 out of 10. Now in addition, we've enrolled our top 200 leaders in a key program called the Chief Talent Officer Programme. This is another first for Pandora, and it's all about attacking another critical KPI for the company's long-term success and that is succession depth. So we want to tool our leaders to be able to know their people better, groom their people for bigger and better roles so that we can rely less on external hiring and have far more promotions from within, a key KPI for the company. But I'm already pleased to announce that in the last 18 months, we have promoted over 500 colleagues internally in the white collar population. So having given serious attention to structure and organization and also to talent and leadership, the third area we absolutely wanted to address and will continue to address is around our operating culture. So for Pandora to succeed, we know we need a performance culture. We need a performance culture, which is based on meritocracy, where what people do and how they do it are both super important. Now what people do has been very well articulated through the Phoenix strategy. So we now have great direction setting material to help with goal setting, budget setting and of course, business reviews as well. But how people perform, how people behave at work is actually something that up until May 4 this year had gone largely untouched for nearly 10 years. So on May 4, we announced a whole new set of values: we dream, we dare, we care, we deliver and an attendant set of behaviors, which guide employee actions. What we've also been able to do through energizing the digitalization agenda you'll hear more from David on, is to start to measure and quantify our people space. So for example, now we have global master data. Now we're able to do global listening exercises, which supports things like the leadership effectiveness score. What it also gives us, for the first time, is an employee Net Promoter Score, which measures employee sentiment right across our 26,000 people. And I'm pleased to confirm that based on an initial baselining survey, which we did just last month, that we have a plus 38% eNPS score from our people. In addition, we've been looking at how we manage performance. We now have a global model for how we manage performance around performance conversations, career conversations, feedback on a routine basis. That's been rolled out across our white collar population, and we'll continue that with our retail and our supply colleagues next year. That's also informed our short-term incentive plans, which are now globally aligned and focused on financial outcomes. So we're looking at 2 key metrics there for everybody who's in the short-term incentive plan. First of all, sellout growth; and secondly, EBIT margin. And what we've also done to reinforce the performance culture is to drop the payout for threshold performance to 0 and stretch the payout for top performance to 200%. So while we're talking about incentive plans, we've also updated and globally aligned the long-term incentive plan. So we now have one global long-term incentive plan for the VP and above population, and that plan is centered on one key metric, and that is earnings per share. And what we love about earnings per share is it aligns very close or very strongly the interest of our senior leaders with the interest of our shareholders. But I'm happy to announce today that we're going to extend or alter the plan design for 2022 to include for the first time an element of ESG. Now reference to ESG is a great link to our sustainability agenda, which is the last topic I'd like to cover here. Our stated ambition in Phoenix is to become a sustainability leader to put us right up there with the best in our industry. And to achieve that, we've set about 3 major ambition areas. So the first area is about being a low-carbon business. And we've already announced that by 2025, in our own operations, we want to be carbon neutral. But today, I'm going to announce 2 further ambitions that go even further. So firstly, by 2030, now approved by the science-based target initiative, we're going to make a 50% reduction in CO2 emissions across our own operations and our value chain. And by 2040, we're going to be net zero. So 2 significant additions to our low-carbon ambitions. Secondly, in the circular space. So we've already announced that by 2025, all the gold and silver in our jewelry will be from recycled sources. And that was actually the second largest PR story in our corporate history. The largest story was the launch of Brilliance in May this year. And of course, Brilliance is the new platform where we use lab-created diamonds for the first time. And both those stories resonated very well with our consumers and also with our employees. And then thirdly and announced just last week, our ambitions in the inclusion and diversity space. So this is a really important area, and I'm pleased to be able to share with you our ambitions here. So first of all, in the leadership space, we want to see women as a third of our population in the senior leadership space by 2025 and as achieving gender parity by 2030. We also want to see a step up in the representation of underrepresented groups across the company. And secondly, we want to think about how we can invest up to 30% of our marketing dollars, whether that's on brand or marketing content material with organizations, partner organizations, which are run or operated by women or underrepresented groups. So we hope you like these ambitions. We think they modernize and future-proof for our organization. We know that they're going over very well with our employees and also with prospective employees. The consumers are liking the message and the ambition here, and we hope here in the financial community also appreciate the direction here. Now of course, our people and sustainability ambitions apply right across the company, but nowhere more so maybe than in our supply organization where we have 12,400 employees. So at this point, I'd like to hand over to Khun Aussie in Thailand, who's going to take us through our manufacturing strategy and talk about how we will continue to transform our supply organization towards an even more sustainable future.

Thank you, Erik, for your sharing, and welcome to this next session on crafting and supply at scale. My name is Aussie and I'm now in one of our crafting facilities in Bangkok, Thailand. Today, I will talk about our crafting and supply strategy and how we work towards being even more competitive in the future. I will also provide tangible examples of how we are pushing our sustainability ambitions as introduced by Erik. We are the world's largest jewelry brand, crafting and supplying over 100 million jewelry pieces per year. Our crafting capacity is the largest in the world, where we craft beautiful hand-finished jewelry. We do this at affordable prices benefiting from our economy of scale. Our scale advantage is manifested in our highly competitive cost structure. We currently operate 3 state-of-the-art crafting facilities in 2 locations, namely Bangkok and Lamphun, which is 700 kilometers north of Bangkok. Our Bangkok-based facilities are primarily producing silver and plated jewelry, whereas our Lamphun facility is producing gold and two-tone items in addition to our silver jewelry. Having said that, most of our jewelry can be produced in multiple locations if needed. Besides manufacturing, we also have a strong in-house end-to-end design and product development team. This allows us to develop very unique products from design until delivery to our global DCs and eventually to the hands of our customers. What makes Pandora truly unique is not only the scale of our operation, but the ability to combine scale and craftship. As Erik said, strategy without people is really not possible, and the same goes for our crafting and supply organization. We have over 12,000 craft people working in our facilities, and our workforce are multiskilled, which brings flexibility to our operations. This is an advantage which is unique and difficult to replicate as it requires years to develop this base of skilled craftship. We care for a strong base of experience, craft people, making it possible to bring unique craftship at scale. Our operating model is built on available crafting hours, which is one of the most important levers we have to add flexibility into our operations by scaling up or scaling down when and where needed to act on consumers' demand. Using best-in-class technology, we find the right balance between automation and craftship. The combination allows us to maximize efficiency while using craftship to ensure Pandora jewelry has a distinct uniqueness. This is a solid foundation in which we have and will continue to build in the coming years. We have launched the crafting and supply strategy as a part of our Phoenix strategy, marking a new beginning after we successfully completed the turnaround. Our supply setup plays a foundational role to enable our growth strategy. We are getting closer to our maximum in-house production capacity with the projected growth volume of our Phoenix strategy. Therefore, we need to address, to secure, develop and optimize our global supply base and also make strategic decisions regarding when, where and how to expand capacity. I will get back to this in a minute. Being the largest jewelry brand is one of our core competitive advantages with the growing need to act faster on ever-changing consumer demands. We need to increase flexibility and agility in our operation to deliver jewelry faster while still maintaining our cost effectiveness and leadership in our industry. Pandora's value proposition is based on providing our customers with affordable handcrafted and collectible jeweleries. So delivering our product quality commitment is crucial to drive consumers' satisfaction needed for sustainable growth. Innovation is a fundamental part for Pandora. To support the growth agenda, we need to deliver better, faster and a more cost-effective innovation. Ensuring newness and improving speed to market requires us to focus on our core in-house capability while utilizing our network within and also beyond the jewelry industry. As Erik has mentioned, Pandora embarked on an ambitious sustainability journey, and we did our part by having our facility LEED Gold certified. We are sourcing 100% renewable energy for our crafting facility, and we are on track to use 100% recycled silver and gold by 2025. In addition, we undertake social responsibility initiatives such as My School Project, where we have been giving back to local communities by providing school buildings and facility for more than 16 years. Although our strong foundation allowed us to manage the current pandemic and minimize the impact in the supply of our products, we need to strengthen our supply resilience and robustness. We have concluded that further diversification of our manufacturing setup is needed. As we have announced this morning, we made the decision to expand our in-house production capacity both in Thailand and Vietnam. And this comes after carefully evaluating well-known countries for jewelry production globally. In Thailand, we will continue to build on and leverage our solid foundation to increase capacity in the north, bringing an additional capacity of 20 million pieces by 2023. In Vietnam, another new production location will gradually increase our production capacity with 60 million pieces, and we have started the process of selecting the location for our new facility already. This search will be concluded by quarter 1 next year. We will invest USD 160 million for in-house capacity expansion for both Thailand and Vietnam. This allows us to grow our total crafting and supply capacity with close to 60% over the next 4 to 5 years. This is a part of our business continuity and risk management to secure and serve the future demand and as well as build capacity for seasonal peaks. Vietnam is an emerging jewelry hub, has a rich craftship history similar to Thailand, providing access to required skilled craft people, come with foreign investments and also provide regional risk diversification. While adding these new facilities to our network, we will maintain our world-class conversion costs, our gross margins. Our cost of goods sold profile won't be impacted. In the future, our supply network will consist of strong supply basis, namely our Lamphun facilities, our Bangkok facilities, our Vietnam facilities, supplemented by our expanded supplier network to realize a diversified and resilient global supply network. Expanding production capacity is critical to meet Pandora's growth ambition, maintaining our cost leadership and flexibility while also mitigating supply risk through geographical diversification. To recap, we are the largest jewelry brand in the world, producing approximately 90% of our volume in-house, leveraging our strong supply base in Thailand, generating profitable and sustainable growth opportunities and continuing to drive our competitive advantages. Our growth ambitions, combined with ever-changing customer demands and global challenges, both now and in the future, requires us to strengthen the resilience and robustness of our supply foundation, facilitating projected growth and build capacity as a part of geographical risk diversification in supplying Pandora jewelry globally. We continue our journey by realizing a diversified global supply network for Pandora through regional expansion of our in-house manufacturing capacity by building new facilities in Thailand and in Vietnam and strengthening our global supplier base. Our unique scale provides competitive advantage and provides a highly competitive cost structure. Our uniquely and passionately crafted jewelry is touching the lives of millions of consumers every day around the world. We will continue to leverage this scale advantage to provide beautiful jewelry at competitive prices and reach consumers faster and better while staying agile and adapting to changes in the market. Thank you for being a part of our crafting and supply at scale. Now I would hand it over back to our colleagues in Copenhagen and where David will share more of our digital strategy.

Khun Aussie, thank you for a fantastic presentation. Every time I think about our crafting facilities in Thailand, I think about not just the epic scale of the operation there, but really the care and attention and love that goes into every single piece of jewelry that we make. It really is breathtaking what we do there. Now I'm going to talk about digital transformation and what that means in Pandora and how we're orienting Pandora around the digital agenda. I'm going to talk about a couple of key market trends that we see, and then I'm going to tell you a little bit about what we've been up to in the past couple of years before we think about the future and talk about that. In terms of the market, jewelry has been very late to adopt all things digital and partly to do with our price points, it's to do with the physical nature of the selling experience maybe. But jewelry has always been the back end of categories in the adoption of digital. We see transport, finance, apparel, all leading their way up that S curve through that kind of rapid adoption of digital over the last 10 to 15 years. Jewelry has always been at the bottom of the curve, and we think it is actually still at the bottom of that S curve, ready to -- ready for the inflection point. Now we also believe that in Pandora, some of our markets are reaching that inflection point and particularly through COVID, have been accelerating through that. We believe that Pandora is pretty well set up now from this stage because of the work we've been doing in the past couple of years on all things digital. But let's talk about the next trend. So if e-commerce is growing -- as we all know, e-commerce is growing as a key foundational element of any business. The second trend we're seeing is the shift to direct-to-consumer, global trend in consumer goods, for sure. Now again, Pandora is pretty well set up in this regard because 75% of our business is transacted through direct channels, online and in-store. Now online and in-store element is a key strength of ours today. Our business has been heavily vertically integrated since our business was founded and that's a key strength. But if we take a step back and think about this next stage, what we can see is that whilst it's useful to know what people have bought and maybe their name and address, our relationship needs to go a lot, lot deeper than that. Let's bring this to life with a number. We have something like 700 million touch points with people globally every year through online and in-store. But of those 700 million touch points, we have today just over 20 million customers in our customer database, consented, ready to be contacted, who we can have conversations with. Now it's not enough. Our goal in the midterm is to double that 20 million to 40 million. And our goal in the longer term is to have at least half of those 700 million contacts be with people who we recognize, can talk to and so on. And this, this race to first-party data really forms the heart of our digital transformation. This is the core pivot point around which everything hangs. But if that's the kind of context and the mission, let's just go back to where we've been in the last couple of years on e-commerce. So prove that we've actually got the right to have this conversation and believe we can actually move into this next stage. So through 2020, our e-commerce business was stretched to the limit through the height of COVID, but business was essentially pure play at certain stages back in April, May. And through that time, our e-commerce operations, websites, customer services were stretched and found to be super strong. And we didn't just survive, we thrived through that time. And you can see that in the numbers from last year, which I'm sure many of you are familiar with. Underpinning that is a huge amount of work to drive forward the customer experience. Now Martino is going to talk a lot more about the omnichannel experience that we're creating. For our part, we've had a massive drive to really fuel all points of the customer experience. Now how do you bring that to life in numbers? I'll give you one number. Taken the last few weeks, our conversion rates online, literally the last few weeks, it's more than double what it was in 2019. Now things that are driving that and things that have driven that, I'll give you one example, site speed. 2 years ago, our sites were typically taking 7 seconds or more to load a page. Today, they take 3 seconds. And I know that because today, we have a system that measures site speed in a way that 2 years ago, we didn't even have a reasonably consistent measurement. We think there's further headroom on topics like site speed as we do on a number of topics. Now I get asked, what do you think is a reasonable conversion rate? And it's a really hard thing to model and predict because it's a very elastic number. Through COVID, for instance, we saw some markets reach double-digit conversion. Because all the stores were closed, it shifted shopping patterns that dramatically. So conversion is pretty elastic, but we do believe we've got significant headroom on conversion and a reasonable target in the midterm of 3%, feels within our grasp when we really drive around some of these topics that we've described. But if that's the e-commerce business that we've been driving on for the last couple of years, let's talk about now the bigger mission. So our vision for Pandora, digital transformation, we want to create the most personalized shopping experience for jewelry shoppers anywhere in the world. That's big words. What a consultant would tell you at this point about digital transformation is it needs to affect every part of your organization from ERP and supply chain through people systems, finance systems and so on, and it will do. We have all of that in the plan -- in the program for the next couple of years. But for us, this comes back to -- every time we think about digital transformation, we come back to those 700 million customer contacts. That's where all of our focus is. That's the pivot point for our whole digital transformation. This race for first-party data, building these deeper relationships with our customers. Now let's bring that to life in terms of what that's going to look like when we get there. So it's easy to give these big words, but actually, let's bring this to life and show you what it's going to mean and what you're going to see that's different in Pandora. So first of all, with media. Our media teams are already directly targeting our customers through personalized content, personalized advertising, real-time targeting based off this customer database that we've already described. We will seek to double that database in the midterm. Alongside that, we're driving our media through predictive segments, and I'm going to talk about those in a short while because it's a very important, I think, differentiator in Pandora's digital transformation. With the channels then, Martino is going to talk more about the omnichannel experience and how we're personalizing that experience for our customers heading forward. I just want to talk about the underpinnings though because we're going to be personalizing not just the digital experience, different people seeing different content at different points, we'll be personalizing the in-store experience. Now how do we do that using technology? Well, we're going to be building a new platform, the OmniStore platform, which is the global platform for our organization. This, for the first time, will link together e-commerce and in-store. Over time, it will reduce our reliance on the diversity of point-of-sale systems we have in our organization. And critically, it brings together real-time single customer view with real-time stock view. And in fact, in the past 18 months, we've built out that single customer view to create a fundamental platform to enable how we understand our customers and how we target them in real time. So with those platforms, we have the foundations we need to drive the personalization mission. Last, on service and CRM. Over the past 18 months, we've rebuilt customer services from the ground up: new partners, our own new customer service platforms globally and everything, including automated chats, Bella Bot!, our automated chat robot. And what that means is much better customer service, much better experience driving down key metrics like call to order ratio and overall improving the customer experience. Where do we go next? Well, first, loyalty. The loyalty platform is going to be a key part of our armory on this mission of personalization and the mission to capture first-party data, and that's going to be key in a couple of ways. The first is, yes, it enables us to catch data. But the second is it gives us reasons to have conversations with customers. It gives us reasons to share new product or new exclusives, reasons to return in store. Why is that important? Well, we have some loyalty schemes at the moment, not a global platform, but we have in-country schemes. And what we see there is that when someone is a member of the scheme, they're spending 17% more with us than people who aren't a member of the scheme. So like I said, we've got direct commercial benefit, but more importantly for me is that fundamental relationship with the customer, reasons to have those conversations. And last, clienteling. So the OmniStore platform that I mentioned a second ago will enable store managers to market locally to their key customers, again have those conversations on reasons to return. So this is what the experience is going to look like overall as we drive on our personalization mission and drive on the digital transformation. But the last thing I just want to reference on this is actually our core model, our core -- the core earnings model at the heart of the Pandora business. And Anders, my colleague, can talk far more fluently about this. But really, from my point of view, the core model is about frequency. It is about driving collectibility. And you can see that running through everything that I've just described. It's reasons to return the frequency of these smaller conversations. That's going to be the secret sauce that drives Pandora forward. So if that's where we got heading, let's talk about what we need to have in place to achieve that. So first up, people. We know in tech and data, we're in a war for talent. Now in January 2020, we announced the creation of the Digital Hub in Copenhagen. And through the height of COVID, we recruited over 100 people to join us there, many locally, but many have relocated themselves and their families from around the world. Why? Well, they became interested in what we're doing and then they became really excited about the mission. They want to join a company that understands tech, understands data and values of the role that they can play. In January 2021, we announced the consolidation of that digital unit with all of tech and data to create one global function, digital and technology. We've rebuilt the leadership team in digital and technology, bringing in people from firms like Adidas and Dyson and Nordstrom to build a really strong tech focused and data science focused organization. And that team is driving this next level of change. Let's talk then about foundations. I've mentioned some of the systems that we're building and some of the big platforms that we need to have in place as well as the things we've already built. Our level of investment on technology stepped up at the start of 2021, and our intention right now is to keep that sustained raised level of investment through the next few years. But alongside that, we have, I see 3 opportunities for greater efficiency. The first is, what I call, insourcing. So a lot of companies like ours traditionally used third parties, consultants to build the tech, the guys with the hands on the keyboards. We're insourcing the engineers, the data scientists, the machine learning engineers. It's a big driver for us to build sustainable knowledge, build expertise in our organization and culturally put things like engineering at the heart of Pandora. Alongside insourcing, we have the move to agile. Now agile is a buzzword. It has a lot of baggage attached to it. But in this context, it means objectives for technology tied really tightly to business objectives. It means much greater speed to market for technology delivery and deployment. And it means a lower risk on our investment because we've got far more iterative releases for technology rather than 12-, 18-month-long programs and hoping the system at the end of it is going to work. So that agile method is a way that we derisk investment and move with greater pace. And third, I'll move to the cloud. We moved -- completed the move to the cloud for most of our technology in 2020, and really, we've been driving on efficiency on that front. We've got a lot of opportunity there to create much greater flexibility and also greater efficiency in terms of our investments in our fundamental tech. So we've made a solid start in our use of data and how we're driving our organization through the use of data. When we think about consumer data, in particular, though, let me just take a second to describe what we're doing. What we're doing is building out predictive models to understand what you have done and what you might do in the future. Why is that important? In a lot of organizations who focus on personalization, it's typically retrospective. On average -- people who look like you, on average, have done these things in the past. Our model is much more, for instance, well, we think that people who like shopping Disney with us might also shop Pandora Me and testing that out in real time, testing those connections. The machines are self-learning. This is artificial intelligence. They are partnered with data scientists and the data scientists are continually tuning and looking to move them forward. The currency we're working is called use cases because everything we do is focused on the consumer. So far, we've worked through 18 different use cases related to personalization. Now into 2022, the same teams will be applying the same artificial intelligence and data science to areas like commercial and financial planning and sales forecasting as we build up our muscles in this area. Lastly, I just want to touch on loyalty again because it's a fundamental enabler for our mission to race to first-party data, driving those connections with customers. We've actually already launched our first points-based system, modern loyalty system in our Chinese markets. Now that's early days but showing promising signs. Our plan is to continue to roll this out from 2022 and embed that across our organization as this fundamental platform. Okay. So really just to close out then and remind ourselves of the digital transformation mission. This is about -- really, at its heart, it's about creating these deeper, more connected relationships with our customers. Why do we want to do that? Well, we believe that these connections with our customers and creating an omnichannel experience that's going to -- Martino is going to talk about shortly, that drives every experience that customers have with Pandora will really be the secret source that fuels not just our brand, but conversion would fundamentally be the driver of growth for Pandora in this next stage. Okay. So now I'm going to hand over to Alexander, who's going to take it from here.

Thanks, David. What an amazing journey we've done in the last 2 years, incredible pace of change. So now we've heard a bit about the foundational elements in the Phoenix strategy. But -- and next, we're going to talk about the growth. But before then, we'll take a short break. See you back soon. [Break]

Hi and welcome back. In the previous section, we spoke about the foundations of the company. Now we're going to get into the exciting part and looking at the growth pillars. And we're going to start off by looking at brand and design, which are going to be introduced by Carla, who is our Chief Marketing Officer; and Stephen, who is our Chief Product Officer.

Thank you so much, Alexander. It's with such great pleasure that we can be here today.

Yes, indeed, it's a real pressure. We are now going to look into our first and second growth pillar, brand and design. Specifically, we're going to share how do we intend to drive brand desirability and consumer-centric innovation. We will start by sharing our brand positioning and what do we stand for. Pandora exists to create affordable, high-quality, desirable jewelry, empowering self-expression and collectability. This is our brand promise to consumer. This is the bible in everything we do and this is the compass for our organization. Let me share a few data points to show how this positioning resonate with our consumer. If we look at our global brand tracker, we can see that we lead on all brand metrics. In fact, we are the most recognizable jewelry brand. We score very high when it comes to awareness, aided and unaided. And through the funnel, we equally see strong consideration, purchase and ownership score. Obviously, this is the global picture, and we see some variances by the country where, for example, in China, we have a lower brand awareness. If we then look at how our consumers perceive our positioning, we equally see strong perceived positioning with key brand attribute ownership. In this chart, you see top category drivers of desire. So for example, "helps me to express my personality" is the #1 category drivers of desire, and Pandora overindexed against category average. What is good about this is that, obviously, consumer perceive the brand positioning in line with our brand promise. While this is a great picture, we are not complacent about it. To the contrary, in fact, we have the ambition to keep fueling our brand desirability average. We will do this by focusing on 3 distinct building brand efforts. The first one, which is our obsession, is increased brand relevance. We believe in an outside-in approach. We are not about silos or ivory tower. Consumer understanding to generate culturally relevant insights is a critical factor to succeed. We have built capability, and we will continue to build even more when it comes to latest research methodology, data analytics, marketing tech and behavioral. This is obviously -- it's a mix of art and science, and we do believe into this perfect mix. Once we have generated insights, we are all for creating amazing brand experience. And I'm talking here about experience because this is what we are aiming for. This is not just about product or advertising, this is about the whole thing. How the store look and feel, what is the selling ceremony, how the live purchases works. So we are after a brand experience across multiple touch points. And last, once we have generated this brand experience, it's critical the consumer sees this. So we need to put the right support behind each of our priorities. You know that in the last 2 years, we have increased our media spending to become more competitive and to keep our awareness leadership. Going forward, we will continue to be competitive while ensuring our return on investment gets higher. The second thing we're going to do is think and act 360. When I was younger many years ago, the life of a marketeer was much easier. You would have a physical retail store, you would have a couple of touch points, mainly TV and print and that was it. Today, the media landscape is much more fragmented. And at the same time, the consumer to purchase is, by definition, less linear. So there are a couple of things that we need to do better. One, we need to drive consistency across all different channels, online and off-line. Two, we need to ensure that the content we create is customized across channel, so that when consumer meets the brand, she does it in the most personalized way. Lastly, we want to win with Generation Z and millennials. We are a brand accessible to everyone, but this is where we'll put a special focus in the coming year. It is clear why we want to do this. Across these 2 generations, this is where the biggest growth is coming from, and they would present up to 60% of the luxury market. To do so, we observed 5 key behaviors where we want to become even more relevant in the future: digital native; inclusivity; being value, money and time conscious; sustainably and socially conscious; and last but not least, creative. Every single person in this generation crave to express their own individuality. So we will do so while retaining and actually leveraging our core Pandora values. I want to just pause here for a second because I think it's important that we recognize that in the last 2 years, we spent extra focus and extra effort in understanding better our consumers. But this goes well beyond age. As you will see in the upcoming chart, we will look at motivation, aspiration, behaviors so that we can win with this consumer with one clear mission in mind: create and deliver a sustainable growth strategy. That's what this is all about. So if we think about sustainable growth strategy, we have in mind 3 clear priorities. The #1 is drive the core. Our core is Moments. It represents 70% of our business. We must be building on our strength. It is fair to say that in the past we deviate our focus for Moments. By going after the next launch, the next DVs, creating a variety of DVs and then dropping them after a few weeks. We are building on this learning, and we are obviously going to protect and drive our core. At the same time, to ensure our incremental growth, it's critically important to fuel the brand with more. What do I mean by that? We must create universes that are appealing and relevant to our consumer, and they are complementary to Moment. This is not revolutionary. It's actually quite intuitive. If you look at key players in the jewelry market, you see there is the brand, the master brand and now you have key collection, key universe, the answer to specific consumer needs and target specific consumers. So Cartier, for example, you will have the LOVE Collection, the Juste un Clou Collection, the Panthère, the Trinity and so on and so forth. But even if we look at most affordable categories like fragrance, for example, where I come from, Chanel doesn't rely on Chanel No. 5 only. There is a Coco Mademoiselle universe, there is a Chanel Chance universe, Allure universe. So you create different universes with -- that cover different consumer needs. So you build the brand by doing that. Last but not least, we are about dedicated support model. Strategy means nothing without the perfect execution. So when we go to market, we will make sure that behind the key priority we have a dedicated support model. Whether it's about communication, media, training, store visibility, it's all about building extra universe not detrimental to the core. So our go-to-market strategy will mirror our key business priority from A to Z, from creation to execution. Let me now share with you how this journey started and where did we actually start. We obviously started from to market, the jewelry market. And the first thing we did was segmenting the market. We took -- we look at consumer driver of choice, choice that drive consumer to buy. We then cluster the needs. We look at functional needs, emotional needs and desire product features and we then map them in the market. So the result of this is what we call enduring 10 enduring concept platforms, which is, in simple words, is a segment in the market the answer to why do you buy jewelry, what is the role of jewelry in your life and what is the desired product feature in that space. Just to bring this alive, let me give you a couple of examples. If you go to the top of the chart where you see Eternal Treasures segment enduring concept platform, the reason why consumer that sit in that space by jewelry is because they want jewelry which is eternal, that never goes out of fashion. As a consequence, the product feature, it's obviously something which is somehow more traditional, a bit more classic with long-standing features. If you go to the bottom of the chart under creative expression, the jewelry here is a vehicle to spice up their life. Life for them is too short to wear boring jewelry. As a consequence, the product feature that they expect in there is much more fun, playful, using colorful and innovative material. Once we have done this segmentation, it was critically important for us to understand, okay, out of these 10 segment, where do we want Pandora to play? And we selected 5 ECPs, enduring concept platforms, which define consumers' unique consumer space for incremental growth. We did this based on a few criteria. First, brand fit. Is that space credible for Pandora to play into? Secondly, affordability. Is that the right price segment we want to look into? Third, materials. Is it about precious materials, semiprecious material, so on and so forth? We also look obviously at the size of the segment and a few more things. As a result, we have selected 5 ECPs where we think Pandora has the right to win today and tomorrow. We'll start with My Stories ECPs. Here, jewelry is like a biography, a story that tells many chapters of our life. Here, what consumers expect is a product which is meaningful. It's a product that can be personalized. It's a product that is somewhat unique for them. Clearly, the perfect space for Moments to play into. We did similar consideration with the rest of the 4 ECPs, and we selected Eternal Treasures, Creative Expressions, Cult Collabs and Iconic Hallmarks. This segmentation give us a very specific consumer space, a very clear target and most importantly, a design universe to play with. It will give us -- it's a critical enabler that will give us the right space to generate incremental growth. And here, I'm just going to stop and pass it over to Stephen, who is going to talk about how specifically we are going to drive the core, how specifically we're going to drive our Moments collection.

Thank you, Carla. Now I want to talk to you about our #1 priority of our sustainable growth strategy, drive the core. Moments is what has made us the world's largest and most recognizable jewelry brand. Now I would like to share a short video with you. [Presentation]

I love that video. Now let's go through the key elements of our drive the core. Why? Moments represents 70% of our business. It is the most iconic platform. And this is why consumers continuously come back to us and this is why consumers continuously buy more from us. Let me give you a couple of data points. The Pandora recurring consumer owns 8.1 charms, the Pandora nonrecurring consumer owns 5.6 charms. This data is collected from our brand tracker from the fiscal year of 2019. It is critical to continue building on our strengths. The who. Our Moments consumer belongs to My Stories ECP. We will laser target millennials and the end consumer. Our Moments consumer is principled, she's grounded, she's approachable and with an optimistic outlook on life. She wants products with true and personal meaning to her. The what. Moments is a platform for self-expression, collectability and affordability. We want to empower consumers to tell their personal stories and give a voice to their loves by collecting charms that hold a special meaning to them. Our Moments jewelry is lasting in its design, unique in its creativity and enduring and responsible craftsmanship. How. We will continue to offer broad awareness by being present in high-reach medium and ensuring dominance during key trading periods. We have focused to create a 360-degree packages for Valentine's, Mother's Day and holidays, strengthening 3 key things; offering target to audience and relevant to specific KCPs; a 360-degree campaign creation with big ideas translated across all touch points; and a go-to-market that mirrors our priorities with dedicated in-store visibility, media support and a seamless experience on and off-line. There are 3 key areas of growth when it comes to innovation. First, we will focus on innovating charms and charm holders. So let's start with charms. We will fuel charms with addictive power. We will focus on accelerated 5 key motives. 80% of our business is rooted deeply in our DNA: love, families and friends, nature and celestial, symbols and color and occasions to celebrate. Different from the past, we will glorify, focus innovation and communication only behind these key themes. We have also involved our VM materials and the VM ceremony and regroup them into relevant themes for our consumers in a language that our selling assistants can better assist them on their choices. We will also introduce new icons to [ express motives ] with a new, modern twist. An example, in Valentine's, of course, we will continue to design heart designs. However, we want to introduce new cool things like padlocks. We will expand charm wearing occasions through charm carrier innovations, innovating first on bracelets. We just launched a new bracelet with a new clasp functionality and meaning. The new clasp is a heart and it has a dual functionality as it can hold charms. We are extremely pleased with its performance. And in the pipeline, we will continue to innovate bracelets by bringing new functionality and/or meaning. Expanding jewelry beyond the wrist by completing our assortment with pendants and earings and communicate about it to ensure consumers start seeing moments as a cross-category pillar. We will also want jewelry accessories such as key rings and bag charms. We just launched the first wave of innovation, and we have seen great results from this. But actually, we see a halo effect on our Moments business, and this is one of our key business objectives. In conclusion, the wearing occasion platform gives us infinite possibilities to innovate on bracelets and beyond; e.g., new shapes, new functionalities, new materials and new meetings. This will contribute to build moments, relevance and desirability. In addition, we will focus on personalization to drive uniqueness with engraving. We have already rolled out an engraving program in physical stores in our key market of North America. We are in 190 doors. We also have just launched an online engraving in Italy, and we are learning about the consumer response and the needed supply chain. We are planning to expand our capabilities in engraving into the future. Last but not least, I want to talk about the untapped potential behind our collaborations. We have been incredibly successful with our collaborations with Disney being the first and the longest standing one. Lately, we have seen great results with Harry Potter and Star Wars. And in total, revenue has tripled in the last 5 years. When it comes to collaborations, we see a clear way to grow the business further. We will focus on volume drivers, collaborations with big brands with high awareness that complement and match our playful universe of Moments. Examples include Disney, Star Wars and Harry Potter, but I have an amazing new one coming next year, which I cannot share with you. We will complement the above with cult collaborations that will stretch the brand into new territories such as fashion, art and music. Finally, we will continue with purpose-driver collaborations, supporting specific causes like our current collaboration with UNICEF. To summarize, driving the core is all about driving Moments, by ensuring a strong pipeline of innovation behind charms and charm carriers, personalization and collaborations. This combined with focus and visibility will ensure we build on our strength. Now I would like to hand over to Carla, who will talk to you about how we will fuel the brand with more.

Thank you, Stephen. So let's change chapter. After having talked about Moments, we are now going to talk how do we fuel the brand with more? Remember, this is about creating universe, which are complementary to Moments. Specifically, what you will see in the upcoming chart is 2 initiatives: Pandora Me, which we are launching in fall, which sits under creative expression ECP; and Pandora Brilliance, which we launched in U.K., which sits under iconic hallmark ECPs. Let's start with Pandora Me. It's very simple. It's a new generation of jewelry. The why, it's -- by now, it's clear to everyone. We want to create incremental growth and a new pillar. And most importantly, for Pandora Me, we actually want to drive our brand DNA into the future. The who, it's super clear. We have designed this initiative with Generation Z in mind. We have done extensive research. And if there is one thing which is important to them is give them jewelry with a voice that help them to reflect their personality. And this is exactly what we're going to give them. We're going to give them a platform of a cross-category collection. We are shifting the mix towards what is most relevant, being rings, being earings on top of necklace and bracelet. And we will make sure that within the offer, we hit the right value for this consumer because we know, as we saw before, they are time and money conscious. The how is equally important. We will talk in their language. We will be in the channel they are into. And we will launch and leverage this initiative, not leaving it after 2 weeks. As a matter of fact, we have already the next 18 months plans behind Pandora Me. If I zoom a bit into the how and how the campaign, what was the thinking behind the campaign, it is imperative that this campaign is social media first. There are 3 creative components. The #1 is music as a catalyst of the entire campaign. This is the #1 passion point. So it is critically important that we know what they are interested into. The second thing, we have not chosen one phase for this campaign. To the contrary, we were inspired to create a tribe of different individuals so that we could drive credibility, authenticity and global reach. It is important for them to have a jewelry and a campaign where they can express their personality. Because the me, it's quite important for Gen Z, but equally, the we so they're belonging to a tribe with common values is as important. We have joined force with artists that have strong social followers, that they are creative in their own field, diverse, but equally with the common language. For confidentiality reason, I cannot share yet the names but watch the space. Last, we will hero the product. That's our hero. In fact, we will glorify. We will educate. We will customize. We will inspire so that every single consumer understands that there is a unique way to personalize Pandora Me jewelry so they can reflect their own personality in there. We will do this cross category. Lastly, to finish with the go-to-market, we created a variety of consistent but equally customized content to launch and leverage and keep the conversation with consumers going across the weeks. We have 3 objectives in mind. Number one is drive awareness. We will grab attention, we will create buzz and we will do so through paid media and earned media. We will also create clips, content, which is about talent, which is about product, but also what we like to call snackable content, which is what generates engagement. What my kids will call it cool. Then you have -- the second thing we need to do is drive consideration. And here, inspire and educate is super important. We have done an extensive training to our store people -- for important store people that are the ones that drive the business, so they can become our ambassador. Equally, we have created a variety of how to wear style, customize, so they are tutorial, but in their own Gen Z language. Lastly, we are going to drive conversion and ease the purchase on and off-line. We have created a dedicated visual merchandising windows, store walls. And equally, quite a variety of commercial tools, whether it's a starter kit or is a build your bracelet to ease departures, on and off-line. So I'm going to close now the Pandora Me chapter. I hope this gave you a sense of how we talked about this initiative holistically, but also in a complementary way to Moments. And now we are going to move into a new territory. We're going to talk about Pandora Brilliance, our first lab-created diamond. And Stephen will do this for us.

Thank you so much, Carla. So exciting about Pandora Me, so cool Pandora Me. Now though, I want to talk about something which is a whole brand-new territory for Pandora. And it falls under the iconic hallmark and it's called Pandora Brilliance. Pandora Brilliance is a new, sustainable, lab-created diamond collection. For those who don't know what lab-created diamonds are, it's super simple. They are exactly real diamonds. The difference is, they're lab and grown in lab and they're not extracted from mines. What is so amazing about this is we want to democratize diamonds. So what I'd like to do is show you a video about Pandora Brilliance. [Presentation]

This video shows Brilliance is beautiful, innovative and sustainable. So as I said before, we want to democratize diamonds. So diamonds are for everyone. Why? We want to tap into a DKK 500 billion territory. That signals also a commitment to sustainability. It will be our first product that has been launched by Pandora that's carbon neutral. The who? As I stated before, Pandora Brilliance falls under the ECP of iconic hallmark. The what? It's lab-created diamonds, identical to mined, but at a price point that is more accessible, which will broaden our consumer base and audience. And the how? We will create broad awareness. It will be at an affordable diamond price point, and we will have aspirational ambassadors. So we launched Pandora Brilliance in the U.K. on May 6. We have an assortment of 36 products that encompasses rings, earrings, pendants and bracelets. We offer 6 different carats. We offer in silver, 14 yellow and gold. Very interesting is our opening price point starts with silver with a 0.15 carat diamond at GBP 250. We also offer a 1 carat diamond and gold that retails for GBP 1,290. So these price points are higher than other Pandora collections, but still very competitive within the diamond market. I want to stress very, very clearly, we are not about raising prices at Pandora, but we are about making diamond jewelry affordable at good value to our customers. So on that note, I want to pass it over to Carla who will talk a little bit about what we've learned in the past 4 months since the launch in the U.K. on the 6th of May.

So lots of learning. We've learned a lot in these 4 months, and there are actually some very encouraging signs. The first thing that we learned is that we can actually stretch the brand to a higher price point by offering a strong value equation. Just to give you a data point, the average order value for Pandora Brilliance is around GBP 500. This is 10x higher than what we normally do in U.K. So we are actually democratizing diamond. The second piece, it's -- which is equally important, we managed to deliver incremental business. This is around 3% in terms of share of business in the U.K. market. We also see and show the consumer would actually buy diamonds online. 35% of our sales are coming from e-comm, which is very much in line with what U.K. weight of e-commerce is on total business. One very interesting learning is A and B store trading are outperforming C and D store performance. Just a few data points for you. A and B store represent 28% of doors in terms of quantity. They also represent 45% of Pandora sales. And Brilliance in these stores represent 60% of the sales. So it is evident that there is a great opportunity for us to drive further A and B stores with the right assortment, the right pace, the right location. And ultimately, this is all about which demographics profile are for each store. The other thing that we learned is rings are the leading category. 50% of our sales are represented by rings despite a further only 30% of DVs. And lastly, we drove strong awareness and appeal with the campaign. Over 40% of consumers recognize the brand, understand the campaign and most importantly, they say that this has influenced a lot the way in which they think about Pandora. 80% said they think of Pandora in a nicer way. So we can summarize this in a few simple way. A, we've learned a lot. B, there are very encouraging sign. C, there are a few things that we need to learn next. What is it that we need to learn next? If you think about we launched Pandora Brilliance in May. And between May and now, there has not been any key consumption period. So we are looking forward to see and ensure that this initiative performs during all the period. In fact, we are creating dedicated gifting message behind the campaign so we could capitalize on gift giver. We are also going to drive further productivity in A and B stores by driving visibility, extra training, full assortment and so on and so forth. At the same time, we'll drive efficiency in C and D stores with a more limited assortment and also trying few things like Endless Aisle. It is critically important to ensure that we have the full assortment, the full supply chain working where the Pandora Brilliance perform at best, while driving efficiency where it doesn't. We will also drive consideration into purchase. And there is one key word here, education. We are creating a new category. We are creating a new collection. So education is clear -- is key. In fact, we need to make sure that both internally with our store, organization as well as vis-a-vis consumer, we keep -- let them understand that these diamonds are authentic and, at the same time, they offer great values. We will also expand our assortment in key categories and metals. We have an 18 months plan, a 24 months plan. We will select what is most appealing to consumer, and we will also do what is the right thing to do in key categories and new methods. And lastly, we will test all year round in-store support model. We know in-store is critically important for this brand. We know that 50% of consumers learn about Brilliance in store. So it's critically important that we understand how to drive further visibility all year round. And we are doing a few tests about that. Next, we are quite encouraged by year-to-date result of Brilliance, and we are obviously looking forward to new learning to drive revenue even further. I'm now going to close this section. I hope you have the same understanding that we have on why do we believe we have a sustainable growth strategy, which is sound. We have a segmentation model which help us to create and target distinctive -- distinct and only different consumer space. We also are very clear on our 3 priorities: drive the core by nurturing Moments; fuel the brand with more with Pandora Me and Brilliance, and this is just the start; and last but not least, ensure we have a dedicated support model across the entire value chain for creation to execution. This is the end of it. I hope we were able to give you an idea of our ambition, of our thinking and our complete plans behind this strategy. I'm now going to pass it over to our Chief Commercial Officer, Martino Pessina, who is going to talk about core market and personalization. Thank you very much and see you later.

Good afternoon, everybody, and thank you, Carla and Stephen. I will cover now the last 2 growth pillars. In the first part of my presentation, I will go through how we plan to drive a more personalized experience. And in the second part, after the break, I'll cover our plans to drive growth in our core markets. Being a direct-to-consumer brand, we see a unique opportunity to build unbreakable relationships with our customers, and we want to take it to the next level. Pandora is built upon personalization, upon the idea that you can express yourself and tell your story by collecting and combining charms. Now we want to take this idea to all our customer touch points. Our vision is to create a jewelry experience as unique as you. And when we look at other brands that have started this journey a few years before us, we see several areas of opportunity. Our digital ads and e-mails are still targeting 2 wide segments. Our e-comm landing page is still mainly generic. And when customers come back to our stores, we're not equipped to recognize them. And all of this creates several customer pain points, the biggest one being that it still takes too long for our customers to get to the products they really want. To bridge these gaps, we are putting together a new center of excellence in our head office, which is creating a plan around 4 key objectives that you see on this slide: quality reach, better omnichannel experience, unbreakable customer relationship and richer customer data. Today, I will keep focus on our omnichannel experience and some of the big initiatives that will have an impact on our growth going forward. I will cover how we plan to develop our omni journey, how we are rethinking and resigning our store experience and how we are planning to engage our store staff in bringing personalization to life. Let's start with the customer journey. Customers' expectations are evolving, and this has accelerated with COVID, particularly younger consumers are moving fluidly between channels, even in the jewelry space. A customer may discover Pandora in a mall, browse it on Instagram, buy online and pick up in store. This opens for great opportunity to grow by offering a true omni experience. We want to make it easy for our customers to explore and buy our products whenever and wherever they want to. And for that, we're shifting our focus from channel to customer, and we see how this is driving growth. I will bring 2 examples here. Last year, in quarter 4, we launched click-and-collect in our 2 biggest markets, the U.S. and the U.K. And looking at figures this year, we see that click-and-collect is generating an incremental 10% on our e-comm sales. By allowing customers to buy online and pick up in store, we're driving recruitment of new customers. As a second example, I would like to take that we last year, in select market, launched 2 new omni features, virtual try-on and remote selling assistance, with a goal of bridging the physical store and the digital store experience by allowing our e-comm customers to try on products and get direct advice from our sales associates. Combined these 2 features have generated another incremental 5% of revenues in our e-comm channel. To enable for these experiences, we are redesigning our merchandising and logistic processes. We are redrawing the flow so that the product will be available to our customers at all times. When we look at rollout at the end of this year, our customers in all our key markets will have the possibility to use click-and-collect. Already today, in all our main markets, we have Endless Aisles. We're planning for 2023 year rollout of buy online and return in store. And today, in most of our markets, our customers have the opportunity to have virtual try-on, remote selling assistance and other omni features. And we're convinced that all these initiatives will have a positive impact on the conversions on our e-comm channel. We have put together a short video that paints a picture on our ambition when it comes to the customer journey. This builds upon current capabilities and ambition of future capabilities that will enable for this journey. [Presentation]

This brings me to the second big initiative I'm planning to cover today within personalization, our new store. Allow me to bring you to a virtual tour of our new store. And please bear in mind, this is work-in progress and the concept will evolve. [Presentation]

That was a quick tour of our store, and I hope you enjoyed it. Now it's time to move on to the people. Back to Erik's presentation today, our biggest asset. Pandora has a unique group of sales associates who every day engage, inspire and serve our customers. All our yearly millions of transactions in store happen through the direct engagement of our store staff. And we think they play a key role in bringing personalization to life. In order to support them in this journey, we are re-architecting our selling ceremony, starting from the best ones, applying an omni mindset. And as we deploy, we will measure not only the quants, conversion and basket but also the qualitatives with the store NPS. We're also developing new training modules for our sales associates to support them as we develop new global [ bets ] like Pandora Me or Brilliance as well as we develop the omni journey with new programs like click-and-collect and loyalty. As David mentioned earlier today, we're investing in empowering our staff, improving our digital landscape and tools. And a great example of this is what we have enabled earlier this year in China, clienteling, which gives an opportunity to our sales associates directly from their mobile phone to individually reach out to customers to check-in, make them aware about new arrivals or personalized offers. This one-to-one approach will be rolled out globally. We're really excited with the role that our store staff are going to play in bringing personalization to life. I've now come to the end of the first part of my presentation, which I would like to summarize with a few key messages. Our vision is to create a jewelry experience as unique as you. Particularly in the commercial area, our focus is to make it easy for our customers to buy whenever and wherever they want to by offering a true omni customer experience. We're rethinking and redesigning our store experience to make it easier, more convenient and more personal so that our customers will find the products they really want. And lastly, we're planning to engage our store staff in bringing personalization to life. And now, I will hand over to you, Alexander.

Thank you, Martino. Really exciting to see the new stories in it. So now we've concluded 3 out of the 4 growth pillars. We're going to go for a short break. And when we come back, Martino is going to tell us how we're going to drive growth in the core markets. And Anders is going to try to wrap all of this into financial objectives for us. So see you shortly. [Break]

Welcome back. We're now getting into the last section of our presentations today. First, Martino is going to talk about how we drive our business in our core markets and have a view also on the network. And then Anders is going to come on and talk about our financial objectives. So over to you, Martino.

Thank you, Alexander. [Presentation]

Welcome to the second part of my presentation. I will now cover the last growth pillar, growing our core markets. Alexander mentioned earlier today that Pandora is entering a new chapter of growth, a journey in which we see significant opportunity to grow within our core. Pandora today is present in 100 markets and 7,000 points of sales. And while we, long term, definitely see opportunity to grow in new geographies, in the short to midterm are going to focus on our core markets. As we're putting our plans together in this space, we see 2 great areas that give us the opportunity to drive sustainable, profitable growth; driving higher brand penetration and growing and optimizing our network. I will start with our plans around driving higher brand penetration. Here, I need to zoom out before I zoom in. And Pandora has had a phenomenal journey establishing a global brand in 100 markets. Looking at it closer, Pandora, this journey has been unique to each market. And the outcome of that is that we are enjoying largely different market penetrations, even in market with very similar macro conditions. By benchmarking between our markets, we see that we have great opportunities of growth in several of our core markets. Looking at market size, projected growth and market penetration, U.S. and China clearly represent the 2 largest opportunities of growth for Pandora. And that's why we have decided to put them as a Phase 1 of a multiyear plan, in which we aim at increasing penetration in several of our key markets in North America, Europe, Asia and Latin America. So now we'll cover very briefly our plans in the U.S. and China. The U.S. is our largest market. And here, we have given ourselves a very bold ambition. We want to double the size of our business in the mid to long term versus pre-COVID. In order to do that, we have created a plan which articulates around 4 key areas. I will start with the brand. Our goal here is to fuel the brand momentum. And to do that, we're going to invest to increase the lifetime value of our existing customers, improving the frequency and the average order value. We're also going to broaden the reach, tapping into lookalike audiences, increasing penetration. As Carla mentioned earlier today, we want to win big with Gen Z and increase awareness and relevancy. Looking at the product, the starting point for us for U.S. is to leverage our global big bets. Like Pandora Me that you saw earlier today, our market insights tell us that these products are going to be very relevant for our U.S. consumer. Secondly, we're going to continue to optimize our global assortment, investing on those parts that particularly work well with our U.S. consumer. Looking at the network, I will cover this bit in a few minutes. What I can say here is that we today have very uneven market penetration in the U.S. We're strongest in the Northeast and weakest in the West. And lastly, when it comes to omni, here, the U.S. customer, like in China, is ahead of the curve when it comes to expectations in terms of being able to move fluidly between the channels. And that's why we always prioritize the U.S. for all our omni feature. Last year, in quarter 4, the U.S. was the first market where we launched click-and-collect. And today, it stands for around 17% of our e-comm sales. When it comes to logistics and merchandising in the U.S., we are redrawing our product flows and processes in order to bring together the online and the physical store stock increasing dramatically product availability to our customers. As a last point for the U.S., I would like to mention the teams. And we believe that the quality of our plans will deliver in line with the quality of our teams. And here, we have newly recruited a new leader, Luciano Rodembusch, who comes to Pandora with an incredible strong international track record, his last position being SVP Americas for Tiffany. I am convinced that Luciano is the right leader that will help Pandora reach these amazing targets in the most important market. Now it's time to look at China. And when we talk about China, I need to look back and bring on the table how we see the journey up until now before I look ahead and go through how we envision the journey going forward. We took over operations in China 2015, enjoyed good growth until 2017 and engaged in aggressive network growth until 2018 when comparable stores started deteriorating. We were off a very promising start, but we're never really successful at establishing our core product proposition, the Moments platform, that builds upon collectibility, affordability and self-expression which are the true brand values of Pandora. So looking at our Chinese customers today, we see that they come to our stores and buy a bit more with their first buy, but they don't come back as frequently as we see in other markets. We also see that we underperform in the meaningful driven products and themes in China. And comparing ourselves with peers and competitors, Pandora underscores in value for money. All of this results in a very low unaided brand awareness. Why? We think the reason for this is that the journey in China has started by applying the same recipe that had worked in other markets. And instead of focusing on solidifying our brand, we have engaged in opening a lot of new stores. And as sales started deteriorating, different plans and actions have been put in place, but they never really solved the core of the issue. We have engaged in a lot of researches, both qualitative and quantitative. They all confirm that both our brand values and core product proposition are very relevant to the Chinese consumer. And that's why as we are putting together our plans for the future, we're more confident than ever that we will bring China back to growth territory. Now it's time to look ahead. For China as well, we're giving ourselves a very bold ambition. We want to triple the size of this market in the long term. Here, the key for success is us being able to establish our core product propositions and our true brand values. And for that, we have put together a plan that engages in tight collaborations, our Copenhagen head office with our China's team. We're going to revisit all the customer touch points from communications to experience and products. It's a complex and comprehensive plan that needs phasing. So here, we see a Phase 1 in which our goal is to solidify our brand and our products, and a Phase 2 that kicks in as Phase 1 gets traction, in which we're going to step on the gas and open new stores. We want to make sure that we're able to drive comparable growth before we open a lot of new stores. The brand articulates on 7 points that you see here on the chart, and I will start with the brand. Here, our goal is to refuel brand desire. And in order to do that, we are revisiting and changing the content of our campaigns to make them more relevant to our Chinese consumers. We're also changing our media mix strategy, investing more in the upper funnel to drive awareness, and we are preparing for a KOL strategy. And lastly, we think we need to invest more to make Pandora more visible to our Chinese consumer by increasing our share of voice. Looking at the experience, we see great opportunities to improve both in our physical and in our digital store. Starting with the physical store, we are going to leverage our new store format. China is, by the way, one of the pilot markets. And in store, we're going to re-architect our sales narrative, anchoring it in storytelling that we'll talk about affordability, collectibility and meaningfulness. Also, in our digital store, we see similar opportunities to shift more towards storytelling, both in our PDPs and landing page. When it comes to product and commercial calendar, our plan is to adapt more to our Chinese market. Starting with the commercial calendar, we will focus on the key consumption period, bringing our Moment platform at the center and looking at products, product development is going to be a key constant element of our China journey. We will start with optimizing the global assortment, taking those metal mixes and teams that are most relevant to our Chinese consumer. We will later look into relevant local collaborations, and we will continue developing and adapt products in order to make sure that we have a relevant assortment for our Chinese consumer. As a last point, like for the U.S., people is a key element of our plans. And we have recently invested and recruited several key talents in key positions. And we have a strong commitment, both by China leadership team and all Copenhagen functions in keeping on bringing on board world-class talent. I have now briefly covered our plans for U.S. and China, and it's time for us to move on to the second big focus in this area, which is growing and optimizing our network. In order for us to be successful in this space, we have to change a lot of things. And last year, we have established a new center of excellence in Copenhagen and recruited world-class talent. The goal with the network for us is to be where the customer is, making it easy for our customers to explore and buy our products whenever and wherever they want to. Our strategy is to model a flexible network of channels that play complementary roles. And we have put together a disciplined plan aimed at improving the profitability, the flexibility and the quality of our locations. Now looking at the tractions that we're getting this year with rent negotiations, I really feel confident that we're moving in this space with rapid progress. We have a disciplined plan for all the channels that you see here, but I will today double-click on our plans regarding the physical stores. Here, the key obvious question is, is Pandora overstored? And to answer this question, we have engaged in an extensive analysis where we have scanned the whole commercial real estate in our top 40 markets. We have mapped approximately 13,000 locations, street and malls. We have looked at mall productivity, traffic patterns, quality of cotenancy and vacancy rates and have extrapolated around 7,000 locations, which we judge commercially viable, which means that it would make sense both from a branding perspective and financial perspective for Pandora to have a store. We have crafted a plan that starts from the top 600 white spot locations within this 7,000. We will work in phases, opening waves with an open and learn approach. We're going to follow a clear sequencing starting from the best white spots. We're going to close sub-par doors, and we're going to protect our brand, improving contracts and flexibility. This staggered approach you will see is reflected in the financial targets that Anders will go through with you in a few minutes. And lastly, let me conclude in this space with a word about our franchise partners and start with saying that we really appreciate their passion, the dedication and commitment to Pandora, even in difficult times like through the pandemics. What I can say here is that our strategy going forward will be the same as up until now, judging case-by-case, store-by-store based on financials and operational setups. I've come to the end of my second part of the presentation, which I would like to summarize with a few key messages. We see great growth opportunities in many of our core markets. And we have started the journey with U.S. and China, where we have given ourselves very bold ambitions and comprehensive plans to deliver on those ambitions. We also want to grow the size and the quality of our network, and we have put in place a disciplined plan to deliver. And lastly, we're investing in world-class talent to be successful in bringing growth to Pandora. Thank you. I will now hand over to Anders.

Hi, everyone. I hope you have enjoyed the day so far. Next up on the agenda is how everything you have heard during the day, how that translates into financial targets. And let me start out by saying that all of us from Pandora present here today are very excited about where we can take Pandora during the next couple of years. So in simple words, this is how we see the journey ahead of us from an investment point of view. As you have heard during the day already from Carla, Stephen and Martino, then we have significant untapped growth opportunities ahead of us. And importantly, that's all growth opportunities within the core business, the existing core business or close to the existing core business. And as a consequence of that, we will see operating leverage and thereby EBIT margin expansion. We will also continue to have a very strong cash flow, and we will continue to invest in future proofing our business with sustainability. All of that leading into a significant potential for value creation during the next couple of years. Now if you look into how that more concretely translates into financial targets, we are targeting a 5% to 7% organic revenue growth CAGR during the next couple of years, and we are targeting an EBIT margin that grow towards 25% to 27% in 2023. And with these targets, we are also firmly saying that Pandora is back on a growth track. Digging a little bit more into the investment case, there's a few key messages I wanted to call out here, starting to the left. The strategy is built on our existing core assets. And again, repeating, that is important because it drives operating leverage and it drives EBIT margin expansion. And secondly, I wanted to comment on the second bullet point in the middle, the one reading gross growth opportunities are well ahead of the 2023 target. And I think that most companies that are announcing targets like we do, that's probably the case. But the reason that we are calling it out very explicitly specifically is that the distance between the gross growth opportunities and the target that we have set out are quite large. The last thing I wanted to call out on this slide is about more growth avenues on the right part of the slide here. When we started developing the strategy, it quite quickly became clear that we have more growth opportunities within the existing core business that we can handle and execute upon during the next few years. And that's even though that some of the growth opportunities are quite obvious like getting a stronger foothold in India or Japan, but it's simply a question of prioritizing. And needless to say, it's quite a nice situation to be in. Before I dig more into the financials, there's a somewhat technical clarification I wanted to make. The Phoenix strategy as such -- so the strategic levers stretches out 5 years until 2026. But the targets that we are setting only covers the period until 2023. And the reason we do it like that is that we're just coming out of a large turnaround during the last couple of years. And at the same time, we are only at the beginning of the growth journey that we are embarking on. So one step at a time, so to speak, we want to see how the growth journey plays out and then update you on the targets further out at a later point in time. Digging a bit into the organic growth opportunity. One of the key messages on this slide is that the last black killer in the bridge is larger than the second last one. And this is what we mean when we're talking about that the gross growth opportunity is higher than the target. We're not putting a specific number on the gross growth opportunity, but it should be clear from what you have heard during the day that there's ample ammunition to deliver on the 5% to 7% target during the next couple of years. I also wanted to repeat what Alexander said in the introduction during the day that the 4 growth pillars are interlinked. There's overlaps between the growth pillars. And that means when we, for example, talk about the growth opportunity in U.S. that includes elements of network expansion and it includes elements of design and new product platform. So the growth pillars are linked. And I know that this may raise questions about then how am I going to model the future revenue growth? And we have included some supplementary notes, some additional notes in the appendix in the company announcement that was sent out this morning. And I hope that, that will be helpful for you for modeling purposes. Another thing I wanted to call out on this slide is to the far left, the starting point of the bridge, being the 2021 guidance. And as you know, this year, 2021, is impacted by 2 nonrecurring factors, all resulting from the pandemic. And first of all, the 2021 revenue is dragged down by the store closures -- the temporary store closures that we have seen during the year so far. And on the other hand, the revenue is lifted by the U.S. stimulus packs, and that's driving revenue up in 2021. We can only guess about how that will be -- how that net impact will be in 2021. But at this point of time, it's safe to say that we see the net impact as being roughly neutral on 2021 and thereby also roughly neutral on the growth target that we have set out. That may change, of course, depending on how the pandemic plays out during the rest of the year and depending on how the U.S. growth continues during 2021. Here, we are unpacking the revenue growth in a bit more detail. The 5% to 7% growth target includes 1% to 2% from network expansion. And that's, first of all, opening up new stores, new concepts to opening up, but it also includes a smaller part of the franchise takeovers where Pandora is not paying goodwill. And in those cases, where Pandora is not paying goodwill, it counts as if we had to open up the stores, our sales and, thereby, is part of the organic growth, and we just wanted that to be clear. On top of the organic growth, there would be one point of support from forward integration in the years to come taking us to a 6% to 8% revenue -- local currency revenue CAGR during the next couple of years or a revenue of between DKK 24.8 billion and DKK 26.2 billion in year 2023. I should also stress here at this point in time that these targets assumes that there will be no COVID-19 impact in 2022 and especially in 2023. A couple of more comments to the network expansion. That's the pink box to the left here. In the target, we have included 100 to 150 net concept store openings during the next 2 years. And some of you may think, well, that doesn't sound like a lot given the amount of white space in the U.S., China and in other places. And it is correct that there is more expansion potential and a few more -- a few comments in that connection. First of all, opening new stores requires organizational resources, and there is a limit on -- to how fast we can drive network expansion. And we also want to make sure that we don't lose focus on driving sell-out growth in our existing stores. And secondly, we don't want to push the accelerator on the China network expansion too much until the brand is in a better place. But depending on how things develop, there may be an opportunity to push the accelerator more on network expansion because the financials around opening new stores is quite attractive. It's margin accretive. The payback is very short, just around 1 year, and it's a fairly low-risk growth avenue for us. As Martino has already mentioned, U.S. and China are 2 very big growth opportunities for us in the years ahead. And both of these opportunities are part of why we are saying that the gross growth opportunities are bigger than the target that we have set out. Whether we will realize that potential and how fast we will do it? That's obviously an open question, but there's no doubt that the potential is there. And the growth potential in these 2 geographies is around DKK 9 billion, and that amount accounts for around 40% of our existing total global Pandora revenue. And as you know, we are disclosing the revenue in these 2 markets every quarter, so you can track closely how we are progressing on a regular basis. And as Martino mentioned, I also want to emphasize that China and the U.S. are not the only growth opportunities that we see from a geographical point of view. There's definitely opportunities in our other core markets as well. And then we shouldn't forget that we are operating in an industry which has grown nicely historically as well. A few comments to the growth lever, about new platforms as well from a financial point of view. There's no doubt that there's more firepower in Moments, the black box in the illustration to the left here. We do see an opportunity to keep growing our core Moments platform in the years to come. But there's also a very interesting opportunity in new platforms going forward. And when we talk about a new product platform, it's something that has the potential to become at least 5% of our total revenue. Given that the platforms is something that we'll be building on our existing assets, our existing brand and existing store network, it's also quite attractive from a profit perspective. And then as a CFO, I like the concept of new platform that because it's something that we can test out, we can scale up and scale down in a fairly low-risk fashion. Now you're probably asking yourself, where is the 5% to 7% growth going to come from? Is it U.S.? Is it China? Is it one of these platforms? Or is it other of the growth pillars? In reality, the answer is that time will tell. And the reason we say that is that we are not depending on a single one of these growth pillars to succeed in order to get us to 5% to 7% growth in the years to come. And thereby just repeating, we also are indirectly saying that if we succeed in driving more of the growth pillars, there is an upside towards the target. Now I'll take a step further down the P&L and talk a little bit about profits and EBIT margin. We see quite decent EBIT margin expansion during the next couple of years. And that EBIT margin expansion will be driven by operating leverage. And that operating leverage will come from our sales and distribution costs and it will come from leverage on our admin costs. On the other hand, you should expect that our marketing expenses will remain in this 13% to 15% range that we have communicated previously already. So we see a margin expansion of 2 to 3 points between this year, 2021, and 2023, taking us to an EBIT margin of between 25% and 27% in 2023. If we can drive growth faster than the target, there might also be a further EBIT margin expansion opportunity on top of these 2 to 3 points. Having said that, we want to stress that it's very important for us to make sure that we invest enough to drive sustainable and consistent top-line growth going forward. Under this EBIT margin target, you should expect to see a gross margin that is slightly down to roughly flat during the next couple of years, and this is compared to 2021. We do not see any larger structural changes on this time horizon. And as it is said in the first footnote on the slide here, these targets are based on the foreign exchange rates and the commodity prices, silver prices, not the least, as of September 1. And that assumption may change, obviously, upwards or downwards going forward. Then I want to finish off with a few comments about capital structure, cash generation and capital expenditure. In our dialogue with you, we normally don't talk a lot about return on invested capital, but it's actually quite a nice story. Our business is asset-light, and we're already operating with a quite high ROIC, and we expect to land above 45% already here in 2021. And we do see further ROIC expansion potential during the life and the time horizon of Phoenix. And in terms of cash conversion to the right on the slide here, we confirm that we will continue having a very high cash-generating capacity. We don't see any structural changes in our cash-generating capacity. And our cash conversion on average will remain in this 70% to 75% range that we have already talked about in the past. On capital expenditure, we will see a somewhat higher CapEx level during the next couple of years. We expect to be in the 6% to 7% percent of revenue range during 2022 and 2023. That's a bit higher than where we've been during the last couple of years. And you will recall that we have been holding back on investment both during the turnaround and now during to the pandemic, both on network expansion, store refurbishment and a couple of other areas. But during the next couple of years, we will be investing in our store network, network expansion, store refurbishment as well. And then there's 2 other larger investments that I just wanted to give a comment to as well. The first of those is what Aussie mentioned earlier today, our investment in manufacturing capacity expansion and risk diversification. We will not finalize that investment during the target horizon, but we will be spending upwards towards around DKK 600 million during the next couple of years on manufacturing capacity expansion and risk diversification. And then the other large investment I wanted to touch upon is an upcoming replacement of our ERP system. We are already nicely down the road on the analysis on that replacement, and we will be investing in that in 2022 and 2023 as well. When we look at how we plan to use the cash that we're actually generating, there's no news in reality because we will maintain our existing capital structure policy being that our leverage will be between 0.5x EBITDA and 1.5x EBITDA. And from our dialogue with you, our understanding is that, that also reflects the preferences of our shareholders. And that also means that we will be continue to pay out a dividend yield of around 2% per year, and the remaining excess cash we will be paying out as share buybacks. And again, this reflects no change compared to where we are already operating today. And if we convert this into practice, then you may have noted that this morning we announced an additional share buyback program of DKK 2.5 billion. And when you add the program that we were already running as of this morning, plus the program that we originally intended to announce as part of the third quarter announcement in November, then we will be buying back shares to the -- up to the amount of DKK 3.3 billion as of from today and until early February next year. And you can read more about this in the announcement that was sent out this morning. And with the combination of still a fairly low leverage that we have and continued good cash generation going forward, there's obviously room for more cash distribution going forward, and we will communicate about that in due course. Moving on to the right part of the slide. If you combine top line growth, EBIT margin expansion and share buybacks, it obviously translates into a very nice growth in earnings per share as well. And as you can see on the slide here, all of the targets that I've just been through translates into an EPS growth in the high teens during the next couple of years. All of us from Pandora on stage here today are very excited about the plan that we have in front of us. We are very pleased to be able to stand here today and look back at a successful turnaround during the last couple of years, and we are very pleased to be able to stand here today and talk about growth and confirm that Pandora is back on a growth track. We have a wide range of growth opportunities ahead of us and its growth opportunities that is building on the existing core business. That leads to margin expansion and the potential for significant value creation. And equally important, we will realize that value creation in a sustainable way. That's all from me today, and I'll now leave the floor to you, Alexander.

Thank you, Anders. Very inspirational, and, of course, educational as always when Anders is on stage. So before we get into the Q&A session, I just want to take the opportunity to summarize a few of the things that we've heard today. But rather than repeating it, I come back to the 4 key messages that I opened up on a few hours earlier. The first one being that this is an evolution rather than a revolution. We don't need a revolution. Our starting point is strong. The brand sits in a very healthy place. Secondly, our financial objective is about being balanced with the top and bottom line growth. This means that we manage the risk profile of the company, and we maintain a very strong return on investment mentality inside. The third point is leveraging some of the core assets that we have. And one of them is the manufacturing capabilities where Aussie showed you what's going on in Thailand. The second one, we've heard from Stephen and Carla about the brand and the design aspect. And thirdly, Martino shared some very exciting insights on how we intend to develop the retail concept going forward. Fourth point is that we continue believing that the potential sits within the core. Meaning that we will focus on the jewelry market, and we will focus in our core markets where we already have a very strong and established operation. I think we have showcased a gross list of opportunities, which again exceeds the numbers that Anders just went through, but that just goes to show the amazing opportunities we still see ahead of us. And finally, I cannot talk enough about making choices. Having a focused plan is the mother of excellence in execution. And we know that's what really needs to happen going out of here. Now we'll take a quick break, and I'll come back for the Q&A. [Break]

Hi, there. Welcome back for the final stretch of a very long afternoon. I hope you've enjoyed it as much as we have. This somehow also marks a chapter for all of us around the table here, the executive leadership team that's been hard at work, I have to say, the last 2 years with Programme NOW, then we had corona. And in the midst of that, I came to the table and said, we need a plan once we're through with Programme NOW. So we've kind of been working double shifts for quite some time. So now we're at this point. You have the executive leadership team here in the studio together with me. And I would really encourage all of you to draw them in, connect with them. It's not often you get a chance to meet with them. Normally, it's Anders and myself in the quarterlies. On that note, I just would like to remind you or encourage you maybe to focus less on the quarter current trading, which, of course, we will not comment on and rather focus more on what you heard today and make sure that you get the answers to whatever questions you may have. So without further ado, I will hand it over to the operator. As usual, we will take 2 questions at a time, then please get back in line, and then we'll catch you at the back end, hopefully. So with that, let's get to the first question, please.

Our first question comes from Elena Mariani from Morgan Stanley.

Congratulations on your presentation. I hope you're hearing me well because I think we hear a strong echo on the line. I'll try to lower my volume. So a couple of questions as requested. So my first one is a broad one. So I have perceived a lot of optimism, lots of initiatives, strong growth opportunities across several markets. And somehow, this clashes a little bit with the financial guidance that seems to me a little bit conservative because you're talking about extra growth opportunities that could materialize. So why not including those extra growth opportunities in the top end of your guidance? So are you being on purpose very conservative and try to under-promise over-deliver? Maybe you could clarify this point? And then the second question I have is on China. I'm sure that you're going to get lots of questions on these markets. It's a little bit clearer to us now what the plan is. Perhaps it's a little bit less clear what the time line of improvement is going to be. So what should we expect by 2023? And what should we expect later on by 2026? And also still part of this question, the issues that you've been having in China, do you think that they are more like company-specific, so really about some of the mistakes that have been done over the past few years? Or do you think that there is something more related to the market structure, a more competitive environment, maybe different preferences by the consumers that could make the path more difficult for you in the recovery? And therefore, is not just a company-specific situation, but perhaps part of your strategy could fail because of market-related issues.

Thank you for the question. We'll try to devise a little bit as we go. Maybe I'll ask Anders to comment on the first part of the question.

Yes. Let me do that. Thanks for the question, Elena. I think, first of all, I should say that we are very pleased to be able to sit here today and confirm that Pandora is back on a growth track. That is a really big milestone for the company. If you keep in mind that we're just coming out of a very big transformation, a very big turnaround with Programme NOW during the last couple of years. And I think targeting 5% to 7% organic growth or 6% to 8% total revenue CAGR is a very large step forward. And there might be an upside, as we've been quite explicit about during the day here. But one step at a time, as I said in my part of the presentation. We are only part -- only at the beginning of the growth journey and then let's see how things play out.

Then on your question on China, I'll give it a shot first and then maybe we'll turn it to Martino to get his view. But I think, first of all, on the -- is this a company issue or is this a market issue? From what we understand and based on the kind of research which we've done and also been operating in the market now for up to 10 years, we believe that the majority of this challenge is a company issue. Now that's not to say that there might be market conditions, which come into play. But if I would have to kind of size it up, I'd say 80% of our challenge is inside rather than external. Then maybe, Martino, your view on the speed of recovery and some of the time lines that has been asked.

Sure. I mean we're putting together a comprehensive plan. And like all comprehensive plans, it needs phasing. There's a first phase in which we'll consolidate the brand and our core proposition and a second phase in which we're going to step on the gas with opening new stores. So the time line of our revenue progression will be very dependent on how fast we will be able to establish our core proposition because we will not be opening a lot of new stores until we see positive growth in our comparable stores. So it's a bit premature now for us to say when exactly we will be in 2023 or 2026. We have given ourselves a very bold ambition, and we see it as a long-term ambition for China.

Yes. And maybe just to kind of cover off that. Of course, you know that we've been working on qualifying a couple of elements during the spring. And the idea was that some of these would go in also together with a substantial investment starting in Q3. But because of the external factors with COVID outbreaks and typhoons, et cetera, what we've seen lately, that's been postponed at least to Q4. So we need to see that traffic comes back into the stores before we can actually start implementing the plan. And as the quarters go by, we'll obviously have an opportunity to report back on the progress that we are making. And maybe then we thank you and move to the next question.

Can I just ask a very small follow-up? So what is embedded in your fiscal year '23 guidance with regards to China? So is it fair to assume that there is minimal contribution from China to that 5% to 7% growth?

I think -- this is Anders, Elena. I think the way you should look at the '23 target or the target in general is that China is one of the elements that can drive growth on that time horizon. It might be more U.S. or less China or the other way around. There might be more Brilliance and less Pandora Me or the other way around. But what we're just trying to say today is that we have a lot of ammunition to drive top line growth, but exactly which of the elements and growth pillars that will be driving the 5% to 7% organic growth remains to be seen.

[Operator Instructions] Our next question comes from the line of Anne-Laure Bismuth from HSBC.

I have 2 actually. So the first one is regarding the implementation of the newer concept store format. When will you start? Where and how long it's going to take? And my second question is regarding Pandora Brilliance. Given the positive feedback that you have provided, when do you plan to role out Pandora Brilliance in other regions? And is it something that can be expected towards the end of the year? Or can you give us a time line of the launch in other countries?

Okay. I'll take the first one quickly. As we've said when we launched Brilliance in U.K., we would need at least 6 months to fully understand or at least better understand how this launch works and what needs to be done before we actually get to a point where we decide on a global rollout and also the ambition of a global rollout. We're a few months away from that point. So today, we are not announcing a global rollout. So that will probably come towards the end of the year. Now maybe I turn the new store concept question to you, Martino.

Sure. Our plan is to have the first 2 to 3 stores in quarter 4 this year and a few in the quarter 1 into next year. Our plan is to prepare and be ready for a global rollout starting 2023. We are going to focus on China and Europe to start with. And in the second wave, we're also going to have stores -- test stores in North America. So trying to cover more geographies to see how the customers will respond to our new concept.

And the next question comes from the line of Lars Topholm from Carnegie.

My first question is sort of combined to David and Stephen because you spoke about your 20 million customer database, which you want to expand to 40 million. And Stephen, you spoke about the engraving program in the U.S. So I just wonder for those 2 initiatives, the customers involved in that, is the basket size larger than for the average customer? Are there more repeat purchases? Do they have more jumps per Bracelets? Or how could you sort of illustrate the value proposition in having an engraving program and having that customer database? The second question is quite different. So looking at all your initiatives and looking at your target of growing 5% to 7%, which I think involves sell-out growth of 3% to 5%, how would you distribute those 3% to 5% sell-out growth into growth in the number of customers, into growth in the number of transactions per customer and into growth in ASP? And relating to that, you clearly signaled that there could be upside if everything works. So what is the blue sky scenario here? If everything works, where could growth end?

Maybe I'll give the first -- the second question a go and then we'll involve a few more people on your first question. So if you look at the current number of customers, as I think I mentioned, we have a lot of visits into our various platforms today. And I'd say that the majority of the opportunity lies in conversion rates. I don't see necessarily the ASP as a big driver other than if we would model a global expansion on Brilliance, which, of course, might move the needle a touch. And as we said just in the previous question, we're not really commenting on that rollout yet. And then I think the remaining 1/3 would probably be new customers, probably skewed a little bit younger if I look at the more recent trends what we've experienced in the U.S. So that's, broadly speaking, what we would get to. On your blue sky question, I think I would have to give that a slight thought. And maybe in the meantime, I'll hand it over to David to comment on the profile of the people that we have inside our database today.

Yes, sure. Thank you, Alexander. So Lars, great question. If we step back in terms of your question, we think about engraving as a proposition, we think about what we're doing with our customers. It's about creating those sustainable, deeper conversations with our customers giving them more reasons to return. So I mean, that's really at the heart of the digital transformation and the whole push with all of our customers. I would add one number, though, in terms of what we see when we do personalize the experience today. And it's early days. I think Martino referenced its early days on this journey. But when we create personalized and create recommendations for customers in e-mails, we see something like a 60% uplift in revenue versus an untargeted kind of blanket newsletter approach. So we know this has a response. Yes, it's putting money in the till but we know customers are responding to this and enjoying being us talking to them in a more personal way. And I think engraving is another great initiative that's going to build on that reasons to return on deeper conversations. So that's -- I think that's how we look at this.

Just from my end, Lars, now don't take the 60% he said and extrapolate that. Of course, there's going to be diminishing returns as we get more people into the database. And then just coming back to your question on the blue sky, I mean, we've said that the long-term ambition is to double the U.S. business, triple the Chinese business, add a couple of platforms. We said for a platform to kind of stick, it needs to be at least 5% of share of business. I mean between those, you can probably spend some time extrapolating some numbers. We probably won't get more into detail today on that, but just to give you a sense of our long-term opportunities.

I think that's fair, Alexander. Just a quick follow-up to David, because in your presentation, you mentioned promising signs from launching the loyalty program in China. I just wonder if you could put some more color to that.

Yes, sure. Again, it's very early days. So the points-based loyalty program in China launched back in spring. I think we've got something like 3.8 million customers in the database already from the initial program. It's working very well with our customers who are coming in store. Critically also, it's working well with our store associates. They're enjoying the conversation with the customer, signing them up to the loyalty program. And alongside that, we've got the clienteling platform in China now as well where store managers were able to market their own local communities through WeChat. So that combined is creating a good platform. It's a great learning base for the global program, which we're looking to start the rollout in '22 on.

And our next question comes from the line of Michael Rasmussen from Danske Bank.

Alexander, I know that you already answered a couple of questions regarding Brilliance. But I was just wondering a little bit also from the presentation and then also from the wording that you used in your sustainability brochure on Brilliance, which you show on your web page. That says that you expect to launch globally in 2022. And now you seem to be indicating a lot about the fact that staff and consumers need more education. So just wanted to figure out, has anything changed in that perspective? Or should we basically see that everything goes as planned? And then my second question, also staying on Brilliance. So Anders has talked about the gross margin. I didn't really hear a product mix. So can you just talk a little bit about margins in terms of Brilliance and also your assumptions because, obviously, the production costs seem to have been dropping rather significantly over the past 3 to 4 years? So just what's in the plan for -- in your assumptions for the next 2 to 3 years, please?

Michael, I think I mentioned excellence in execution is the matter of good results. I think whatever we put in that brochure probably doesn't really line up to that thought. We have not decided to roll out Brilliance. I think we've been crystal clear on that. What you see in that brochure is a glitch in the system. And it's not about customers needing more education. It's about us learning how to maneuver this space. It's a new category for us. It's a new way of selling. It's a new way of merchandising. It's a different way of marketing versus what we are used to. So there's just a ton of learnings that we need before we decide whether we want to push the button or not. Because if we decide to go global, this needs to become a big and sustainable bets. So I think that's really the backdrop of Brilliance. It's a good catch for you, but it doesn't change what I've said quite consistently since we launched. And maybe, Anders, you can talk about the product mix.

Yes. Michael, it's Anders here. Thank you for that question on the gross margin. It's right. I didn't call it out when I spoke about the gross margin or the EBIT margin for that matter. But on the gross margin, it's true that the -- that Brilliance has a lower gross margin than the rest of the portfolio, and it's more or less sort of the only product in the portfolio that sticks out versus the average of the rest of our product portfolio. And the reason I didn't call it out in that bridge when I talked about the gross margin is that we are not factoring in sort of a big share of revenue from Brilliance. It comes back to the question from Elena just before. And so what actually sits in the targets? And as I said time will tell. So we're not assuming that Brilliance will become a new platform at plus more than 5% of revenue with the same, but Pandora Me or China and the U.S. So we're not being so specific on which of the growth pillars will actually drive revenue. Having said that, if Brilliance became a very successful, just saying, our -- 10% of our revenue on this time horizon, it would be visible in the gross margin. But then we will also be in a situation where we will probably be above the 5% to 7% organic growth target if Brilliance came to that share of revenue on this time horizon. I hope that helps.

And the next question comes from the line of Antoine Belge from Exane BNP Paribas.

It's Antoine at Exane BNP Paribas. Two questions. First of all, on what seems to be the -- really the short-term big opportunity in the U.S. I think you mentioned where you were strong and where you were a bit weaker. So could you elaborate a little bit more in terms of U.S. states, where you see the most opportunities? And also, do you think that your growth going forward in terms of new stores will be mall based or outside of malls? And my second question relates to Brilliance. You seem quite pleased by the acceptance of Pandora consumer to price up. In my memory, the average transaction was someone going into a Pandora store and spending EUR 75 and buying 2 units. So how is the conversation once this person is in the store to convince her or him to pay a much higher amount of money on Brilliance?

So maybe you can talk about U.S., Martino?

Sure. Today, when we look at the U.S. into detail, we see that our market penetration, our brand awareness is very different. We're strongest where we come from, where we established our head office. So in the Northeast. We're weakest in the West, particularly in California, and we're somewhere in the middle in the South. So this is also connected with the store density. So the amount of points of sales that we have distributed through the country. So in our plans, when we look at growing the U.S., we definitely see an important network component, particularly hitting on those underpenetrated parts of the U.S. where we also see that our e-comm sales becomes weaker as our brand awareness is lower. When it comes to where exactly streets versus malls or outlets, the malls represent the large majority of the distribution ecosystem in the U.S. So as we are going to expand our network, it's going to be predominantly malls, but looking at malls, our focus is going to be in the best white spot. So A, plus A and B locations, so the best malls available in the U.S.

Antoine, and I'll take on the Brilliance piece. I think there is one main reason behind this trading up, and this is all to do with education of our incredible store staff. So basically, they learn 2 things. One is these diamonds are actually real diamonds and we have a certificate that actually prove that. And at the same time, there is an entire selling experience, which allows them to try, but equally, to understand the value frame. So we actually train our selling stores on 2 things, authenticity of diamonds, a value frame. This is actually very good value versus real diamond. And that's the key recipe for us to trade up our consumers. I hope it helps.

Yes. Maybe a follow-up on what has been said about gross margin. I understand that it will be flat, but when you look at -- and you already talked about product mix, but what about distribution mix? Because if on retail continue to increase, either through online or physical. What about the third-party distribution? Isn't that supposed to be lower amount of your sales by 2023 or 2026? And shouldn't that be actually beneficial for gross margin as the margin on retail and physical or online is greater than the third party?

Yes. Antoine, it's Anders. You're absolutely right. The forward integration, the smaller piece of forward integration that we have in the target and the network expansion will support gross margins in the years to come. And the way to think about it is that the gross margin in a sort of new O&O store is, so let's say, mid-single digits above the group average. And in terms of forward integration, the gross margin is probably high single digit higher than the group average. And then when you try to translate sort of 1% forward integration per year, plus 1% to 2% of network expansion per year into a gross margin support. It's probably just doing the math in my head here have 15-plus basis points per year in gross margin support from that. So that will be -- it all helps, of course, but it's 30, 40 basis points in total during the next couple of years, gross margin support from those 2 pieces of growth initiatives.

And the next question comes from the line of Thomas Chauvet from Citi.

Apologies. I hear some each. First question. In your slide with the sales data, you've highlighted that to like the FY '23 contingency target, which is higher than the base case. FY '20 is not that far away. So when will you decide whether to trigger that plan? And what are the critical initiatives and that order of priority. Secondly, a question maybe for [indiscernible] you talked about how you're not building predictive models around consumer behavior shopping intention. Are these models going to help you even upstream in deciding what new platforms or what you believe the chance of collaboration with new brands and what to launch, for instance, to launch Brilliance, really, in the U.S. first rather than France or Australia. And just finally, a quick follow-up on the previous question on the U.S. What is the long-term time frame you have in mind when you expect to double the U.S. to order. I mean, is that 2026 [indiscernible] if you achieve this target, that would imply around 15% sales CAGR in the next 5 years to significantly evolve above market growth. So I was wondering maybe Martino can answer, where do you think the market share gain will come from if you totally unbranded affordable segment to affordable jewelry brands? Is it big luxury players given obviously, Brilliance was going to in some ways from a traditional jewelry brand?

Okay. Maybe, Anders, you can shed some light on Thomas first question.

Yes. And I'll just repeat the question, Thomas, to make sure I got it right. But I think the essence of what you were asking for was whether -- so when we might reach a point where we would trigger that the growth target might be higher than 5% to 7% that we've set out. And if that's correctly understood?

Yes, Yes.

Okay. Then I think the way to...

[indiscernible] contingency prime target that is to the right of the original target. When do you think you'll have visibility on that? And where will they come from? Is it just really organic or are they [indiscernible]?

Okay. I might not be answering the question. But I've had quite difficult hearing what -- there's a lot of noise on the line. But obviously, when you set our target, a few years out. We will always be looking at how are we sort of trading on a quarterly basis, on an ongoing basis? And then what does that implicitly mean for the targets for the rest of the period. So let's say, we come into 2022, things go well, and we are growing at above the 5% to 7% CAGR, then you might reach a point where the implicit growth target for '23 looks strange. And that, of course, goes both ways. Hopefully, we'll be more likely in the way around that we will be growing above that target level in 2022. But it's something that we'll as a listed companies, of course, have a legal obligation to track on an ongoing basis, not least when we announced our quarterly announcement. So where are we? What was behind us and what does that mean for the target for the rest of the period? But let's see how it plays out, many of our growth journey we are just in the beginning of that. We're just in the beginning of just test launching Brilliance, where we have not even yet relaunched Pandora Me. We're not embarked yet on our investment in turning around the brand in China as an example. So many of the growth journeys work sort of early on. So yes, let's see how things develop during the quarters to come.

Yes. And maybe, David, you can shed some light on the predictive models.

Yes. Sure, Thomas. Great question. And I think the line is very bad, as Anders is saying, so I hope I'm answering the question you asked. I think I said in the presentation that our predictive models and data science can cover the whole value chain in our business. But we're starting and our primary focus remains on our customer experience and customer data, raise the first-party data to capture the data and then how we leverage that through personalization and so on. That is the fulcrum for the digital transformation of Pandora. But you're absolutely right predictive models work all the way along the value chain from product design and market trend through product launch. And I think in Martino's backyard in terms of what he's outlined in terms of store openings, some great data science at play there with the team that Martino has built to build out that agenda. So it's already working in different points in the business. And we're at the start of Phoenix. And I think over the next few years, you'll see a steady expansion of how we're using predictive analytics and data science at various points in the business.

Yes. I think it's important -- I mean, first of all, Thomas, it's great. You push us, and we need to start we've just stopped crawling and now we're walking at a decent clip. And of course, it's great that you guys encourage us to start running, but we might get there 1 day. As you know, I'm also a firm believer on staying focused, landing the planes that we've sent up before we kind of start getting confused by too much going on. So predictive models for new launches, I think, is still ahead of us, to be perfectly honest. And then maybe your view a bit on the U.S.

Yes. I think doubling the size of the largest market is a very bold ambition. It requires that we become significantly better. And not only from a geographical standpoint, but also from a product standpoint, we need to be able to capture new consumers. We want to win big with Gen Z. So like for China, this is a comprehensive plan that will take time. So it is hard for us to say when the time frame, what we're saying is that we believe we will get there in the long term. When it comes to where does the market come from? We have been mainly focusing on our own internal drivers. So what within Pandora needs to become better for us to double our size. And less focus have we put into from where we see that this share is coming from. I guess this will -- time will tell. It's -- we're more engaged at the moment in looking and scanning ourselves and becoming better rather than studying how this will affect competitors or other brands.

But the only thing I would like to add on that is we play in the affordable luxury space. That is what Pandora is about. So we're not going to go after price positioning that Tiffany or Cartier or these other people out there in the market to occupy today. That is not where we have our strength. We are strong in the middle of the market where the volumes are big if we strike the right code with consumers. So we will not stray from that aspect.

[Operator Instructions] We have another question from the line of Fredrik Ivarsson from ABG.

I hope you hear me well. First question to David. You aim for a 3% conversion rate, I think you said within the eSTORE. Would you mind giving a ballpark figure on where you are at today? That's the first question. And second one to Anders coming back to the gross margin discussion, you guide, obviously, for a roughly flat margin ahead. And given the raw material headwinds you're aiming or you're phasing as we look into next year as well, given your hedging policy. Do you plan to offset those through pricing? Or is channel mix going to be the key offsetting factor as we look into 2022?

Yes, maybe David.

I don't think we release our conversion numbers as part of our trading numbers. So I don't propose to break that trend right now. I think the point what I was trying to make was actually we've made significant progress on conversion over the last couple of years, better technology platform, but really strong trading approach across all of our cluster teams, our global teams. And alongside that, we see significant headroom in the future. So you'll notice I was relatively diffuse about the 3% conversion target as well, which will be in the midterm. But we see significant upside in our e-commerce business still. And I think that's the main takeaway. And the last point, which again, I made in the presentation was in my job, everyone asks you conversion targets, and it's a very difficult game because the number is so elastic, and that's one of the things that we've certainly experienced through the COVID period. So for now, I'll save the significant headroom, and I hope that's sufficient for now. But thank you.

And then Fredrik on the gross margin piece, we will have around 50 basis point or so headwind from higher silver prices and foreign exchange. So this is a combined impact of that 50 basis points next year. And so the offsetting factors is not price. That's not on the agenda for us, but the offsetting pieces are that we will continue running cost efficiencies across the value chain like we did during the program now turnaround during the last couple of years. There's a leverage as production volume goes up on our existing platform in Thailand, the existing manufacturing platform. And then there's the channel mix support that we talked about a little bit earlier on during the Q&A factor here. So that should lead to that net-net, the gross margin should be sort of flattish in the period towards 2023.

And the next question comes from the line of Magnus Jensen from SEB.

And thank you for a good presentation. Two questions from my side as well. The first one is to -- you sort of disclosed for the first time in a while, the consideration to buy among your consumers in your key markets, and it's at 21%, which compared to your competitors, clearly, is a good level. However, when I go back and look at the last time you disclosed this number, it was at 34%, and that was in 2017. So a significant down step on where you actually were back in '17 where the brand was not considered to strong where you actually saw some negative like-for-like. Why should I not be worried on this key metric in terms of the brand strength? That was my first question. The second question goes to sort of, yes, the relaunch of Pandora Me. It's fair to say that you've not been that successful in introducing new concepts to the market in the last number of years with ESSENCE, Reflexions and latest, Pandora Me. And I understand that you're going to do a lot of things that Carla mentioned. But what is exactly going to be the difference this time around? Why should we believe that now is the time where you will actually be very successful with a new concept. That's my 2 questions.

Shall I take more. Magnus, nice meeting you. So first and foremost, comparing the 2021 data to 2017, it absolutely relevant because we changed the methodology in the last, actually 12 months. So what have we changed versus the past is, first and foremost, the number of countries we are looking at to make sure that we reflect market reality. We are looking into 10 countries versus before we were looking much less. We increased the number of brands. Before, we had around 6 brands per countries. Now we have around 19 brands per country. So this gives you clearly 2 ammunition to say that the broad base is much, much higher, much larger, more representative the reality. And what we do is actually we do compare quarter-by-quarter, and we do compare versus 2019, 2020. These are the 2 comparable data. This data just shows us that we are actually keeping the leadership position or actually increasing depending on the countries, obviously. And that's the first piece. The second piece, obviously, Pandora Me relaunch. There are a couple of things which are important to point out. First, the intuition when Pandora Me was launched was absolutely correct. What was wrong was the execution to market. And so there are a few pieces that we are actually addressing. First, as you might have seen from the presentation, we are obviously targeting this against Gen Z. We changed the assortment in a way that not only we shift to categories which are more relevant to that target, but also we ensure the right affordability across different categories. The third and most important piece is actually related to the go-to-market. In the past, we used to launch something a couple of weeks and then leave it. For Pandora Me, which, by the way, also, we did it for Pandora for moments wearables, we actually did the full 360 exploitation, which goes from ensuring the perfect visibility in store, ensuring our staff is trained and on top, launching and leveraging. Launching and leverage means we are not going to leave Pandora Me after 2 weeks. Likely in the past we are actually expecting to continue to support this initiative for the next 18, 24 months minimum where we have already year 2 plans. So it is actually quite different from what we have done in the past, and I hope this answers your question.

Very clear. Just if I can have a follow-up to my first question. So you say we changed methodology. But you also say you have the numbers from '19 and '20, could you say what they were in '19 and '20, so we sort of know the trajectory of the brand strength in that term?

They are pretty much stable if not slightly increasing. And obviously, what you need to consider in there, there is obviously the entire COVID piece and how frequently we do. So we trust us. We are actually obsessed with this number. I have Alexander asking every month. So if it was declining at that rate, probably will not be sitting here, right?

And the next question comes from the line of Omar Saad from Evercore.

I really appreciate the presentation. That was really well done. I have 2 questions. One is on the core Moments, Pandora Moments customer and their behavior. And the second is a follow-up the manufactured diamond opportunity. I know you're still early on the Moments customer. I know you're still early in the process of developing your data and analytics capabilities, but it also sounds like you've got a customer files on 20 million people. Maybe you could share with us how that customer is evolving, some more characteristics about the customer in particular, I'd love to know trends between gifting and self-purchase older versus younger customer demographics. Any update in terms of the customer duration? How you could translate maybe at the average Pandora customer into more of a collector or lifetime customer, if that's a trend that you're seeing. Is the growth coming more from new customers or increasing spend with existing customers? Those are my kind of questions around the Moments customer. And then in terms of the manufactured diamond, I really appreciate the supply chain discussion early on that was really helpful and very impressive will manufacture diamonds be an own manufacturing capability. Is this an outsourced supply chain? And if so, how do you differentiate your manufactured diamond products versus others that are out there?

Carla maybe you can...

Okay. So I'll start by just sharing what we have for the brand tracker. So what we can see is a couple of things. First and foremost, 70% of actual consumer are coming from gifting versus 30% are coming from self purchaser. We don't see too much evolution of this, obviously, it depends a bit by when we are talking key consumption versus average. But in general, 70% are gifter and 30% are self purchaser. What is important to notice though is out of this 70% gifter, probably around 50% or men, 50% men, which would tell you, why are you not talking to men? Well, men are simply hinted. So we know that actually the majority of their purchase is driven by the end consumer. So effectively, our key customer is the end consumer. She represents plus or minus 84% of the total and what we know is either she purchase for herself or she does it for gifting. That's one of the first consideration. When it comes to demographic, what I can tell you is that 44% of existing owners are below the age of 35 and the balance is above the age of 35. And we saw actually a slight increase over the last few months on the consumer getting younger versus what it was before. And when I say a slight increase, I don't want to oversell a couple of percentage points. The last piece, which is interesting is the average consumer age is around 37 versus a global competitor around 38, so we are plus or minus in line with the average. What else can I tell you? I don't know whether David has additional point on new versus old customer, we don't have lots of data on this one to actually track it. We are very early stage when it comes to in-store, but perhaps you have some...

I don't have a number, but just to build on what Carla was saying in-store. Martino's team are driving on in-store data capture with our customers, and that's early days as well. But building that base, that raised the first party data is fundamental, and that's. That means we're capturing more data on people we've never seen before, if I could put it that way, whether they've shopped with us before is unclear. But that kind of new customers in our database is a growing component. I don't have a number off the top of my head, I'm afraid.

Shall I take this?

No. I can take your second question on the lab-created diamonds. So the supply chain today has fundamentally 3 parts. One is the piece where we grow the rough. The second is cutting and polishing. And then the third piece is the setting. All of that today is outsourced. And in the foreseeable future, I certainly don't see that the first or the second part of that chain is going to be brought in-house. There's very specific skills that people have developed over the years in that space. The setting is obviously something we do. We set lots and lots of lots, over 1 billion stones annually. So I think that's probably an area where we know what we're up to. And maybe I'll turn it over to Aussie, so he also can be included in the conversation. Maybe you can shed some light also on your view on this space.

No. Thank you very much, Alexander, and Omar Saad, thank you very much for the question. Exactly to the point that Alexander mentioned, of course, for the diamond, it takes a different technology. So the part of the growing the rough and also cutting and polishing, we really have no plans to in-source that. But as Alexander mentioned, our manufacturing strategy is, of course, that we want to produce 90% of the jewelry in houses. So of course, eventually, we do see that the setting and it could also be coming in in-house later on, but that will be at a later stage.

That's really great color. Maybe just one quick follow-up on the Moments customer. That was really helpful color. Do you have any data on the duration, the customer duration, if customers are staying in the Pandora brand longer? Or is it a similar duration relationship as history?

So we don't actually have hard data, but what we know is a customer -- consumer active owners, which means in the last 12 months have bought 1 purchase -- 1 Pandora gift. We know that they own on average, 11 pieces of Pandora. So given that consumer comes to our store 2 or 3 times per year, we expect the duration to be quite strong. And even if you look at inactive owners, which are the people that have bought in the last 12 months. This goes down to 7 pieces and still 5.6 Charms. So I'm afraid I cannot give you a precise data. But we have indication that actually we are in for really loyal consumer because it's built in our business model. It is actually very much built into this. It's about collectibility. And if you think even naturally, Charms it's almost inbuilt in the idea of Charms that you collect. Whether you collect 3, 4, or 5, it's our job to make sure that they collect more and more. But if you think about it, it's very hard to find a Pandora Bracelets or Neckless with only 1 Charm.

Yes. No. I mean we -- I know that in the past, we have quoted some longitudinal data, but these were kind of photographic time that I think was done as part of the program now that BCG helped us do. So that was interview-based data, where we hope to get to with the help of David and his engineers is actually to be able to answer that question on the trend line in the future. But as Carla says today, we don't really have a rich historic data file to which we can draw and draw a lot of conclusions. So it's more creating the conditions today, populate this with data that we capture and then we can build out this insight over time.

And we have a follow-up question from Lars Topholm from Carnegie.

Actually, 2 follow-up questions. So one, I guess, is for you, Anders. So in your presentation, you mentioned regarding cash redistribution that you target a 2% dividend yield. Does that mean we should model dividends as a function of share price or how should we think about that? And then I have a question on your growth potential because you have a 5-year strategy, but give targets for 2023. How should I think about momentum post 2023, do you see a sort of slowdown in growth? Or do you see some of your initiatives being more long term, so we should expect an acceleration of growth? Or how should we think about that?

Lars, yes, you're absolutely right on the first question. That's essentially the bottom that the absolute size of the dividend will depend on the share price. That's how we think about it. We think the 2% dividend yield is competitive when we look at the landscape around us, among other listed brands and companies. And so yes, that's how to think about it. And then the rest will be share buybacks.

Yes. Lars is trying to find creative ways of getting us to answer what the number is, but...

I'll be...

I'll make up my own number, Alexander. So if you tell me the moving parts, I'll make up the number.

I can give a couple of comments, and then that will be at least starting out. But it's clear that the growth pillars in Phoenix stretches out beyond 2023. We have most likely not doubled the business in the U.S. by 2023 or doubled sorry, tripled in China by 2023. I guess that's quite obvious. We have not reached a point where we have opened all the 600 stores that Martino talked about, et cetera. And there will be -- so we have other ideas about potential platform. So the growth ideas stretches out beyond 2023. So when we get to that point, we will not be standing there and say, well, we are sort of empty for ideas. And now we can just sort of cross our fingers and hope that we can grow in line with the market. So that's 1 point. And then I think another point as part of the investment case that we called out. When we went through the development of the strategy, as I said in my part of the presentation, there is quite obvious growth avenues that I think in other circumstances, you would have jumped on them immediately, but we simply had to postpone them because there's too much to do. And that includes India and Japan as 2 obvious markets to look into at a point in time. So yes, so that's I can hopefully give you some guidance that there should be ammunition to keep growing at a decent rate, at least in line with the market also beyond 2023.

That's an excellent answer. If I may, a very quick follow-up to Carla on Pandora Me and the relaunch there. So Carla, in your experience, if a relaunch is successful, how quickly will you be able to see that in numbers? Is it like a 3-week thing? Or is it a 3-year thing? Or how should we think about?

3 years, no. That's one I can tell you. I think it's fair to say that we just need to wait for Christmas. So we cannot obviously just launch Pandora Me, October 1, and then after 4 weeks, we decide whether this is successful or not. This is a bit what we have done in the past. So we just need to give ourselves at least 3, 6 months. But I would say that in January, we will actually know the potential behind this initiative in a way or another, which doesn't mean that we'll make the call or whether this is successful or not. But generally, the first 3, 6 months gives you a good indication of whether -- what is the size of that initiative and how well this resonate with consumer. I don't think Pandora Me needs more than that for us to have the ability to say it's going to be 5% of the revenue in the next 2 or 3 years, we should be able to give a better indication after holidays, I would think.

Yes. I think we need to learn as we go. But if you think about the Brilliance launch, it kind of got to 3 points after a couple of months, and now we're trying to kind of work our way through that. So the one thing, Lars, I can say, we know if it's a dog that you know very quickly. On the other hand, how big an initiative can be, takes a bit of time to figure out. So I'd say, we give ourselves half a year on these major platforms to say, yes, we like it or it needs to be retooled. And sometimes when you do these things, it's not just to say it's a hit or miss. It can also land somewhere in the middle, and then you need to decide, can I spruce it up? Are there some learnings that we can do. So I think part of the operation that we've set up with the removal of the regions, we're much closer on the countries now. I mean there's a weekly call, which Martino hosts, and I joined most of the time. And we speak to the markets every week on all the initiatives that are going on around the world. And that actually is a very important input on how we then adjust plans or stock plans or accelerate plans. So I think we've built an organization that is capable of kind of learning on the go, which I do think is a very important aspect of how you run a successful global business.

And we have another follow-up question from Antoine Belge from Exane BNP Paribas.

Yes. It's Antoine again. First of all, just in terms of the marketing ratio, I think this year, you're depending on how much you spend in China in Q4, it should land, I think, between 14% and 15%. Do you expect that to be pretty stable until 2023? Or at some stage, do you expect a bit of leverage. And second element, and sorry, it's a bit boring, but working capital is actually quite a big part of your cash flow generation. And we know that it's been quite volatile. So in your sort of your cash flow targets, what sort of working capital ratio are you using? And sorry to be specific, but can you mention the one where it's purely the operating free cash -- working capital with just the trade payables and the more sort of broader ratio, which includes other payable because that's also quite a big amount. And actually, I've got a third one, just to confirm that there is no M&A before 2024?

Antoine, I'm going to go out on limb here and ask Carla to answer the question. But of course, it's dangerous because she spends the money as well. I will come back at the end to confirm whether I agree with the level that you suggest.

So Antoine, first and foremost, we in the coming years to maintain the ratio of 13%, 15%. Now there are a few things which are important for us to clarify. The first thing is, of course, we are going to continue to keep investing behind the brand. We know this is critical in a nondiscretionary category. We know that this is a category that works with top of mind. We need to -- we need to maintain the competitiveness and ensure that the awareness levels stay at least where we are today. That's a brand level. Then if we look forward, we have a couple of priorities you all have seen, one is China, where obviously, we expect to overinvest versus a mature market and the other one is new platform being this Pandora Brilliance, Pandora Me and whatever comes next. Where we actually do expect to overinvest versus revenue because we simply don't have the scale of an existing base business. With all of this, obviously, it is super important that we make some choices as we move along and at the same time, increase the ROS from existing spending which means we do expect digitalization to pay off. We do expect personalization to give us a better return on investment. So part of this investment will be funded through a better way of doing marketing. Part of this will be funded through cost mentality, reset mentality, what Anders was saying before, trying to really go for a 0 cost and make sure that we kept the nonworking invest at max. So net-net, we do not expect to go crazy, actually, right? But we also know that there are a few pieces where we will need to overinvest versus other pieces where actually we're going to drive synergy and scale and benefit from higher ROS.

Yes. So I concur with the answer. And I should also add that given the kind of the earnings model that this company has, which is quite unique with this high level of gross margin, there may be a year where we overinvest a little bit in your space because it's just the right business decision. But from a modeling standpoint and from a guidance standpoint and what I think is a sensibility standpoint, the 13% to 15% seems to be a good range to run a sensible growth and a balanced growth for the company. And Anders, maybe some views on that.

Yes. I guess that was for me. Yes, Antoine, and the way to think about it is on the operating working capital, you could think about that as mid-single-digit percent of revenue -- annual revenue and a bit broader working capital definition of net working capital, you can think about that as a low single-digit percent of revenue.

And M&A.

And M&A. Yes, that's one of the potential growth pillars that we have said. That's not for now. Of course, the nature of the M&A game is that you don't always know exactly when something that's too good to be true turns up. But for now, I think sort of parking that we are focusing on the opportunities that we have laid out during here today, but definitely see a longer-term opportunity and value creation potential in the M&A space.

And the last question comes from Michael Rasmussen from Danske Bank.

Also 2 follow-up questions from my side. So first of all, Anders, what would be the M&A opportunity that would be too good to true to come to comply by what type of company would be looking at? And my second question is a little bit on the new production site in Vietnam. So what are the plans here? I might have missed that, if that's been said already. But will it be specific product categories? Or do you basically seem to plan making a carbon copy of one of your existing factories. And also what kind of efficiency improvements do you expect now that you basically start from a greenfield and you have those of findings from your 2 existing sites?

Michael, I think maybe I'll take the first one. And of course, whatever I say here is going to be now cast in stone. So I need to be very careful. What we have said is the focus of the Phoenix strategy is to drive the Pandora brand. Now there could be M&A opportunities that support that drive. So that could be one option, which could be of interest to us. And I'll just leave it at that because your imagination can take you to quite interesting places here. But bear in mind that what we've said for the Pandora brand, as we sit here today, we see that the growth is within the jewelry space. So that kind of gives you some hint of what could be of interest to us. Now if you then kind of zoom out a little bit and say what does the Pandora company have to offer? Where could we be a better owner than maybe some other people. And then you can look at some of the things that we do think we are good at. We have been quite good at building a brand that reaches a mass audience. We have been quite capable of building a global reach in terms of the distribution network that we've built. And with Aussie and his team in Thailand, I think we are at the top of the charts when it comes to manufacturing at scale. So whatever kind of fits in that space, you would then consider to say if that comes along at an attractive price, we can put some of the things that we're good at and leverage that opportunity, that could be of interest to us. And that could be other brands. We're still in the jewelry space as far as I'm concerned. Now if something completely left field comes, it's left field and therefore, I can't even comment on it here and now. If that opportunity comes, we will have a look at it. But right now, the focus is mass and it's jewelry. And then maybe I'll turn the manufacturing question over to Aussie, in Thailand to give us a view.

Yes. Thank you very much, again, Alexander. And also, thank you very much, Michael for giving me the opportunity to answer the last, last question today. It's really nice. Maybe first and foremost, in regards to the plan of our new manufacturing facility in Vietnam. So currently, we're in the progress of selecting the location. And we also mentioned that -- I mentioned that in the video before, expecting to conclude this study latest by Q1 next year. And with the production site itself, we are planning to come out with the first piece of the production approximately quarter 3 or quarter 4 of 2024. And then we will ramp up the production then from 2025 to 2026, approximately 20 to 40 million pieces, right? And eventually, that we are planning to produce or extend our capacity up to 60 million pieces from '26 onwards. I think to the other point that you were mentioning, since we have this opportunity to have this greenfield and really coming up and plan and built a brand-new facility. And I think that's -- I mean that's a very good question, especially the person who has manufacturing at heart there is that, of course, we're aiming to build this new factory to give the opportunity that we optimize really the factory let's say, set up into a world-class manufacturing. There are so many good things that we have learned in Thailand for the past 30 years that we have been producing in Thailand. So of course, there will be a lot of, a lot of leverage and synergy of that best-in-class jewelery. But nevertheless, as we have that opportunity, instead of doing more of the same, we also will look into alternative manufacturing techniques, technology and also to bring much more productivity and then being even more competitive going into the future. And last but not least, to the point that Erik had mentioned is also that we will put in our sustainability ambition into these new plants as well. So hopefully, that I was able to answer your question, Michael.

Okay. We've come to the end of a very long day for us around the table here. Somehow we come to a milestone with this Phoenix project that we started in the midst of raging COVID last year. So probably going to have a genentonnic when I get home tonight. We thank you for your interests. It's humbling to say the least. I also want to take the opportunity to thank the executive leadership team in public. You've done an amazing piece of work to get us to this point. It's really exciting what we have ahead of us. I think what I'm also very proud of is not just the strategy and the financials, which are, of course, I get that the financial stakeholders are incredibly interested in, but also is the way how we intend to do this. We have new values. We are making strong commitments when it comes to the ESG goals, both in terms of circularity, becoming a low-carbon business, but also inclusivity and diversity, which are important to all our employees and people even outside. I think we have a great plan, but a plan is nice on a piece of paper. Going out from here, it's time for us around the table to roll up our sleeves and get working on the plan. And on that note, I thank you very much for your interest, and hope to see you soon again. Bye-bye.