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

Good morning, everyone, and welcome to the conference call for Pandora's Q3 2025 Results. I'm Bilal Aziz from the Investor Relations team, and I'm joined here by CEO, Alexander Lacik; CFO, Anders Boyer; and the rest of the IR team. I'm also really happy to have with us today CEO Designate and Current CMO, Berta De Pablos-Barbier. As usual, there will be a Q&A session at the end of the call. If you could kindly limit yourself to 2 questions at a time, that will be great. On that point, I will hand over to Alexander on Slide 3.

Thank you, Bilal, and welcome, everyone. Let me start with a few high-level points on our business. So we've been operating with very challenging macroeconomics, actually for a while now. But even in this difficult setting, we continue to execute on our strategy and repeatedly deliver solid organic growth. The strategy centers around investing behind the Pandora brand and bringing more exciting innovations to our consumers. This will help keep us relevant today and will drive value for us well into the future. Our business model and financial algorithm remains incredibly healthy. You can see that in our gross margin still operating close to 80% despite the macro headwinds. We keep having very healthy margins. We keep generating significant cash flow, and we keep driving healthy EPS growth. These points are also clear when we look at Q3. So now let's have a closer look at the quarter. Next slide, please. Again, we did a good job in a tough backdrop. We have maintained good discipline on the Phoenix strategy and our overall mission to build a full jewelry brand. We delivered 2% like-for-like growth, which alongside network expansion, drives 6% organic growth. The like-for-like growth has been a bit below our usual run rate over the past few years, obviously not helped by the broader macro and consumer sentiment. But we know what to adjust, and we have a healthy pipeline of growth initiatives. On profitability, we are impacted by external headwinds from tariffs, foreign exchange rates and commodities. In that light, we are very pleased with the profitability of the group with gross margins, as I mentioned, just around 80%. The underlying performance is even stronger. So our core profitability drivers offset a lot of the external headwinds. Finally, our return on capital remains very high at 43%, something you should generally expect from us. On EPS, we continue to drive good underlying growth. So overall, quite a satisfying quarter. Now, let's have a look ahead. Can we move to Slide 4, please? On guidance, we've generally left things unchanged, but with a few tweaks. From a topline perspective, our guidance is still for organic growth of 7% to 8%. For the like-for-like guidance, we're now expecting that to be 3% to 4% versus 4% to 5% previously, and there's a few things to highlight there. First, due to the broader macroeconomic situation, we've changed the like-for-like range slightly, as I mentioned, from 4% to 5% to now to be 3% to 4%. The low end of this range would require a worsening of the macroeconomic situation. We are also mindful that the holiday season can be quite promotional, so we built in some room for that, too. On network, our new stores are performing a bit better than expected. So we have raised our expectations to a 4% growth contribution as opposed to 3% previously. Therefore, in total, our organic growth guidance of 7% to 8% remains unchanged, albeit, as I mentioned, with a slightly different composition. I'll let Anders talk about some of the specific details here later on. Finally, that brings me on to current trading. In October, our like-for-like trading has been around 4% and thereby above the Q3 level. So an encouraging start to the quarter. On the EBIT margin guidance, the message is that it's unchanged at around 24%. We have managed to absorb quite frankly, an insane amount of headwind this year, and I'm very pleased that we can still target an EBIT margin in the mid-20s. I actually think that's a fantastic outcome and a true testament to the health of our business model and the agility of our organization. Can we move to Slide 7, please? Our strategic focus is to attract more consumers to the Pandora brand by broadening our appeal as a full jewelry brand. Our North Star is the Phoenix strategy, and the pillars you can see on this slide. This year, we've started to develop our focus a bit more on the 2 aspects you see on the top of the wheel, brand and design. This is something that will continue into '26 and beyond as well. That brings me nicely on to the next slide. I already showed this last quarter, but I will highlight it again. It shows how big the growth opportunity is for us beyond wristwear. As a brand, as you know, we come from mainly operating in around 18% of the market, increasingly targeting the other 82% of the market is what makes our growth profile really exciting. You see the main elements of the Phoenix strategy on the previous slide. We are sharpening some of our execution to attract more consumers to the brand and drive like-for-like growth. Some of you may remember from last year that I mentioned how our focus will naturally shift towards design and brand. This includes really looking to dialing up our innovation pipeline and marketing efforts, something Berta also fully endorses. The launch of Talisman and Minis subcollections are good examples of how we drive incremental newness that brings excitement to the brand. You will also see us dialing up our relevance on a more local level for the use of some assets that reflect our brand values. And then last, but certainly not least, we see opportunities to optimize our in-store experience. I'll come back to that a little bit later. Now, let's have a closer look at our marketing. Next slide, please. Here are some examples of what we've been working actively through Q3. That gives you a taste of what's to come in the future. From a marketing standpoint, it's fair to say we've made a big impact already with our Talisman launch. The press and media coverage of the collection has been fantastic, and initial consumer reactions are also very positive. You will remember how in the previous quarter, we mentioned we would also be looking to dial up our brand heat on a local level. Pandora is and will always be a global brand, but there are clear areas where we think we can be sharper and even more relevant to consumers on a country level. We've started to execute this already in some markets and see good impact. This is something we will continue building on. Before I move to the next slide, I also want to comment that our new Christmas campaign is now live. It's a campaign that is more rooted in Pandora's true DNA, driving meaningful moments, and we are super excited for that. So please keep an eye out for that. Next slide, please. I mentioned earlier on in the year how we're excited about our creative pipeline. This year, we focused the newness in our charms and carriers' core. It's always important we keep this offering fresh and front and center of our consumer minds. We did that through the introduction of our Talisman and Minis collection. And so far, most of our media efforts have focused on the Talisman. I mentioned previously that the media coverage of our launch has been very successful, and we've also seen this translate in the actual stores. The Talisman collection has resonated very well with consumers with good initial results in all market -- in more markets. It's still a relatively small collection from a design variation perspective, but the consumer appetite to engage has been incredibly pleasing to watch. This demonstrates how we can continue to drive consumer engagement with our unique combination of innovation, affordability and storytelling. Now it is our job to build on this momentum, something I know Berta will have a sharp focus on going forward. Next slide, please. Now, innovation doesn't just limit itself to new designs. It stretches all the way from optimizing current designs over crafting methods to new material innovation as well. We are advanced in exploring creative innovation that is anchored in our distinctive DNA as a precious metal jewelry brand in the space of accessible luxury. This innovation will allow us to mitigate a material part of the cost headwind we face from higher commodity prices, in particular on precious metals. Our consumer research here has been encouraging, very encouraging, in fact. And let me be clear, everything we do is being led from a consumer standpoint. That's the center of gravity for us. Pandora's brand DNA is to provide beautiful, high-quality jewelry that is accessible to the many. I won't be more specific at this point in time for competitive reasons, but of course, we will keep you updated when the time comes. In conclusion, we're excited about the opportunities ahead to keep driving our business model forward. Next slide, please. Let's now look at our 2 segments, core and Fuel with more. As you know, our strategic aim is to be seen as a full jewelry brand, which essentially entails driving steady growth in the core whilst adding higher growth in Fuel with more. As I mentioned earlier, the newness we have is impacting within the core, which helped support growth here at 1%. The new subcollections we have launched are within the Pandora ME, which delivered quite strong like-for-like growth of 34%. You can see once again, how over the past 3 years, we've been able to drive good, stable growth sequentially in our core, exactly in line with our plans. Next slide, please. Our Fuel with more segments grew at 2%. That's probably a bit lower than what we would have liked. But as I just mentioned, this year, our creative newness has been more tilted towards the core, so there always will be some small swings. We have good upcoming plans for this segment in next year. Let's now move on and have a look at the markets. Next slide, please. As always, I'll start with our biggest market, the U.S., which delivered a strong 6% like-for-like growth. This performance is particularly impressive of the tough comps we faced in the U.S. Our brand metrics are very strong here. The response to our new Talisman subcollection has also been very positive. As with all markets, our attention now shifts to the holiday season, and we've started Q4 in our largest markets in a pretty good shape. Next slide, please. In Europe, our total like-for-like growth across all markets came in roughly flat at minus 1%. We continue to see strong growth in Poland, Spain and Portugal to name a few, where the brand is going from strength to strength. Performance in these markets was somewhat offset through weakness in our 4 European markets that we have historically disclosed separately. I'll pick out a few specific points. The overall environment remains tough in many European markets, but we will also sharpen our execution in a few of them. The first signs of that can be seen in Italy, where I mentioned that we've leveraged some more local marketing to drive brand heat, and the new subcollections have also seen good consumer interest. We've started to see pickup in traffic now in Italy, which is the first important sign we always look at. We will also leverage this strategy in some of the other markets. In the U.K., our like-for-like growth remains soft at minus 8%, not helped with the performance of our online platform. We are working on fixing this whilst pushing forward with our brand and product initiatives. Finally, in Europe, we'll also dial up our affordability proposition a bit better. The launch of Minis is certainly helping with that. But as I mentioned in the past quarter, we are realigning the pricing architecture slightly in some markets. So overall, our European growth remains somewhat mixed, but we have a plan, we're executing on this, and we see first signs of improvement. Next slide, please. In rest of Pandora, we delivered another good quarter of 6% like-for-like growth. This was helped by some of the markets I mentioned in the previous slide, namely Spain, Canada and Portugal. But moving beyond Europe, Japan continues to do very well and is showing very strong like-for-like growth, as we're beginning to build the brand presence out here. In Mexico, we saw good improvement due to some of the actions we're taking. This is despite the highly promotional environment in that market. We are confident that our improvement continues into Q4. Finally, in Australia, we saw continued good like-for-like growth of 4%. We have solid -- we had solid performance through the quarter and are also investing in the brand for the long term here. Next slide, please. Here, you can see a familiar slide on how we create value from our network. We are broadly on track with our openings this year, targeting around 50 net openings by the year-end. As I mentioned, reflecting the good revenue ramp-up we've seen from the openings from the past 12 months, we've upgraded our organic revenue contribution to be 4% from previously 3%. That should give you a good indication how quickly we do see a revenue pickup in new stores. We have little to no cannibalization from existing stores, as we typically open up in pure white space areas. Of course, the number of 50 openings might look low this year, but keep in mind that net of the 100 closures in China, the latter do not impact revenue significantly, so we expect the gross openings to also contribute nicely to revenue into next year. As always, you'll see on the top of the slide, the economics of new store openings in Pandora. A fantastic aspect of our business is our highly productive stores, generating very strong shareholder value. Next slide, please. Finally, before I hand it over to Anders, I just wanted to highlight that we continue to sharpen our in-store execution. Part of this comes from the new store concept, which we now have sitting at close to 700 stores, but we've also decided to enhance the store design and lay out to attract more consumers. This includes enhancing visual merchandising and elevated facades. We are also accelerating the adoption of a new digital window framework, which 80% of our stores should have already by the end of next year. Whether it's the flagship stores or the new formats, it's pretty clear that we have an exciting opportunity to improve how the full jewelry brand comes to life in our stores. And on that note, I'll hand it over to Anders for a closer look at our numbers.

Thank you, Alexander, and good morning, everyone. Please turn to Slide 20. Our reported financial performance is impacted by the significant external headwinds from commodity prices, foreign exchange and tariffs. And this obviously distorts the picture when you look at the reported numbers. But if you look at the underlying performance, you will actually see that it remains very strong. On the gross margin, for example, we had 280 basis points of combined external headwind in the quarter, but the reported gross margin was down only 80 basis points to 79.3%. That means that our actions through pricing and cost efficiencies had a strong positive effect in the quarter. So even despite all of these headwinds, we are on track for a full year gross margin to be only slightly down versus 2024. I'll talk about the EBIT margin shortly, but the other KPI I'll mention on this slide is earnings per share. The reported EPS is down year-over-year in the quarter. But again, if you adjust for the FX headwinds, then we are driving quite nice EPS growth of 5% in the quarter. I normally don't like to talk about adjusted KPIs. But in a quarter like this, you need to look underneath the reported numbers to understand what actually goes on. And when you do that, you will see that our financial algorithm keeps running well. Next slide, please. On this slide, we break down the revenue growth in the quarter, and we have commented on most building blocks already. And so I'll just add one comment to like-for-like. Like-for-like growth in the full third quarter was 2%. But as we launched the Talisman and Minis collections towards the end of August and as we continue to evolve execution in the other areas we have talked about today, we have seen like-for-like improve since this summer and then reached 4% in October, as Alexander said. Next slide, please. I've already mentioned the external headwind that we faced on the gross margin, and those headwinds obviously also feeds into the EBIT margin. But at an even higher level, you can see those headwinds in the dotted box here with a total of 380 basis points of external headwinds. And without these headwinds, the EBIT margin would have been 17.8% in the quarter and up versus last year. As you can see in the purple boxes on the bridge, these headwinds were partly offset through the effect of network expansion, pricing and cost efficiencies. The EBIT margin in the quarter ended exactly in line with the plan. And as you can see, we, therefore, also keep the guidance for the year unchanged. And then please go to Slide 24. This slide explains our top line guidance for 2025. And Alexander already spoke about our thinking, so let me just elaborate on a few points. The overall organic growth guidance is unchanged at 7% to 8%, but the composition has changed slightly. We've lowered the like-for-like range to be 3% to 4% versus 4% to 5% before. Since the start of the year, the macroeconomic picture has become more clouded and uncertainty has increased. And we did see softer trading during the third quarter. And this has made the old high end of 5% like-for-like a bit too ambitious based on how we see the world today. On the low end of the new 3% to 4% range, we have factored in a potential further macro weakening in the fourth quarter and a potential more intense promotional environment during the holiday season. And we think that's prudent given the environment that we see. As you have probably calculated, the new like-for-like range implies a like-for-like growth of around 2% to 4% in the final quarter of this year. And as we said, we started the fourth quarter with 4% like-for-like in October and thereby in the upper end of the implied range. And finally, on the network growth, as Alexander already mentioned, the new stores we're opening are ramping up faster than expected. So we expect to land closer to a 4% growth contribution for the full year as opposed to 3% previously. Next slide, please. On the EBIT margin for 2025, our guidance is unchanged, and we still expect to land around 24%, and the building blocks that you see on the slide here are also broadly unchanged. But again, I would like to draw your attention to the 280 basis points of headwinds, which sits in the dotted box in the bridge on this slide. And in that context, we are actually quite pleased with an EBIT margin of around 24% this year. Next slide, please. Now finally, I just want to give you an update on our latest thinking about the 2026 EBIT margin, given how commodity prices keeps moving. And also here, I want to highlight the total external headwinds since we issued the EBIT margin target back at the Capital Market Day in October 2023, and then now, amount to a total quite significant headwind of 620 basis points. And that's the sum of the headwinds from commodity, foreign exchange and tariffs, as you can see in the dotted box in the bridge. Given the recent surge in commodity prices since we last reported to you in the second quarter, we see an additional 120 basis points of EBIT margin headwind next year in 2026. And that takes the target to around 23% for next year versus the at least 24% that we spoke about in the last quarter. Our mitigation efforts are tracking exactly as planned. On pricing, we continue to expect the benefit of around 210 basis points on our cost -- on the cost side. We are moving ahead full speed on the cost program, which we call Project Silverstone, and we are executing as we speak. And at this point in time, we still expect savings equivalent to 50 to 100 basis points margin uplift in 2026. And then finally, but important, as Alexander mentioned, creative innovation has the potential to mitigate a material part of the EBIT margin headwind when you look beyond 2026 and thereby also has the potential to protect our high margins and protect our strong financial algorithm. And on that note, I'll hand it back to Alexander.

Thanks, Anders. So to conclude, let me just highlight a couple of things. Our business model is healthy and very resilient. You can see that in our gross margin still operating close to 80% despite all the headwinds that Anders just detailed. Secondly, what we will protect in our business model is our ability to innovate and be ahead of the curve. Our recent launches demonstrate the potential, and we're working on some really exciting innovations, which also have the potential to both drive consumer excitement and deliver margin protection at the same time. Finally, we're targeting another year of solid organic growth and are well geared for the holiday season. Before we turn over to the Q&A, I'd like to add a short comment to our announcement a couple of weeks back. As you know, I decided to retire next year. I'm sure you will see -- I will see most of you before I leave. But I'd just like to say that it's been the greatest honor of my professional life to lead Pandora over the past 7 years. I'm incredibly proud of what we've built, and the company today stands on a very strong foundation and with a clear path to grow. Everything has a beginning, middle and an end. And now it's going to be time for me to spend my energy on other things. Anyways, I'm always very happy that I can -- I'm super happy that I can pass the baton to Berta, who I know will do a fantastic job. So I'll just hand over to her to say hello.

Good morning, everyone, and thank you, Alexander. I am really honored and excited to take over as CEO next year. I've already been here a full year, and let me tell you, I see many exciting opportunities ahead of us, all that building on the vision to become a full jewelry brand. I mean, this past 4 weeks, I have worked even closer with you, Alexander, as we are planning the transition, and I think we both agree that we are making it a very smooth one and a very pleasant one. So I really look forward to speaking with you all in the near future and continuing the strong engagement that we have had. So with that, Bilal, I believe we can open to the Q&A that will be headed today by both Alexander and Anders.

[Operator Instructions] First up, we will have Grace Smalley from Morgan Stanley.

Thank you, again, Alexander, for all your help, and congratulations to Berta. I have 2 questions, please. The first one would be on pricing. Could you just help us understand what you're now seeing on the pricing elasticity relative to your previous assumption of 1%? And more broadly, on your entry price point, I believe part of your strategy -- part of the strategy has been, especially on the back of some of the deep dive work you've done in Italy is related to increasing the offering entry price point. So could you just help elaborate on that strategy and any initial learnings from that so far? And then my second question would just be on the creative innovation you mentioned with the idea of mitigating some of the margin headwinds in 2027. I appreciate you don't want to share too much detail given the competitive landscape. But can you just help us understand how you're thinking about testing those initiatives and managing the potential consumer impact and brand perception and whether you think kind of the work you're doing here could be a key differentiator as other players are also trying to offset some of these silver headwinds?

Okay. I can give it a go, and then, you guys file in as you see fit. So I think the elasticity assumptions still sit around the minus 1%. I don't think there's any change worth reporting here. Then, in terms of the entry price points, as you mentioned, so one of the things, obviously, it's not only about the price points as such, it's also about the innovation that we put in there and specifically around, let's call it, charms sub, let's call it, EUR 39, $39 or GBP 39, where I think we've probably not had enough exciting news. So a way to address that has been through the introduction of Minis, part of the Talisman range and a few other things that we have been bringing. The other aspect of that has also been to relook a little bit on the pricing architecture, where maybe we've moved some price points above the 40 decile and then reconsidering whether that should be dropping down below again. So those are kind of the actions that we are taking. Very surgically, we're moving step by step. Then, when it comes to the creative innovation, yes, we will keep the lid on this. But you can rest assured that the starting point is not COGS. The starting point is continuing to stay true to the Pandora DNA, which I mentioned in the presentation, around affordability, around precious metals. So everything we do is going to be thoroughly tested. We've, in fact, already done. I think it's over 20-odd thousand interviews on this to ensure that from a brand fit, concept fit, value fit, it sits smack in the middle of who we are. So the identity of this brand is not going to change due to the innovation. Will it be a key differentiator? Let's see. I obviously don't have a crystal ball and to see what other people are doing around us. But surely, it will be a very, very strong consumer proposition that we are intending to bring to the market. That's as much as I can reveal today.

[Operator Instructions] Next up is Lars Topholm.

Actually, a related question. Maybe it's a bit naive to us because I'm not asking for 2027 guidance, but when you specifically point out, you expect to mitigate a material part of, I guess, the 370 bps headwind you see into 2027. How much is material part? Can I compare it to the 200 bps you mitigated this year? Or how should I think about that?

It's not an unexpected question, Lars, obviously, but thanks for that. The best way to look at it is actually to use 2025 as the starting point. And in this year, we have -- the P&L sits with a $28 in the P&L, give and take. And it's that increase from $28 this year to $48 that we are basing the company announcement on that will hit the P&L in 2027. That $20 uplift on silver, and the equivalent on gold, where we see that we can mitigate a material part. So it's actually a material part of the total, I'm just thinking about, 600 basis points of headwind across from '25 to '27, not just from '26 to '27. So a material part of that 600 basis points and that we see a way forward to how -- exactly how much and how fast as well, I should say, that's a bit too early, but we do know enough today that we could say over time, whatever that number of years is, we can mitigate a material part of it. And so -- and then I would like to may be take the opportunity here to add a couple of points because with this creative innovation to the extent we can actually do it, it doesn't just have a nice margin uplift, or to Alexander's point, starting with a nice consumer opportunity for us, but it actually also reduces the commodity exposure in our P&L as well. So it exposes our earnings model less to swings in commodity to prices. And then lastly, if I'll take the liberty of saying if you take a step back, then when we had the CMD in 2023, the starting point was an EBIT margin of 25% back then. And then, over the course of those 25 months since October 2023, we have had 1,000 basis points of headwind across commodities, FX and tariffs between 2023 and 2027. So it's pretty significant. So what we're saying today is that with the combination of pricing, with leverage, with the Silverstone cost projects and now also creative innovation in a broader sense, that's actually the way forward for us to keep margins almost unchanged compared to 2023 despite all of this headwind and thereby protect our financial algorithm. That's quite okay in my book. I can't give you a hard number yet, even though I would love to do that. It's a little bit too early to do that, but we will definitely keep you posted.

But Anders, is it fair to say that if you expect to be able to mitigate unspecified material part, that long-term business model still have margins well ahead of 20%? And then I guess a related question, maybe that's my second question. So when you talk about reducing the exposure to silver, I guess, in particular, it sounds to me like you're talking stainless steel. Maybe you don't want to comment on that. But can you comment on how that creative innovation affects the way you produce? Will it allow you, for example, to use more robotics? Would it allow you to do printing directly in metal? Can you talk about what that brings of other design opportunities? Will you do PVD coating, for example? Maybe some words on that.

Lars, I understand your question, but we will not answer that. This is way too sensitive to get into. The only thing I will point out that we will not turn into a costume jewelry player. We will still remain with precious metals. We're just finding another way to execute that. That's as much as we will do. I know you all want answers on this, but from a competitive standpoint, I'd be crazy to give you that today. So you just have to hang. I think it's -- I think the statement Anders gave is a strong indication that we still believe that the earnings model that we're operating under today is going to be valid in the future as well. I think that's as much as we will stretch the conversation to.

Our next question will be from the line of Daria Nasledysheva from Bank of America.

This is Daria from Bank of America. I have 2 as allowed. Could you please talk a little bit about Germany, where like-for-like worsened a little bit despite an easier comparison base? How should we be generally thinking about the growth trajectory from here for the geography? And what are you seeing so far in October? And my second question would be on gold and silver. Could you please help us understand a little bit about hedging? Doesn't look like you have been hedging much recently for obvious reasons and also given how much you hedged earlier in the year. But is it currently on pause and you're more in a wait-and-see mode, if you could help us there?

Okay. I can start off with the German question. I think that end line of this question is we will see Germany in growth next year, okay? I think that's the important point to make here. What we have sitting in the base, it's -- I mean, the Q3 wasn't necessarily much easier from a comp standpoint. In last year, in the same quarter, we grew by 45%. And I think prior year, in '23, we were growing 30%, 35% from memory. So over a 2-year stack, you're looking at over 70% growth. The important point here is, and we made this comment last year, because a lot of that growth last year came because of this viral trend through TikTok. And we've been very clear to everyone that we didn't see this as part of the underlying business going forward. So, of course, when it happens, we're happy to accept those customers coming through the door, but we also need to be very clear on what actually becomes a sustainable business. The good news on that, though, is when we look at the kind of customer base, over the last 3 years, we've literally doubled the customer base, which actually means that even a lot of these TikTok trends, we actually retain that customer to come back to us again. So that's the good news. Of course, when you have this huge mountain to climb year-on-year, it's not that easy. And the science around this isn't as precise because how much of the 45% was due to the TikTok versus Q2, God only knows. So -- and as you say, the comps going into next quarter are easing up a little bit. It doesn't mean it's easy. But I think as we get into next year, we should see growth -- a healthy growth coming out of the German business. The brand is in super good shape. All our brand metrics are very strong in Germany. So this is purely a comp issue, nothing else. And then, I hand over to Anders on the hedging or Bilal maybe.

Yes. Thanks for that question, Daria, on the hedging. You're right that we haven't hedged more of gold and silver since April, where we took the opportunity to hedge a little bit longer out. We stick to the -- our hedging guidance of hedging gold and silver production, silver hedging 70% of the next 12 months of production. That's our sort of rule of thumb. We will stick to that. But we will not get below that hedging level until a couple of months further out compared to today. And then, we'll, yes, go back and hedge as per usual once we get to that 70% threshold again.

Our next question will be from the line of William Woods from Bernstein.

I think last time we spoke, we talked about how you're balancing growth and margins, and I think you described it as a tightrope walk. How do you think that balance is going at the moment? And I suppose, do you think you'll need to give up more margin in the next year or so to drive further growth? And then the second one is when you look at the slowdown in the underlying business, the like-for-likes, how much of this are you ascribing and do you think is due to consumer weakness versus an underlying downturn in the brand or with Fuel with more?

Let's just decipher your first question. So are you suggesting pricing playing marginal, just so I'm answering the right question here?

No, sorry, I think it's about the balance of growth in margins going forward. I think before we were talking about it being a high growth walk of kind of pulling a little bit of margin to invest in growth or either way. How do you think about managing the business going forward for growth or for margins?

I mean, we've always said that the algorithm of this business is by generating more traffic. And through more traffic, then you drive like-for-like. And then when we drive like-for-like, people like yourself like our stock, and then, the share price appreciates. That -- nothing in that has changed. Now, of course, the sentiment around us and the macro around us has arguably become a little bit more challenging to the tune of what you see now. But I don't see that there's any change. We're not going to start driving this for EBIT margin. This is the wrong thing. But if I have to choose between the 2, what we've been doing in the last couple of years, we'll keep pushing the top line. Then, on your other question, you actually have to peel the onion a little bit to get under the skin of that question because it's not a uniform answer. So it depends on where we're asking the question on the underlying growth. So if we look at it from a regional standpoint, which is kind of how in the future we'll report it, but it just gives you a slightly different perspective. Our North American business is growing at 6%. Canada is growing even stronger than that. So I don't have a real issue there. Now, the consumer sentiment, we can always argue, but my starting point from a market opportunity is -- still continues to be very high. And we have great momentum, brand is strong, we're generating more traffic, and therefore, like-for-like is solid. Then we go to Asia Pacific, that's grown by 5 points, similar dynamics. Australia has gone from having a quite weak macro in the last few years. That's turned a little bit more positive. I think we are playing to a better tune there. The brand is mature, but it continues to deliver good growth. Japan is in that region as well, where the business is really flying. And that's kind of an interesting insight, as we're thinking about spending more energy in that region going forward. Then you go to LatAm, which grew by 1 point. We know we had some issues, as we were trying to detox our Mexican business, which, of course, is the lion's share of the business out there. So then kind of we go back to the old known mechanics, and that business responded. So going forward, that should improve. And then we come into Europe. And again, Europe is minus 1% or flattish, pick 1. But within Europe, I mean, we have markets like Poland, or Eastern Europe, I should say, largely speaking. You have Iberia, Portugal, Spain, Greece. You have a number of countries in what we call now the EMEA cluster, which are in double-digit growth. And then, we have a couple of question marks in Europe. So we can talk about them. And each country actually has a slightly different mechanic. So if I start with Germany that we just spoke about, yes, that posted a negative number, but actually underlying is a super strong business for us. And I think in the last 3 years, it's doubled, and it continues to be very, very strong. So no concerns whatsoever there. Italy, we've detailed this in the past. We needed to drive up the local relevance a touch. We know that our opening price points. As we just discussed, we needed to do a bit more work in that space. Sequentially, we can now see that that's starting to bite, at least there's some green shoots. So I think Italy was only down 4 points or something, which is probably a pretty good outcome on such a short notice. And then, we take France. France is super difficult from a macro standpoint. So I think that's not great. The brand, as we've said in the past, is not as strong as it needs to be. And on top of that, in the quarter, we decided to detox it from a promotional standpoint. So we also left a few points on the table just in order to set the brand for structurally getting to a healthier place. So I think that -- and that's not hugely different from what we've seen in the last few quarters. And I think U.K., what -- also, I mean, you guys sit in the U.K., is not a great environment, as I read reports from other people that are kind of in the similar space. Nobody really is having a field day out there. And on top of that, we had some mechanical issues with our e-com business, which didn't help matters. So that's probably the -- of all my children, that's the one which is now getting slapped on the hand, not behaving. But it's the second biggest market for Pandora, and that needs to get in good shape sooner rather than later. So there is not one single answer to say, is the consumer strong or bad? It's always the dynamic of the consumer sentiment in a particular market, the starting point and the health of our brand momentum in there. And between the 2, you will have a very different or mixed picture across the globe. But another way to think about it is, in 70% of my revenue base, I'm growing 6% or more, and I'm talking like-for-like. And then I have these 4 European markets that are kind of dragging the picture down. So actually, I would say, underlying our business is really healthy in a difficult macro backdrop. So I hope that gives some perspective to you.

Next up is Anne-Laure Bismuth from HSBC.

So I have 2 questions. The first one is on the margin headwind coming from the silver price. Would you consider to increase further prices going forward, ahead of the 1% to 2% normal price increase linked to the inflation? And my second question is about the current trading. Just to confirm that you have seen a slight sequential improvement in September on the back of the launch of the Minis and Talisman collections. And so in October, where the improvement was coming from?

Thank you for those questions, Anne-Laure. On the first one, as you know, since -- over the last 18 months or so, we've done more on pricing than what we -- where we see we would normally do. If you go back to the Capital Market Day, we said that you should expect Pandora to do 1% to 2% of pricing every year. Then there's been 18 months here where it's been -- circumstances have been quite different. But going forward from here, still think about 1% to 2% of price increase per year as the -- as how we are going to run the business. And then on the current trading?

Yes. I'll take that one. So yes, you're right, both comments are actually true. And it was that sort of pickup, and the trading was driven in part by the new collections that we launched pretty much through September. The drivers are pretty much similar of that dynamic in October as well. We won't get into the regional split. This was just 1 month. It's relatively small, but the drivers of that improvement are broadly similar.

I'll just add 1 point, which we didn't touch on when it comes to the U.S. pricing. Of course, we have the tariffs, and we would eventually want to offset some of that through different pricing or assortment mechanics. Now, that is also dependent on what happens around us. And if you remember what I said earlier in the year, I expected that we wouldn't see a lot of pricing activity up to the Christmas trading. And that's kind of what's playing out. So I think people are -- or brands are somehow pricing a touch. And then my expectation would be coming into next year. Also when a lot of people have depleted probably inventory that they bought at a different spot prices are starting to seep through their sales, we might see some more movements in the U.S. specifically. And then I think we will obviously be agile and have a think about whether we follow or how we think about that. So -- but Anders is correct. What the baseline right now would be that 1% to 2%, but I'm sort of with the caveat of let's see what happens in the U.S. And who knows? Maybe the Supreme Court in the U.S. decides that tariffs isn't such a great idea, and then, we have a different conversation. That would be welcome, but who knows.

Next up is Thomas Chauvet from Citi.

Two questions, please. The first one on pricing, could you talk a bit about the rationale behind the price decrease in Europe, which I understand was around minus 5% in Germany, U.K., Italy and France? What volume uplift would you anticipate from these cuts? Are you considering similar cuts in the U.S. or the rest of Pandora? And do lower prices potentially allow for lower promotion in those European markets in '26 versus '25? And secondly, on the creative innovation, I understand you cannot say too much whether it will remain a precious metals offering or stainless steel. In terms of production, however, given you're highly vertically integrated, how adaptable today are the Gemopolis and Lamphun production site we visited a couple of years ago or even the upcoming Vietnam factory, which is yet to open? Are these sites and the people able to change gear quickly? Or would you have to use OEM in an initial phase? And just Anders, when you say in the release, such innovation is expected to mitigate a material part of the higher commodity price, effectively, you're suggesting that there is no gap to your very high gross margin of 80%. Is that correct?

I can start. We can probably tag-team this one. On the pricing, yes, there's been adjustments in a couple of markets in Europe. Will it impact the promotion? Well, in a perfect world, the answer would be yes, but it also depends on what happens around me. So if the market doesn't have volume growth, other people will be grappling with the same topic. So let's follow the market and see. The benefit we have here is because we almost fully integrated when it comes to the -- let's say, the retail aspect of our business, so we can act really fast if there's something which we pick up on. And just on that, in the past, we didn't really use the pricing aspect as actively. I think what we're learning is that we can be quite dynamic going both up and down on pricing, and we will be using this going forward. So it's not going to be a monolithic aspect. The other side of that could also be that, that would change promo mechanics, et cetera, and therefore, you can get a price impact or gross margin impact. So it's not all straight list price increase up or down. So I just think that it's going to be a more dynamic future. Do we project any of this to translate out of the markets you mentioned? Not at the moment. But again, as I said, it's a dynamic world. And in U.S., if anything, I need to be thinking up, not down, given the tariff impact. Then, on the creative innovation, just I want to make one thing clear. And I said that we're going to remain a precious metal brand. So this idea that I know some of you guys out are imposing or putting words in my mouth on other material, be careful of that. We have never said it, and that's not the direction of the company. Adaptability, yes, we are very adaptable. So, of course, part of the innovation, as we said, it's not purely about material, it's also the process of production that we're looking at. So it's a whole slew of things that we're considering. And then Vietnam, we are just building so that also gives us some flex. There could be instances where we go OEM, but we have time. This is the beauty of the hedge that we put in place. So this only needs to hit the market in '27. If we can do earlier, let's see, then we'll come and tell you that. But we have enough time to put this under our own 4 walls in order to also be efficient from a production standpoint. And then, I'll turn it to you, Anders, to comment on the gap to gross margin.

Thanks for that question, Thomas. It's still too early for us to be super precise, but I think reframing what is converting of a material part -- of mitigating a material part of the headwind into gross margin, that means getting into sort of the high 70s, again. But what exactly that high 70s mean, that's -- we need a bit more work to be done before we can nail that down, but still very high gross margins.

Our next question will be from the line of Anthony Charchafji from BNP Paribas.

It's Anthony from BNP. Congratulations on the strong financial and nice volume improvement into Q4. I have 2 questions, please. The first one would be on the like-for-like into 2026. The consensus is at around 3%. Just if you want to share any comment on that one and the phasing between H1 and H2, as we are seeing volume sequentially improving. My second question would be on the use of AI with demand planning, marketing or product creation. Historically, Pandora is not much into the buzz business with quite long lead time to market. Just curious if you're willing to put a bit more buzz into the business and if we should expect a bit more volatile like-for-like going forward?

Yes, I'll start with that, Anthony. For 2026 guidance, we'll get back to you in February. We'll trade through the holiday season. Obviously, we'll see where the world looks like. There's many variables, obviously, that goes up. We obviously will always have a good growth pipeline. That's our job to have, by definition, but we'll get back to you on February. Sorry for not being more specific right now. But yes, over to you on AI, Alexander.

Yes. I mean, we've actually been using AI or machine learning or LLMs or agentics. I mean, pick a label for several years across our business where it makes sense, okay? So when it comes to media buying, identifying customer cohorts. We've used it to augment design development. So this is already live and kicking. We just haven't been talking a lot about it. And I think we are relatively proficient. The thing you're asking in terms of product development. What's important in our business is not the same model as an Inditex would have, for instance, where they need to launch new things all the time. What I just need? I need things that are robust and are going to be successful because we can't afford launching that many things in a year. And also, given the nature of the category, where you have a very low purchase frequency, it actually doesn't make any particular sense to kind of gear up and launch tons of things all the time. This is a bit, I think, what Pandora did in the past, and it didn't really work because it takes time to build awareness of a collection. As we know, I mean, Pandora ME has been in the works for 4, 5 years. Now it's hitting a really nice mark. We've just launched ESSENCE 2 years ago. That's now hitting a 3% share of business mark, and we need to get that up. And then, we're launching other things. So speed of that development is not critical for me. It's quality of that development that is more important. Then thinking a little bit forward, we just came back from the Dreamforce, which is the largest IT gathering in the world, headed up by Salesforce, and they kind of own the space around CRM. We've been partnering with Salesforce, I mean, for 15 years, when it comes to our CRM platforms, our e-commerce, et cetera, et cetera. We are one of the people that have come the furthest in the world of applying the agentic approach, or AI, if you may, on how to improve the sales experience online. Because today, everybody kind of thinks that their online experience is fantastic. It's not. It's a pretty plain -- for those of you that are old enough, would remember the old mail order catalogs. That's what it is. It's just a glorified 2-dimensional experience online. It's irrespective of which brand we talk about, including Pandora. And I think there's a huge opportunity in this space if we can use this type of technology to actually improve that whole experience that, frankly, when you go into a Pandora store, we give to you, and that's one of our competitive advantages. We need to find a way to translate that online because the one thing which is going to -- is absolutely sure is that in 5 or 10 years from now, more transactions will happen online than today. And therefore, we need to be offering them a more interesting experience than I think we do today. That's why we're throwing ourselves together with Salesforce in this development. So much more interesting stuff to come in that space.

Okay. It's very interesting. Maybe just 1 follow-up on this. Is your partnership with Salesforce means that you can't do anything with Shopify and maybe OpenAI to bring basically a sale in ChatGPT directly? Or can you still do this?