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

Good afternoon, everyone, and welcome to this short conference call where we thought it would be helpful to outline some of the key points from the trading statement we just released a few hours ago. This pertains to the Q4 trading period. I have with me today Berta De Pablos-Barbier, Group CEO; and Anders Boyer, Group CFO; as well as the rest of the IR team. There will be a chance to ask some questions at the end that be great. On that note, I will hand over to Berta.

Good afternoon, everyone, and thank you for joining us today at short notice. Well, you will have seen the trading statement released earlier today. So with Anders, I will briefly cover some key points and also add some context. As CEO, my focus is to continue to strengthen brand desirability and deliver sustainable long-term growth. It is clear to me that Pandora has many untapped growth opportunities. Now the macro environment is challenging, which requires us to sharpen execution and focus in selected areas to strengthen brand desirability. I will come back to you in due course with our plans on that. Now let's turn to performance. In Q4, our like-for-like was flat, including network expansion and other, organic growth for the quarter was 4%, resulting in full year organic growth of 6%. This was below our guidance of 7%, 8% organic growth for the year. The EBIT margin is expected to be around 24%, in line with our guidance. The quarter 4 like-for-like reflects a deceleration versus quarter 3, driven by North America. Europe remained broadly stable, although with opportunities to strengthen execution. On North America, after 3 quarters of strong growth, we continue to grow, but a slow to 2% like-for-like growth in quarter 4 and organic growth at 8%, plus 8%. Now growth was impacted by softer traffic over the holiday period, though we did continue to outperform the overall market on traffic. Now given the short period since the year-end, our data and insight remains, of course, preliminary. However, available indicators suggest that the overall category faced challenges in quarter 4, particularly within the accessible market segment. Now we, of course, don't know how the consumer will behave through 2026 in North America. But we are confident that our brand is in a very good shape, and we have a solid starting point, and we will talk more about that in February. Now in Europe, our growth was broadly stable sequentially at minus 1% like-for-like and organic at plus 2%. Now there's quite a few different moving pieces in Europe given the number of markets and the different characteristics between them. But well, the story remains broadly unchanged from prior quarters. So while macro does not help either in Europe, we do see areas where we can strengthen execution. On that note, I'll now hand over to Anders on profitability.

Thank you, Berta, and good afternoon, everyone. Very briefly on profitability. Then even though the top line ended at a touch below the guidance, our EBIT margin is still expected to land in line with the guidance. We did demonstrate quite good cost discipline in the fourth quarter, in my opinion. And the Silverstone cost program that many of you know about is progressing nicely and the gross margin remained healthy. So the profitability remains in line with our expectation. Specifically on the Q4 EBIT margin is -- that's expected to land at around 33.5%. And that's despite the significant external headwinds, which we have flagged earlier on and that you're all aware about. And that's the headwinds from foreign exchange, commodities, tariffs, which totaled around 400 basis points in Q4. So the EBIT margin of 33.5% in Q4 is quite a good outcome considering that the EBIT margin in Q4 of 2024, the year before was around 100 basis points higher only. As already said, this means that the full year EBIT margin will land at around 24% and thereby in line with the expectations we set out in the third quarter announcement. But for the sake of good order, I just want to stress that these numbers are on -- that we have announced today are still unaudited and therefore, preliminary. And with that, I'll hand it back to Berta for the closing comments.

Yes. Thank you, Anders. So to conclude, so that we can go back to the questions. While our recent performance has come below expectations, the fundamentals of our business remain very strong. The brand is healthy. Our core collections are solid and our vertically integrated supply chain and scale do remain very powerful assets. Now that said, quarter 4 and full year 2025 results came below our standards and commitments. Now after several years of outpacing the category and driving solid growth, of course, operating in a more complex environment require us to be more demanding in how we generate growth. This means to be sharper on what works and decisive in course correcting where momentum has softened. Today, of course, this is not a comprehensive update. You will hear more that in a few weeks. However, some priorities are already clear. A key focus for us is to reenergize our collections and strengthen brand relevance. This approach is particularly important in mature markets. Now we are also focused on addressing the impact of high silver prices and are moving at pace on actions across new products and materials to protect margins and improve value creation. So to close, there remains significant untapped opportunities for Pandora as a desirable, accessible jewelry brand, and we are moving with discipline and rigor to strengthen brand desirability and position Pandora for long-term value creation. I am really looking forward to sharing more detail with you on our call on February 5. And with that, I'll hand over to Bilal.

Thank you, Berta. We can open up to Q&A. I also want to highlight any questions relating to 2026 top line or EBIT margin, we will not answer right now and get back to in the 5th of February for a comprehensive view. With that, we're happy to open up to Q&A.

[Operator Instructions] Our first question will be from the line of Grace Smalley from Morgan Stanley.

First question would just be on the U.S. weakness. And if you could just elaborate more on what you saw there during the holiday period. So any color on traffic versus ASP and conversion, any detail of breaking that down by region within the U.S.? And it sounds like, Berta, you believe that this was really more market-driven than necessarily company-specific or execution issues. But again, if you could just dig into that a little bit more on what gives you confidence that, that is the case? And then my second question would be on Europe where it's very clear you think there are some brand initiatives you can put in place to strengthen the brand's relevance in Europe. And I believe you have started to put some of those in place already in Italy. I guess, were you surprised that you didn't start to see an improvement in the Italian performance already in Q4 given some of those initiatives and what your initial learnings are from that market so far?

Grace, it's Anders starting out on the first one on North America. As you know, in general, there's quite a lack of data available in this industry. And then combined with the fact that we are -- it's just 9 days into the new year, it is a bit limited what's available. But what led us to say what we announced this morning is a couple of data points. One of the things that we track is general street traffic. And we do that not just in the U.S. but across all markets. And what we saw across the 10 bigger markets, not just in the U.S., but the 10 bigger markets that we are operating in, it was only on 1 one of those 10 where the general street traffic, so not Pandora numbers were positive in Q4. The 9 others, the general street traffic was negative. So it's not great. With the data that we have from Shopper Track, that's the one that we are using. Street traffic in the U.S. was negative as well in Q4, and we did a bit better than that as we've done for quite some time and still did that better. So that was -- that's one data point. The other data point we have is simply looking at the OECD's consumer sentiment. And that took quite a low skive during the back half of 2025. And actually -- and I'm just looking at my colleagues here, I actually believe that U.S. consumer confidence reached the lowest since 1960 in the U.S. in November or December. So there's something happening there. And then I know that there are some credit card data available on the industry. And I guess you're close to one of them or just announced one of them earlier today for the December numbers. And if you look at that, there is something that looks like that the sort of lower end of the market, the accessible part of the market is actually declining or at best flat. So it's that sort of combination that has led us to saying that the macro actually did turn for the worst during the last couple of months, 8 weeks of 2025 in North America.

Absolutely. Thank you, Anders. And taking on your second question because I think Anders covered the first one really well. Yes, in Italy, we have started doing certain things, and it's actually the analysis on the Italian market that has uncovered the issues between others that we need to focus on, which is about reinvigorating and reenergizing our collections. And what we actually see is that we have done it, although it's very early days, but where we did something like, for example, with the launch of Minis and Talisman, this is getting a good robust pipeline that is working in the Italian market, but we need to do more of those across the collections, across all the collections. So we know that our Moments platform needs a little bit more of reinvigoration. So this is exactly what I was referring to. Progress is there. It takes time. So we continue to monitor that and to follow on that.

Our next question will be from the line of Lars Topholm from Carnegie.

Yes. Just 2 simple questions for me. So given your like-for-like was positive for October, can you comment on the exit rate and maybe give some colors as to the exit rate across regions? That was the first question. The second question is, what has your average pricing been in U.S. in Q4? I'll jump back in the queue afterwards.

Yes. I will take the first one, Lars, then hand over to Anders. But the sort of exit rate for the group, yes, you're right. We said around plus 4% in October. So you can assume flattish to slightly negative in terms of an exit rate from the quarter as well. By region, we won't get into too much specific color. But again, the numbers you see in terms of the quarter end won't be too drastically off the exit rate as well. And on to the second question, I will hand over to Anders.

Just making sure that -- because I was just about to say just shy of 10%, but it's just about that level, Lars. But I'll double check now I say this and then I'll double check. And if it's not correct, then we'll just get back to you, but just around 10% year-over-year price increase for the full quarter. But as the quarter went by, we did sort of pass the price increase comp in October of '24. So it was higher in the beginning and lower at the end. But on average, just high single digit, 8%, 9% on average for the quarter up.

And maybe in that context, so it doesn't count as a third question. How was the promotional activity for you and for the whole market as you saw it in Q4?

It's basically been flat year-over-year. I think that's the -- so it remains at a high level, but not worse than last year, so to speak. So there has been no sort of -- even though we see that the general trading environment in November and December was soft. We didn't see crazy -- additional crazy behavior, if I can put it like that, both for ourselves and the market.

Next up is Chris Huang from UBS.

I'll ask 2. The first one on the volumes in Q4. So if I remember correctly, in the Q3 conference call, you were commenting that the volumes in October were pretty much back to flattish, slightly down flattish. But given the price increase you had in Q4, is it fair to say that volumes for globally as a whole was down mid-single digit in the quarter? And do you think there's anything -- any self-help measures you can do, you can pull out of your pocket to kind of inject that volume momentum back to the brand? And then secondly, on the OpEx control. I think based on the guidance, the expected gross margin, EBIT margin for Q4, it does seem like you have very strong OpEx control. But I'm just wondering if you can give a little bit more color in terms of the 3 main OpEx lines here. I'm talking about marketing, sales and distribution, admin costs and especially given that like-for-like is generally quite muted. So I'm just trying to understand what was the OpEx lines that were driving this strong OpEx.

Chris, let me -- it's Anders. Let me start out there on units, if you look at the total units that we actually sold and that sits in the P&L for Q4, then unit is flat in Q4. And then that means that the revenue growth of 4% that we delivered in Q4 is consisting of flat units or 0 units and roughly 4% pricing increases. So that's roughly the dynamic. So sequentially compared to Q3, sort of volumes are better as we had expected, but still sort of only flat overall when we look at the total business. On the OpEx control, fortunately, a year back or so, when silver prices started going up, we institutionalized structured cost program, the Silverstone cost program, as we call it. And now with the top line also has been softer in Q3 and Q4, that comes in quite handy that we have a machine rolling already that can help us sort of push up the hunt for decimals around the company and looking for lower cost. We have not been compromising marketing spending. I think that's important to state out it's all kind of other things where we have been dialing a bit up on the OpEx discipline as we did that actually a while back when we saw already Q3 being soft. And then on top of that, of course, there's given like-for-like landed below where we had expected it. The bonus programs are linked very much to like-for-like. That also means there has been some reversal of provisions in Q4, unfortunately. But that's kind of why you have programs like that in place. So that there's some variability in the OpEx lines that helps if you're missing a bit on the top line, then bottom line is protected. And then I didn't fully get the question on self-help. So maybe I missed something.

More you can do on self-help going forward.

Yes, that's a clear, yes, is the way to put it. We put in place -- go ahead, Christian, it sounds like.

On volume.

Yes. So I just wanted to clarify that volume comment. So Anders, you mentioned that volumes overall total units are flattish in Q4 year-over-year. I guess that includes that 4% network expansion, right? If I look on a like-for-like basis, our volumes down mid-single digits?

Yes, then you basically subtract the 4%. So you absolutely -- you're right in your math, Chris.

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

I have 2. The first one would be on the Fuel with More. So a big part of the story is to diversify Pandora outside charms, and we see that Fuel with More is now underperforming. Maybe that might be also a negative mix impact on it. So it's more to have your view on -- if you still see into next year Fuel with More outgrowing the core category and if you have any plan in terms of newness in this category? The second question is on the pricing. So actually Europe stabilizing. I think that you've got a bit of pricing in Europe, probably 3% in October. Just wanted to have some feedback on how did it go? And what are the next step in terms of pricing?

I'll take the first one, Anders. So yes, on Fuel with More, you alluded to it, mix is part of it because Timeless grew at 3% and this continued to grow in the year. And if you look at what happened this year is that we innovated mainly on the core, which has a very decent sustained performance with the launch of Talisman Minis and all the activations that we put behind so I come back into what we are doing now is reenergizing all the collections, whether they are in the core to refresh our icons or whether it's about extending and expanding what is fueling more.