Pandora’s charmed existence in the jewellery industry came to an abrupt end last week when the company reported the resignation of CEO Mikkel Vendelin Olesen; a dramatic drop in sales; and a major downgrade in its revenue growth expectations.
In an official statement released on August 2, Pandora’s Board of Directors said it had decided to update financial expectations for 2011 based on a review of financial results for Quarter 2 and preliminary revenue results for July “where revenue declined by approximately 30 percent year-on-year”.
The company changed its guidance from “expecting a revenue growth of no less than 30 percent for 2011” to revenue “in line with 2010”.
The company believes that the deterioration of its revenue and profitability has been driven by five key factors:
· ♦ Weak sales-out figures (sharply impacted by cumulative price increases of 2010 and 2011; suboptimal price and product architecture; consumers becoming more value conscious and some general softening in consumer spending)
· ♦ Weak sales-in figures (combination of sales-out slowdown, already high Pandora inventory and some trade destocking)
· ♦ Openings and upgrades significantly behind plan
· ♦ Weak sales, marketing and operational execution (recent collections weak in sales through, too many products, poor price architecture, not enough entry-point priced products)
· ♦ Slowness to attack emerging markets
The company’s action plan to improve its performance includes the following “immediate operational actions”:
· ♦ No further price increases anticipated in 2011 and 2012
· ♦ Review of future collections to ensure right sizing of assortment and pricepoints
· ♦ Concrete plans in place to deliver 190 new concept stores in 2011
· ♦ Absolute focus on in-store space management in existing stores
· ♦ Adjusting recommended retail prices on around 60 key items to provide better entry prices
· ♦ ‘Fitness for purpose’ sales and marketing programs
· ♦ Developing a more aggressive emerging markets program
In Australia, sales for the second quarter of 2011 were down 19.9 percent in Australian dollars compared to the same period in 2010.