Damien Albin Douarre @Lyssky: "🔔 𝐄𝐚𝐫𝐧𝐢𝐧𝐠 𝐜𝐚𝐥𝐥 – $PNDORA.CO..."

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🔔 𝐄𝐚𝐫𝐧𝐢𝐧𝐠 𝐜𝐚𝐥𝐥 – $PNDORA.CO (Pandora A/S) Pandora’s Q1 results, released today, were met with a positive initial reaction from the market, with the stock opening with +12.5%. The response reflects investors’ relief rather than enthusiasm: the quarter was not strong, but it was better than many had feared. Overall, the company demonstrated resilience. While the figures remain under pressure and the risk of further deterioration is still present, Pandora managed to maintain its full-year guidance and investors welcomed the news. 𝗞𝗲𝘆 𝘁𝗮𝗸𝗲𝗮𝘄𝗮𝘆𝘀 𝗳𝗿𝗼𝗺 𝘁𝗵𝗲 𝗾𝘂𝗮𝗿𝘁𝗲𝗿 ➡️ 𝗥𝗲𝘃𝗲𝗻𝘂𝗲 𝗱𝘆𝗻𝗮𝗺𝗶𝗰𝘀: Reported revenue declined YoY in DKK terms, but this was largely driven by foreign exchange effects. Organic growth remains at +2%, at the upper end of the annual guidance, indicating that underlying demand is more stable than headline figures suggest. ➡️ 𝗟𝗶𝗸𝗲-𝗳𝗼𝗿-𝗹𝗶𝗸𝗲 𝗽𝗲𝗿𝗳𝗼𝗿𝗺𝗮𝗻𝗰𝗲: Growth was flat at 0% YoY, compared to +6% last year. This suggests that current expansion is primarily driven by network growth rather than organic store productivity. ➡️ 𝗠𝗮𝗿𝗴𝗶𝗻𝘀 𝘂𝗻𝗱𝗲𝗿 𝗽𝗿𝗲𝘀𝘀𝘂𝗿𝗲: ▪️ Gross margin declined by 90 basis points to 79.5%. While still best-in-class, this level of compression will need to stabilize or improve to reinforce investors’ confidence. ▪️ EBIT margin fell by 140 basis points to 20.9%, impacted by external headwinds including FX, tariffs, and rising silver prices. While this decline was significantly better than the 440-bps contraction some feared, restoring margins remains key. Interestingly, adjusting for these headwinds, EBIT margin would have reached 25.3%, marking an improvement YoY. The ability to absorb roughly 300 bps of external pressure highlights strong operational discipline. 💸 𝗣𝗿𝗼𝗳𝗶𝘁𝗮𝗯𝗶𝗹𝗶𝘁𝘆: A 39% ROIC continues to showcase the company’s high-quality profitability profile. 𝗥𝗲𝗴𝗶𝗼𝗻𝗮𝗹 𝗱𝗶𝘃𝗲𝗿𝗴𝗲𝗻𝗰𝗲 𝗿𝗲𝗺𝗮𝗶𝗻𝘀 𝗽𝗿𝗼𝗻𝗼𝘂𝗻𝗰𝗲𝗱 Performance across geographies continues to vary significantly. North America and Europe both declined by 2%, reflecting softer consumer sentiment and increasing maturity, particularly within Pandora’s core charm segment. In contrast, Latin America (+6%) and Asia-Pacific (+12%) remain the primary engines of growth. 𝗦𝘁𝗿𝗮𝘁𝗲𝗴𝗶𝗰 𝗲𝘃𝗼𝗹𝘂𝘁𝗶𝗼𝗻 𝘀𝘁𝗶𝗹𝗹 𝗶𝗻 𝘁𝗿𝗮𝗻𝘀𝗶𝘁𝗶𝗼𝗻 The shift towards platinum-plated jewelry is a notable strategic move, but the absence of a clear timeline may create some uncertainty. That said, the company expects to replace 80% of the silver-based income with platinum-plated income over the next two years, requiring DKK 600M, of which DKK 400M are expected to be spent in 2026, which is more than 10 times covered by its free cash flow. At the same time, the new CEO’s marketing background is already shaping the brand’s direction. The focus is shifting toward “relevance and cultural resonance”, with a greater importance in earned media rather than broad paid campaigns. This approach is more complex to execute but potentially more powerful, aligning with strategies successfully deployed by leading luxury houses such as Hermès and LVMH. 𝗩𝗮𝗹𝘂𝗮𝘁𝗶𝗼𝗻 𝗱𝗶𝘀𝗰𝗼𝗻𝗻𝗲𝗰𝘁 Despite its strong profitability profile, Pandora continues to trade at a valuation more typical of low-growth, low-margin industries. While growth is indeed modest, the company’s returns remain robust. If Pandora can deliver on its growth guidance while continuing to push culturally-driven collections, reinforce high-growth segments that necessitate less design efforts such as Bold, Sparkling and Organic while maintaining Playful attractiveness, and reduce exposure to commodity volatility, a re-rating toward a more balanced multiple (e.g., ~15x earnings) would appear justified. 𝗠𝘆 𝗶𝗻𝘃𝗲𝘀𝘁𝗺𝗲𝗻𝘁 𝘁𝗵𝗲𝘀𝗶𝘀 My thesis remains intact on Pandora. I see the company as a discounted cash machine. Not necessarily a compounder, but definitely not a failing company. It is currently mispriced, and I definitely expect to take a full advantage of this situation by holding on it until fair valuation is reached. Regarding its prospects, growth vectors are clearly identified, and the strategy is more aligned with the company’s ambition to increase desirability. North American market is particularly sensitive to cultural relevance and earned media, giving the strategy good chances to be successful. Cheers 🥂 D.A.D $SPX500 $NSDQ100 𝘋𝘪𝘴𝘤𝘭𝘢𝘪𝘮𝘦𝘳: 𝘛𝘩𝘪𝘴 𝘱𝘰𝘴𝘵 𝘳𝘦𝘧𝘭𝘦𝘤𝘵𝘴 𝘮𝘺 𝘱𝘦𝘳𝘴𝘰𝘯𝘢𝘭 𝘰𝘱𝘪𝘯𝘪𝘰𝘯𝘴 𝘢𝘯𝘥 𝘪𝘯𝘷𝘦𝘴𝘵𝘮𝘦𝘯𝘵 𝘥𝘦𝘤𝘪𝘴𝘪𝘰𝘯𝘴. 𝘐𝘵 𝘪𝘴 𝘯𝘰𝘵 𝘧𝘪𝘯𝘢𝘯𝘤𝘪𝘢𝘭 𝘢𝘥𝘷𝘪𝘤𝘦. 𝘐𝘯𝘷𝘦𝘴𝘵𝘪𝘯𝘨 𝘪𝘯𝘷𝘰𝘭𝘷𝘦𝘴 𝘳𝘪𝘴𝘬, 𝘢𝘯𝘥 𝘱𝘢𝘴𝘵 𝘱𝘦𝘳𝘧𝘰𝘳𝘮𝘢𝘯𝘤𝘦 𝘪𝘴 𝘯𝘰𝘵 𝘪𝘯𝘥𝘪𝘤𝘢𝘵𝘪𝘷𝘦 𝘰𝘧 𝘧𝘶𝘵𝘶𝘳𝘦 𝘳𝘦𝘴𝘶𝘭𝘵𝘴

Not investment advice. The author may have financial interests in the mentioned instruments.

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