Pandora shares lose charm after profit warning

Shares in Danish jewellery maker Pandora plunged by a fifth to their lowest level in more than four years on Tuesday after the company issued a profit warning and announced plans to cut 400 jobs.

Pandora, known for its charm bracelets, lowered its sales and profit margin guidance for 2018 on Monday, saying both had fallen in the second quarter.

The world’s largest jeweller by production volume, Pandora earlier in 2018 warned of thinner margins due to slowing mall traffic in the US and British markets, a lack of new products, and lower prices in China. Shares were trading 19% lower at 347.9 kroner on Tuesday, the lowest level since May 2014.

“Another profit warning just a few months after the updated midterm targets may put the credibility of the current strategy and management team in question,” said Berenberg analysts, who lowered their target price to 475 kroner from 555 kroner.

Pandora owns 2,600 stores worldwide, but sales have slipped in its 600 stores in Britain and the US as consumers turn to online shopping, prompting hedge funds to increase short positions in the company.

The company said on Monday it would add 250 concept stores in 2018, rather than the 200 it had planned.

The weaker retail environment has also been due to a shift by younger consumers away from jewellery and towards technology and experiences.

China with its growing middle class has been a key growth market for affordable luxury jewellery makers such as Pandora. But in July the Danish company said it was forced to lower retail prices in China by an average 15% to combat a rise in grey market sales. The company had warned in May of a slowdown in the Chinese market, which accounted for 12% of its total sales in the first quarter.

THE MANAGEMENT HOLDS RESPONSIBILITY … IT IS NO LONGER STEERING A SPEED BOAT, BUT A CONTAINER VESSEL

Founded in Copenhagen in 1982, Pandora saw strong growth in the years after its listing in 2010 with shares rising almost 20-fold in the four years to 2016, topping 1,000 kroner in May that year. They have since shed almost two-thirds of their value, helped by US hedge funds taking large short positions in the stock.

“The management holds responsibility for not preparing the organisation for a situation where it is no longer steering a speed boat, but a container vessel,” said Per Hansen, economist at Nordnet. “It requires a change of the management to restore investors’ trust,” he said.

The company said on Tuesday that it would cut 397 of its 27,000 employees to streamline operations and to protect profitability.