Pandora shares slide after second-quarter core income decline


By Scott Kanowsky – Shares of Pandora A/S (CSE:PNDORA) slipped to the bottom of the pan-European STOXX 600 on Tuesday after the Danish jewelry maker announced a decline in second-quarter operating profit and warned of economic headwinds for the remainder of the year .

Earnings before interest and tax fell to DKK 1.25 billion during the three-month period, compared to just over DKK 1.30 billion in the same period last year.

The core income margin also declined to 22.1% from 25.2%. Analysts at RBC Capital Markets said marketing spend, share buybacks and negative foreign exchange and commodity costs combine to hurt profitability.

Earnings were also weighed down by a significant slowdown in the group’s organic growth, which fell to 3% from 84% year over year.

Strict COVID-19 lockdowns in China dragged the number down 4 percentage points, Pandora said in its interim report.

Growth in the US also collapsed by 12%, mainly due to a “tough” year-over-year comparison. The market’s performance in the second quarter of 2021 received an unprecedented short-term boost thanks to the temporary impact of economic controls.

Pandora’s decision to close its stores in Russia and Belarus following the outbreak of war in Ukraine also had a negative impact on organic growth. The company had 153 concept stores and 66 other outlets in those countries when the move to cease operations there was made.

Partially offsetting these effects were strength in Pandora’s other key European markets, which posted double-digit quarterly growth driven by the reopening of stores following the end of COVID-19 restrictions.

Group-wide three-month sales reached a new high for the third quarter in a row, rising to DKK 5.65 billion.

Meanwhile, Pandora reiterated its financial guidance for 2022 of organic growth of between 4% and 6% and a core income margin of 25% to 25.5%.

However, the company’s forecast growth for the second half of the year could range from a 1% decline to a 2% rise due to “elevated uncertainty” in the broader economic outlook.

“The lower end of the guidance is more likely to materialize if there is a deterioration in the macroeconomic environment in the second half of 2022,” Pandora said. “Additionally, it should be noted that similar to the second half of 2021, organic growth compared to 2019 is expected to be lower in the third quarter of 2022 than in the fourth quarter of 2022.”

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