Pandora Shares Slide After Q2 Core Income Fall

By Scott Kanowsky 

Investing.com -- Shares in Pandora A/S (CSE:PNDORA) slid toward the bottom of the pan-European STOXX 600 on Tuesday after the Danish jewelry maker posted a fall in second quarter operating profit and warned of economic headwinds over the rest of the year.

Earnings before interest and taxes during the three-month period dropped to DKK 1.25B, down from just over DKK 1.30B in the same timeframe last year.

Core income margin also decreased to 22.1% from 25.2%. RBC Capital Markets analysts said marketing spending, inventory buybacks, as well as negative foreign exchange and commodity costs, all combined to pull down profitability.

Also weighing on the result was a sharp slowdown in group organic growth, which slumped to 3% from 84% year-on-year.

Strict COVID-19 lockdowns in China dragged the figure lower by 4 percentage points, Pandora said in its interim financial statement.

Growth in the U.S. also slumped by 12% due mainly to a "tough" annual comparison. The market's second quarter performance in 2021 was given an unprecedented short-term boost, thanks to the temporary impact of economic stimulus checks.

Pandora's decision to shut down its businesses in Russia and Belarus after the outbreak of the war in Ukraine also negatively impacted organic growth. The firm had 153 concept stores and 66 other points of sale in these countries when the move to abandon operations there was made.

Strength in Pandora's other key European markets, which reported double-digit quarterly expansion, driven by the re-opening of stores following the end of COVID-19 restrictions, partly offset these effects.

Group-wide three-month revenue touched a new peak for the third straight quarter, rising to DKK 5.65B.

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

But the company predicted second half growth may come in between a contraction of 1% to an increase of 2% due to "elevated uncertainty" in the broader economic outlook.

"The low end of the guidance is more likely to materialize if a worsening of the macroeconomic environment occur in H2 2022," Pandora said. "Also, it should be noted that, similar to H2 2021, organic growth vs 2019 will expectedly be lower in Q3 2022 than in Q4 2022."