Pandora A/s · OMXCOP:PNDORA
Pandora A/s — Pandora A/S Ord — Q3 2020 Earnings Presentation
43 slides from Pandora A/s's earnings presentation, Nov 9, 2020
Slide 1: Third Quarter Results 2020
Third Quarter Results 2020 03 NOVEMBER 2020 1 Pandora Q3 2020 - Investor presentation
Slide 2: Agenda of today
Agenda of today EXECUTIVE SUMMARY COVID-19 status Update on Programme NOW Q3 2020 financial performance Full year 2020 guidance DISCLAIMER This presentation contains forward-looking statements, which include estimates of financial performance and targets. These statements are not guarantees of futur
Slide 3: Brand momentum drives strong underlying performance
Brand momentum drives strong underlying performance - Recent COVID-19 escalation creates new uncertainty to the peak season trading Well-executed commercial Sell-out growth positive in Digital initiatives drives comeback drives further 5 out of 7 key markets – strong online growth of brand improveme
Slide 4: Programme NOW continues to deliver results
Programme NOW continues to deliver results - additional cost reduction potential identified - run-rate target upgraded to DKK 1.6 billion 11 operational initiatives New operating model Focus on data-driven on top of Programme drives efficiency with growth yielding positive NOW to cope with social po
Slide 5: Agenda of today
Agenda of today Executive summary COVID-19 STATUS Update on Programme NOW Q3 2020 financial performance Full year 2020 guidance 5 Pandora Q3 2020 - Investor presentation
Slide 6: Good recovery in Q3 - new COVID-19 lockdowns escalating
Good recovery in Q3 - new COVID-19 lockdowns escalating Q3 2020 Q4 STORE OPERATION SITUATION Stores temporarily closed, % 13pp 18% 58% of stores open 100% 10% 9% 5% 24% of stores w/ reduced opening hours 18% of stores are temporarily closed Known COVID-19 End July End August End September closures •
Slide 7: Commercial comeback has been strong – preparing for peak season
Commercial comeback has been strong – preparing for peak season THE STRONG COMMERCIAL COMEBACK IS ENABLED BY PROGRAMME NOW AND BOOSTED PREPARING FOR PEAK TRADING SEASON BY A NUMBER OF ADDITIONAL INITIATIVES Various commercial and operational initiatives made ahead of peak trading STRICT COST MANAGEM
Slide 8: Preparing for the peak season
EXAMPLES FROM THE SOCIAL DISTANCING BATTLE PLAN PREPARING FOR PEAK TRADING SEASON FOR THE VIRTUAL TRY ON JOIN A VIRTUAL QUEUE REMOTE SHOPPING PEAK SEASON Enabling customers to virtually Customers join a virtual queue, ASSISTANT The US and the UK are IN Q4 inspect items outside of the store: using si
Slide 9: Agenda of today
Agenda of today Executive summary COVID-19 status UPDATE ON PROGRAMME NOW Q3 2020 financial performance Full year 2020 guidance 9 Pandora Q3 2020 - Investor presentation
Slide 10: Programme NOW yielding desired results
Programme NOW yielding desired results Programme NOW timeline Turnaround Initiatives objectives Nov • Programme NOW 2018 initiated • Digital spend optimised and increased to reach a targeted audience Data-driven growth • Step-changing the way Pandora does e-mail marketing by utilising the Pandora Fe
Slide 11: Conversion rate drives performance – traffic still impacted by COVID-19
Conversion rate drives performance – traffic still impacted by COVID-19 TRAFFIC AND CONVERSION RATE HAVE …WITH TRAFFIC BEING VERY DIFFERENT ONLINE CONVERSION RATE MATERIALLY UP FOR BOTH CHANGED DRASTICALLY… VS PHYSICAL STORES CHANNELS • In-store retail metrics such as Average selling price and Units
Slide 12: Positive sell-out growth in 5 out of 7 key markets
Positive sell-out growth in 5 SELL-OUT DEVELOPMENT Q3 2020 out of 7 key markets US +18% UK +17% Italy +1% Programme NOW is yielding visible results – a step- France 0% change in momentum for key markets Germany 23% China -23% Australia 6% Group -2% 12 Pandora Q3 2020 - Investor presentation
Slide 13: The reorganisation drives speed and supports performance
The reorganisation drives speed and supports performance GLOBAL BUSINESS UNITS - THE “DIGITAL HUB” BEING RAMPED UP NEW CHINA MANAGEMENT IN PLACE A NEW WAY OF WORKING • Our digital centre of excellence • In collaboration with Merchandising • Since the hire of Jacques Roizen, • Fast-paced innovation a
Slide 14: Launch & leverage approach to reactivate existing product platforms
“Launch & leverage”-approach initiated to reactivate existing product platforms KEY OBJECTIVE PANDORA ME HARRY POTTER x PANDORA Reactivated in early July Reactivated in late July “Launch & leverage”- • Pandora ME reactivated with launch of new • Focus on building on the collaboration with design var
Slide 15: Data-driven growth initiatives
EXAMPLE | E-MAIL MARKETING AN IMPORTANT PART OF DATA-DRIVEN GROWTH Data-driven A combination of utilising the Pandora Club data, intensifying the focus and optimising the ways of working, e-mail marketing will continue to be an growth important driver of sales Data-driven growth initiatives initiati
Slide 16: Continued progress on cost savings
Continued progress on cost savings - target up from DKK 1.4 billion to DKK 1.6 billion ANNUAL RUN RATE TARGET SAVINGS ACHIEVED COST CATEGORIES COST INITIATIVES & IMPROVEMENTS BY END 2020 (DKK billion) (RUN RATE END 2020) • Further manufacturing efficiencies are gained Cost of sales • Structured revi
Slide 17: Agenda of today
Agenda of today Executive summary COVID-19 status Update on Programme NOW Q3 2020 FINANCIAL PERFORMANCE Full year 2020 guidance 17 Pandora Q3 2020 - Investor presentation
Slide 18: Solid financial results despite continued negative COVID-19 impact
Solid financial results despite continued negative COVID-19 impact Q3 2020 results Q3 2020 key highlights Revenue • Material sequential organic growth improvement to -5% in the third quarter (-38% in Q2 2020) DKK 4.1 billion • Online growth continues to be strong with +89% as both traffic and conver
Slide 19: Continued improvement during Q3 2020
Continued improvement during Q3 2020 Organic growth impacted by phasing of sell-in to wholesale partners Commentary DKK million, %-p growth (approximately) • Network expansion has a 1pp negative impact due to net 4,415 32 store closures -1% • Sell-out growth in Q3 was positive in 5 of the 7 key mark
Slide 20: EBIT margin better than expected
EBIT margin better than expected EBIT margin 1.5pp below Q3 2019 excluding FX and commodity impact Commentary %-p growth (approximately) • Profitability impacted by -1.5pp due to the increase in silver prices in 2019 (not related to the current silver price 20.2% development) and foreign exchange de
Slide 21: Strong cash flow despite inventory build-up ahead of peak trading season
Strong cash flow despite inventory build-up ahead of peak trading season Strong cash flow and healthy leverage ratio Commentary Q3 2019 Q3 2020 Strong free cash flow 98% 0.8 1.5x 5.8% • Strong cash conversion in Q3 2020 – +98% in Q3 2020 and 1.1x +239% for the first 9 months of 2020 0.5 2.9% • CAPEX
Slide 22: Agenda of today
Agenda of today Executive summary COVID-19 status Update on Programme NOW Q3 2020 financial performance FULL YEAR 2020 GUIDANCE 22 Pandora Q3 2020 - Investor presentation
Slide 23: Financial guidance 2020
FINANCIAL GUIDANCE 2020 - Recent COVID-19 escalation creates significant uncertainty FINANCIAL GUIDANCE CONDITIONS ORGANIC GROWTH It has previously been communicated that the guidance is conditioned -14% to -17% on certain COVID-19 assumptions. These no longer hold true: – No new material lockdowns
Slide 24: Implicit guidance implications for Q4 and updated building block
Implicit guidance implications for Q4 and updated building block ONE BUILDING BLOCK UPDATED – REST REMAINS OCTOBER OFF TO A GOOD START, IMPLIED Q4 2020 GUIDANCE UNCHANGED BUT… Summary of building blocks for the guidance …from Black Friday and • Restructuring costs changed to “DKK 1.2 onwards, Pandor
Slide 25: Exciting product line-up for peak trading season and next year
Exciting product line-up for peak trading season and next year October 2020 November/December 2020 January 2021 STAR WARS x PANDORA CHRISTMAS COLLECTION PANDORA COLOURS 25 Pandora Q3 2020 - Investor presentation
Slide 26: Closing remarks
Closing remarks Material improvement in Q3 – Programme NOW continues preparing for peak trading to deliver positive season results Cost Reset programme Positive sell-out growth in upgraded to DKK 1.6 billion from October – but recent COVID-19 DKK 1.4 billion escalations significantly increases uncer
Slide 27: Appendix
APPENDIX 27 Pandora Q3 2020 - Investor presentation
Slide 28: Pandora is the world's most recognised jewellery brand
Pandora is the world’s most recognised jewellery brand Aided brand awareness development 83% 85% 86% 80% 73% 67% 63% 50% 43% 36% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019* Aided brand awareness across selected jewellery companies 85% 86% 79% 77% 72% 74% 64% 66% 2018 2019* 2018 2019* 2018 201
Slide 29: Pandora consumers are across generations and stay loyal
Pandora consumers are across generations and stay loyal Age distribution of our consumers who have purchased Pandora Pandora owners highly consider to buy Pandora jewellery unrelated to within the last 12 months time of ownership 18 65 Q: Would you, as a Pandora owner, consider buying Pandora jewell
Slide 30: Pandora consumers have a wide-range of purchase criteria
Pandora consumers have a wide-range of purchase criteria Development 2017-2019, %-point Pandora top 5 purchase barriers Pandora top 5 purchase drivers Women that consider buying Pandora for themselves Share of Active Pandora Owners* (n=1,092), % but haven’t bought in 2019 (n=1,573), % 56 37 48 45 44
Slide 31: Pandora's online business & presence
Pandora’s online business & presence Online store development Online platforms DKK million Online store % of Group Revenue Online store revenue % Pandora online stores available in 20 markets 1,500 55 1,400 across all regions, incl. China (own and Tmall 50 1,300 52% distribution), Australia, Italy,
Slide 32: Revenue development by channel and by product category
Revenue development by channel and by product category Channel development Product category development Q3 Q3 Growth, 2020 Growth, FY 2019 Growth, 2020 Growth, FY 2019 Q3 Q3/Q3, share of FY/FY, share of Q3/Q3, share of FY/FY, share of DKK million 2020 LC revenue FY 2019 LC revenue DKK million Q3 202
Slide 33: Key markets revenue and total like-for-like overview
Key markets revenue and total like-for-like overview Sell-out growth Share of Share of Growth Q3/Q3, incl. temporarily revenue, Growth FY/FY, Like-for-like revenue, DKK million Q3 2020 LC closed stores Q3 2020 FY 2019 LC FY 2019 FY 2019 EMEA 2,170 3% - 53% 10,740 -4% -7% 49% - of which the UK 617 19
Slide 34: Store network development
Store network development Net openings Number of points of sale Q3 2020 Q3 2020 vs Q2 2020 Q3 2020 vs Q3 2019 Concept stores 2,689 -25 -32 - of which Pandora owned 1,379 6 - - of which franchise owned 809 -19 -24 - of which third-party distribution 501 -12 -8 Other points of sale 4,463 -76 -266 - of
Slide 35: Concept stores per market
Concept stores per market Growth Growth Growth O&O stores Growth O&O stores Number of concept stores Number of concept stores Number of concept stores Q3 2020 Q3 2020 Number of O&O Number of O&O Number of O&O Q3 2020 Q3 2020 Q3 2020 Q2 2020 Q3 2019 /Q2 2020 /Q3 2019 Q3 2020 Q2 2020 Q3 2019 /Q2 2020
Slide 36: Profitability development
Profitability development Q3 2020 Q3 2020 excl. DKK million Q3 2020 reported Restructuring costs restructuring costs Q3 2019 reported Revenue 4,070 - 4,070 4,415 Cost of sales -888 4 -892 -1,668 Gross profit 3,183 4 3,178 2,747 Gross margin 78.2% - 78.1% 62.2% Operating expenses (incl. D&A) -2,715 -
Slide 37: Working capital and cash management
Working capital and cash management DKK million Q3 2020 Q2 2020 Q1 2020 Q4 2019 Q3 2019 Inventory 2,619 2,250 2,155 2,137 2,835 - Share of revenue (last 12 months) 13.7% 11.6% 10.1% 9.8% 13.0% Trade receivables 607 602 1,081 1,643 1,256 - Share of revenue (last 12 months) 3.2% 3.1% 5.1% 7.5% 5.8% Tr
Slide 38: Hedging policy and raw materials share of production costs
Hedging policy and raw materials share of production costs Commodity hedging policy is to hedge Raw material share of cost of goods sold around 70% of future 12 months use in production For illustrative purposes Other Other raw materials Gold Silver Hedged Realised 25% 100% 36% 45% 51% 58% 59% 54% 7
Slide 39: Overview of the global jewellery market
Overview of the global jewellery market Fine jewellery market 2020-2024 Jewellery market development 10 largest jewellery markets Jewellery eCOM development 10 years, EUR billion 2020, EUR EUR billion Costume Jewellery Fine Jewellery million E-commerce China 78,324 CAGR DEVELOPMENT CAGR USA 52,430 6
Slide 40: Sustainability
SUSTAINABILITY Sustainability We believe high-quality jewellery, superior business performance and Climate and As the world's largest jewellery maker, we are determined to reduce our climate footprint and high ethical standards go hand in hand, and we craft our jewellery with environment help set an
Slide 41: Sustainable products and workplace
SUSTAINABILITY Sustainable Workplace products and society 98% 100% 97% Partnering with UNICEF to recycled recycled of all stones are silver grains gold grains man-made empower young people Pandora and UNICEF have launched a global partnership to support the most vulnerable children, especially girls
Slide 42: Investor Relations contact details
Investor Relations contact details Investor Relations team Share information ADR information Trading symbol PNDORA ADR trading symbol PANDY Michael Bjergby Identification number/ISIN DK0060252690 Sponsored level 1 programme VP, Investor Relations, Tax & Treasury Programme type (J.P. Morgan) +45 7219
Slide 43: Pandora Q3 2020 - Investor presentation
43 Pandora Q3 2020 - Investor presentation