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Pandora Australia's President Karin Adcock
Pandora Australia's President Karin Adcock

Pandora revises 2011 targets

Pandora has updated its financial expectations for 2011, following a sharp decline in worldwide revenue according to a recent company announcement.
At the same time, chief executive officer Mikkel Vendelin Olesen has resigned from Pandora, leaving board member Marcello Bottoli as interim CEO, while the company searches for a replacement.

Following the significant decline in revenue this year, the company has downgraded its 2011 guidance for revenue and EBITDA margins, with revised expectations to be at the 2010 levels.

Pandora claims the cumulative effect of substantial price increases and poor marketing execution are the major factors leading to the drop in revenue.

“Although our price increases combined with some destocking are significant contributors to our profitability, our own inadequate marketing execution is as big a factor,” Allan Leighton, Chairman of the Board said.

Pandora’s four largest markets experienced a drop-off in revenue with Australian revenues down 19.9 per cent from 2010. According to the announcement to the Copenhagen Stock Exchange on August 2, the decline is a reflection of challenging trading conditions, ending with deteriorating retailer sell-thru figures.

Pandora Australia, president Karin Adcock said, “We expected some decline in sales in 2011, due to our market penetration. However, like many in [Australian] retail we have been surprised by the severity of the retail downturn. Natural disasters have also had a material impact in 2011.”

Adcock added, “It would be fair to say that the declines we have experienced in New Zealand are similar to those experienced in Australia.”

The company’s price increases implemented last year impacted their volumes however Adcock confirms that price increases were more substantial in overseas markets.

“Price increases were more significant in other territories compared to Australia. Given the increases in commodity prices it was considered a modest increase.

“We increased prices in Australia in April because we had not increased prices across the board since March 2009 and given the increases in commodity prices it was considered a very modest increase relatively and with very little push-back by our multi-branded network,” Adcock explained.

She added that some of the price changes were aimed at addressing an excessive number of price points and some inconsistency in pricing across categories.

Increased gold and silver prices, decreased revenues and an increase in inventory of point-of-sale materials are the major factors behind the increased inventory, and Pandora will aim to rectify these issues with revised financial targets.

“We have commenced an across the board ‘old-for-new’ program to allow retailers parting with slow moving items in exchange for best sellers,” Adcock said.

In order to improve its current standing, Pandora’s interim CEO, Bottoli, along with the chairman have implemented immediate operational action.

“Our interim CEO will be doing a detailed review of all aspects of sales, marketing and operations. We will work hard to remedy inadequate operational execution and focus on commercial strategies,” Adcock added.

In terms of the local market Adcock detailed a number of strategies being implemented. “We will be working closely with partners to merchandise and sell the best possible choice of products in the best possible way and we’ll continue our strategy of expanding branded sales channels while also reaching our consumers through a broad network of multi branded stores,” Adcock said.

No further price increases are set for 2011 and 2012 however implementation of new concept stores is set for 2011 and developing a more aggressive marketing campaign is of immediate priority. 

“It is clear the end customer prefers a consistent branded environment and our strategy remains to build on the charm bracelet business with new concepts and to expand the non-charm business to ensure longevity of the brand.

“It is important to stress that management remain confident despite the changed financial outlook. We anticipate revenue in line with last year and EBITDA margins in the low thirties” Adcock said.

She outlined that there would be no changes to the senior management of the business in Australia and concluded by saying, “I am pleased to say that our new marketing vice president Glenda Wolman, has joined Pandora and we are progressing well towards securing a vice president for sales.”

More reading:
Pandora launches online member magazine
Pandora upbeat despite Australian revenue drop
Pandora reveals criteria for account closures

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