Reporter | Chen Qirui Edit | Lou Shuqin
Danish jewelry brand Pandora disclosed the key data of the third quarter of fiscal 2021 performance report on November 1, local time. During the reporting period, Pandora's sales increased organically by 14% year-on-year to DKK 4.728 billion, an increase of 9% compared to the same period in 2019. Pretax interest recorded DKK 957 million and a pretax margin of 20.2%.
Thanks to the strong recovery shown in the first half of this year, Pandora's stock price has increased by 40% overall, and sales have returned to pre-epidemic levels in 2019. But after the third quarter results were made public, Pandora's stock price fell 6.5% to DKK 842.9 per share on Monday, and investors began to doubt the sustainability of its development.
The slowdown in overall sales growth is one of the reasons, and the lack of performance of direct-operated stores is another factor that worries investors. Pandora's overall direct store sales grew by just 5 percent during the reporting period, well below the 14 percent previously expected by analysts. However, Pandora still has high expectations for the performance of the full fiscal year, raising the full-year growth forecast to 18% to 20%, and the overall revenue is expected to be between DKK 22.4 billion and 22.8 billion.
As in the first half of the year, the United States and Europe remain the two main markets driving Pandora's growth. Pandora pointed out that the increase in vaccination rates in the United States and the liberalization of the European tourism industry have driven the growth of sales in these two markets, but the rapid growth in a short period of time has also cast a shadow of uncertainty over whether the subsequent performance can maintain stable growth.
In the Chinese market, Pandora's performance is still struggling. In the third quarter performance report memorandum, Pandora once again stressed that the sales performance of the Chinese market in fiscal 2021 will remain sluggish. In the earlier fiscal 2020 performance report, Pandora had already pointed out that there were "structural challenges" in the Chinese market, and it is expected that the operation in 2021 will be even lower than that in 2019.
Measured by popularity and influence, Pandora is still one of the most famous luxury jewelry brands in China. Classic beaded products are instrumental in helping Pandora open up the Chinese market. The model of matching beads according to individual needs is different from other mainstream light luxury jewelry brands on the market at that time, and at the same time, it can take advantage of consumers' psychology of seeking innovation and change to promote the improvement of repurchase rate.
After officially entering the Chinese market in 2015, Pandora began to expand aggressively. By the end of 2019, Pandora's stores in China reached 240, and in the first quarter of 2017, 19 of Pandora's 58 new stores opened worldwide were located in China.
But after the beading trend passed, Pandora did not leave a new signature product in the Chinese market, and consumers' impression of the brand has been bound to the beading. Pandora's sales in China in the first half of 2021 fell 32% from the first half of 2019, but the decline in sales in the Chinese market in the second quarter has narrowed to 13% compared with the same period in 2019.
In order to reverse the decline in the Chinese market, Pandora has also taken a series of initiatives in recent years, including using traffic stars as spokespersons and actively participating in women's issue marketing. At the "Capital Markets Day" event held in September this year, Pandora proposed a new China market growth plan, which will focus more on the new "moments" product line. The series was a great success in the European market, but the response in China was mediocre.
In addition, Pandora revealed in the third quarter memorandum that it is expected to invest 200 million Danish krones (about 199 million yuan) in the second half of 2021 to promote the transformation of the brand in the Chinese market. According to the Women's Daily, Pandora's transformation plan includes launching new marketing campaigns, strengthening collaborations with social media influencers, and adjusting sales narratives.
However, there is not much time left for Pandora to adjust in the Chinese market. In recent years, the rise of a number of overseas and local light luxury jewelry brands such as apm monaco has diverted the market previously occupied by Pandora. Swarovski, who has a considerable influence, has embarked on a larger transformation plan, including the opening of a global flagship store on Middle Huaihai Road in Shanghai to promote the new "instant wonder" concept.
In the disclosed performance data, Swarovski sold about 3.5 billion euros in 2019, of which the core crystal business contributed 2.7 billion euros in revenue. Affected by the epidemic, Swarovski executives expect the revenue of the crystal business to fall by 33% to 2 billion euros in 2020.
According to Bloomberg, Swarovski's transformational measures include cutting 6,000 jobs, planning to shrink the lower-margin mass-market business and focusing more on more expensive and more profitable rings and bracelet jewelry in the future. In addition, Swarovski recently announced that it will start looking for a new CEO in early 2022, which will be the first time Swarovski has hired a talent from outside the founder's family as CEO since its founding in 1895.