Pandora's Q1 financials hit amidst marketing tests for brand re-launch

Pandora has seen a 12% drop in organic growth in the first quarter of 2019, after it initiated a "commercial reset" to prepare for its brand re-launch. The reset saw fewer promotional activities, reduction of sell-in packages and improvement of inventory levels, which are estimated to have impacted organic growth by -5% in Q1 2019.

According to the press release, Pandora is currently testing and piloting a number of commercial initiatives as preparation for the brand re-launch such as celebrity and influencer collaborations. While they have shown encouraging results, said the company, the most important test lies in the initiation of "significant marketing investments" in key countries. The investments, launching in May 2019, are expected to demonstrate the potential to drive profitable revenue growth.

Total like-for-like sales-out growth was also down by 10% due to lower traffic in physical stores. However, Pandora chief financial officer Anders Boyer said that the Q1 results were expected to be burdened by the company's deliberate commercial reset. Adding on, president and CEO of Pandora Alexander Lacik said,

The brand as well as the company has reached a point of maturity and it is not without some serious challenges.

Lacik believes that the recently announced business transformation Programme NOW will be a "great transition into the future". Despite the weak financials, the jewellery firm said that the programme's cost reduction initiatives tracked well in the first quarter and will support revenue growth from late 2019 onwards.

Additionally, Pandora also reported significant progress in its efforts to change the cost mindset and performance culture, including productivity improvements in Thailand.

Pandora employs more than 28,000 people worldwide of whom more than 13,000 are located in Thailand, where the company manufactures its jewellery. According to a news report by Reuters, Pandora will be laying off another 1,200 workers in Thailand and speeding up marketing spending. This follows the company's 700 layoffs in February in a bid to cut costs by end-2020 and accelerate its marketing efforts. Marketing has reached out for more information.

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