Zale Q4 Comps Up 5.6%, Revenue Loss Narrows to $8 Million

Comps at Zales Jewelers (pictured) and Zales Outlet increased 8.1%.

Fine jewelry retailer Zale Corp. said Wednesday that year-over-year revenues for the fourth quarter increased 2.4 percent to $417 million. Comparable store sales for the period increased 5.6 percent. This increase follows an 8.3 percent rise in the same period last year. At constant exchange rates, comparable store sales increased 5.8 percent.

Net loss in the fourth quarter for the company, which owns retail jewelry chains in the US, Canada and Puerto Rico, narrowed to $8 million, or 25 cents per share, compared to a net loss of $20 million, or 61 cents per share, in the fourth quarter of fiscal 2012.

Other fourth quarter highlights include:

* Zales branded stores, Zales Jewelers and Zales Outlet, posted a comparable store sales increase of 8.1 percent. This follows a 12.3 percent rise in the same period last year.

* U.S. fine jewelry brands, including Zales branded stores and regional brand, Gordon’s Jewelers, posted a comparable store sales increase of 7.2 percent. This follows an 11.2 percent rise in the same period last year.

* Peoples branded stores posted a comparable store sales increase of 5.6 percent. This follows a 4.7 percent rise in the same period last year. At constant exchange rates, comparable store sales increased 7 percent in the fourth quarter of fiscal 2013, following an increase of 9.9 percent in the same period last year.

* Canadian fine jewelry brands, Peoples Jewellers and Mappins Jewellers, posted a comparable store sales increase of 3.3 percent. This follows a 2 percent rise in the same period last year. At constant exchange rates, comparable store sales increased 4.7 percent in the fourth quarter of fiscal 2013, following an increase of 7.1 percent in the same period last year.

* Piercing Pagoda, Zale’s kiosk jewelry business, posted a comparable store sales increase of 0.3 percent. In the same period last year, comparable store sales rose 2.7 percent.

Gross margin on sales rose sharply to $222 million, or 53.1 percent, compared to $210 million, or 51.6 percent, in the fourth quarter of fiscal 2012. Operating margin increased 120 basis points.

Operating loss was $3 million, or 0.7 percent of revenues, compared to an operating loss of $8 million, or 1.9 percent of revenues, in the fourth quarter of the prior year.

For the 2013 fiscal year, the company reported a six-year high in net earnings of $10 million, or $0.24 diluted earnings per share, up $37 million, or $1.09 per share. The company said this is a six-year high.

Comparable store sales rose 3.3 percent for the year with Zales branded stores up 4.7 percent and Peoples branded stores up 4.8 percent at constant exchange rates. Gross margin was up 60 basis points to 52.1 percent and operating margin increased 90 basis points to 1.9 percent.

“For the year we achieved a significant milestone by delivering our highest net income in six years,” Theo Killion, Zale Corp. CEO, said in a statement.

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Comps at Zales Jewelers (pictured) and Zales Outlet increased 8.1%.

Fine jewelry retailer Zale Corp. said Wednesday that year-over-year revenues for the fourth quarter increased 2.4 percent to $417 million. Comparable store sales for the period increased 5.6 percent. This increase follows an 8.3 percent rise in the same period last year. At constant exchange rates, comparable store sales increased 5.8 percent.

Net loss in the fourth quarter for the company, which owns retail jewelry chains in the US, Canada and Puerto Rico, narrowed to $8 million, or 25 cents per share, compared to a net loss of $20 million, or 61 cents per share, in the fourth quarter of fiscal 2012.

Other fourth quarter highlights include:

* Zales branded stores, Zales Jewelers and Zales Outlet, posted a comparable store sales increase of 8.1 percent. This follows a 12.3 percent rise in the same period last year.

* U.S. fine jewelry brands, including Zales branded stores and regional brand, Gordon’s Jewelers, posted a comparable store sales increase of 7.2 percent. This follows an 11.2 percent rise in the same period last year.

* Peoples branded stores posted a comparable store sales increase of 5.6 percent. This follows a 4.7 percent rise in the same period last year. At constant exchange rates, comparable store sales increased 7 percent in the fourth quarter of fiscal 2013, following an increase of 9.9 percent in the same period last year.

* Canadian fine jewelry brands, Peoples Jewellers and Mappins Jewellers, posted a comparable store sales increase of 3.3 percent. This follows a 2 percent rise in the same period last year. At constant exchange rates, comparable store sales increased 4.7 percent in the fourth quarter of fiscal 2013, following an increase of 7.1 percent in the same period last year.

* Piercing Pagoda, Zale’s kiosk jewelry business, posted a comparable store sales increase of 0.3 percent. In the same period last year, comparable store sales rose 2.7 percent.

Gross margin on sales rose sharply to $222 million, or 53.1 percent, compared to $210 million, or 51.6 percent, in the fourth quarter of fiscal 2012. Operating margin increased 120 basis points.

Operating loss was $3 million, or 0.7 percent of revenues, compared to an operating loss of $8 million, or 1.9 percent of revenues, in the fourth quarter of the prior year.

For the 2013 fiscal year, the company reported a six-year high in net earnings of $10 million, or $0.24 diluted earnings per share, up $37 million, or $1.09 per share. The company said this is a six-year high.

Comparable store sales rose 3.3 percent for the year with Zales branded stores up 4.7 percent and Peoples branded stores up 4.8 percent at constant exchange rates. Gross margin was up 60 basis points to 52.1 percent and operating margin increased 90 basis points to 1.9 percent.

“For the year we achieved a significant milestone by delivering our highest net income in six years,” Theo Killion, Zale Corp. CEO, said in a statement.

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Tiffany Q2 Earnings Up 16%, Global Sales Up 4%

Exceptional growth in China along with improvements in operating margins led to a better-than-expected 16 percent net earnings increase to $107 million, or $0.83 per diluted share, in the second quarter for Tiffany & Co.

Worldwide net sales for the New York-based luxury jeweler rose 4 percent to $926 million. On a constant-exchange-rate basis, worldwide net sales rose 8 percent, and comparable store sales rose 5 percent due to sales growth in most regions.

As a result, the company raised its year-end outlook to $3.50-$3.60 per diluted share, from $3.43-$3.53 per diluted share in its first quarter outlook. It also plans to continue its worldwide expansion of stores unabated.

In addition to regional growth, product categories also performed well, according to Tiffany’s second-quarter earnings report released Tuesday. The results were dampened a bit by lower-than-expected sales growth in the US and the drastic decline of the Japanese Yen.

Mark L. Aaron, Tiffany VP-Investor Relations, said in a conference call Tuesday that growth in fine jewelry and statement jewelry were extremely strong and outperformed modest growth in fashion jewelry. He added that diamond jewelry, led by colored diamonds, did well particularly well for the period.

Gross margin (gross profit as a percentage of net sales) increased to 57.5 percent in the second quarter from 56.3 percent a year ago. Aaron said this was the result of diminishing product cost pressure and price increases taken earlier in the year. This help lead to a “better-than-expected” improvement in operating margin.

“We were pleased with the results of our efforts to improve gross margin which, combined with well-controlled expenses, yielded a solid increase in operating margin,” added Michael J. Kowalski, Tiffany chairman and CEO.

Sales by region are as follows:

* In the Americas, total sales increased 2 percent to $444 million in the second quarter. Comparable store sales were unchanged in the quarter, led by growth in Tiffany’s New York flagship store sales. Aaron noted that sales in the US were lower than expected and were mixed throughout the country with no discernible pattern.

* Total sales in the Asia-Pacific region rose 20 percent to $208 million in the second quarter. On a constant-exchange-rate basis, total sales also rose 20 percent and comparable store sales increased 13 percent, “led by especially strong sales growth in Greater China,” the company said in its report.

* Aaron focused a great deal of time on Japan where the company operates 54 stores. The negative translation effect from a substantially weaker yen caused total sales to decline 14 percent to $136 million in the second quarter. However, he noted that on a constant-exchange-rate basis, total sales increased 7 percent in the second quarter, due to comparable store sales growth of 8 percent with strong growth in engagement and higher-end jewelry categories.

* Total sales in Europe rose 11 percent to $111 million in the second quarter. On a constant-exchange-rate basis, total sales rose 10 percent and comparable store sales rose 7 percent due to sales growth in the United Kingdom and most of continental Europe.

* Sales classified as “Other” sales increased 33 percent to $26 million in the second quarter, primarily reflecting the conversion in July 2012 of five Tiffany & Co. stores in the United Arab Emirates from independently-operated to company-operated. The company said it expected to increase its presence in the Middle East.

Tiffany opened three stores in the second quarter, including its ninth in Hong Kong store. Other openings were in, in Verona, Italy and in Villahermosa, Mexico. The company closed a store in Tokyo, due to the mall the store was in closing for long-term renovations, Aaron said.

The company in the second quarter operated 277 stores (116 in the Americas, 67 in Asia-Pacific, 54 in Japan, 35 in Europe and five in the U.A.E.), versus 260 stores (106 in the Americas, 61 in Asia-Pacific, 55 in Japan and 33 in Europe and five in the U.A.E.) a year ago.

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Exceptional growth in China along with improvements in operating margins led to a better-than-expected 16 percent net earnings increase to $107 million, or $0.83 per diluted share, in the second quarter for Tiffany & Co.

Worldwide net sales for the New York-based luxury jeweler rose 4 percent to $926 million. On a constant-exchange-rate basis, worldwide net sales rose 8 percent, and comparable store sales rose 5 percent due to sales growth in most regions.

As a result, the company raised its year-end outlook to $3.50-$3.60 per diluted share, from $3.43-$3.53 per diluted share in its first quarter outlook. It also plans to continue its worldwide expansion of stores unabated.

In addition to regional growth, product categories also performed well, according to Tiffany’s second-quarter earnings report released Tuesday. The results were dampened a bit by lower-than-expected sales growth in the US and the drastic decline of the Japanese Yen.

Mark L. Aaron, Tiffany VP-Investor Relations, said in a conference call Tuesday that growth in fine jewelry and statement jewelry were extremely strong and outperformed modest growth in fashion jewelry. He added that diamond jewelry, led by colored diamonds, did well particularly well for the period.

Gross margin (gross profit as a percentage of net sales) increased to 57.5 percent in the second quarter from 56.3 percent a year ago. Aaron said this was the result of diminishing product cost pressure and price increases taken earlier in the year. This help lead to a “better-than-expected” improvement in operating margin.

“We were pleased with the results of our efforts to improve gross margin which, combined with well-controlled expenses, yielded a solid increase in operating margin,” added Michael J. Kowalski, Tiffany chairman and CEO.

Sales by region are as follows:

* In the Americas, total sales increased 2 percent to $444 million in the second quarter. Comparable store sales were unchanged in the quarter, led by growth in Tiffany’s New York flagship store sales. Aaron noted that sales in the US were lower than expected and were mixed throughout the country with no discernible pattern.

* Total sales in the Asia-Pacific region rose 20 percent to $208 million in the second quarter. On a constant-exchange-rate basis, total sales also rose 20 percent and comparable store sales increased 13 percent, “led by especially strong sales growth in Greater China,” the company said in its report.

* Aaron focused a great deal of time on Japan where the company operates 54 stores. The negative translation effect from a substantially weaker yen caused total sales to decline 14 percent to $136 million in the second quarter. However, he noted that on a constant-exchange-rate basis, total sales increased 7 percent in the second quarter, due to comparable store sales growth of 8 percent with strong growth in engagement and higher-end jewelry categories.

* Total sales in Europe rose 11 percent to $111 million in the second quarter. On a constant-exchange-rate basis, total sales rose 10 percent and comparable store sales rose 7 percent due to sales growth in the United Kingdom and most of continental Europe.

* Sales classified as “Other” sales increased 33 percent to $26 million in the second quarter, primarily reflecting the conversion in July 2012 of five Tiffany & Co. stores in the United Arab Emirates from independently-operated to company-operated. The company said it expected to increase its presence in the Middle East.

Tiffany opened three stores in the second quarter, including its ninth in Hong Kong store. Other openings were in, in Verona, Italy and in Villahermosa, Mexico. The company closed a store in Tokyo, due to the mall the store was in closing for long-term renovations, Aaron said.

The company in the second quarter operated 277 stores (116 in the Americas, 67 in Asia-Pacific, 54 in Japan, 35 in Europe and five in the U.A.E.), versus 260 stores (106 in the Americas, 61 in Asia-Pacific, 55 in Japan and 33 in Europe and five in the U.A.E.) a year ago.

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U.S. and E-Commerce Businesses Fuel 10.4% Jump in Signet’s Q1 Sales

Signet Jewelers Ltd., the largest specialty retail jeweler in the U.S. and the U.K., said first quarter sales increased 10.4% year-over-year to $993.6 million. Same store sales increased 6.4% compared to a rise of 1.2% for the same period in the previous year. E-Commerce sales rose 40.7% to $31.1 million.

Operating income increased 10.4% to $142.8 million and diluted earnings per share rose 17% to $1.13 for the company that owns the Kay, Jared and Ultra jewelry retail chains in the U.S. and the H.Samuel and Ernest Jones jewelry retail chains in the U.K.

The U.S. division, which accounts for approximately 86 percent of total company sales, again was the driver in the strong performance. Total U.S. sales increased 14.3% to $858.6 million. Same store sales increased 8.1% compared to an increase of 1.2% for the period. The increases were driven by broad based strength across all merchandise categories in their Kay and Jared jewelry chains, as well as its recent acquisition of the Ultra jewelry store chain. E-Commerce sales increased 48% to $25.6 million.

“We were very pleased with our results throughout the quarter, including Valentine’s Day and the run up to Mother’s Day,” said Mike Barnes, Signet CEO.

The UK division, which accounts for approximately 14 percent of total company sales, reported weak results. Total sales fell 9.1% to $135. Same store sales fell 2.3% compared to an increase of 1.2% in the first quarter Fiscal 2013. The company said the sales decline was due to a same store sales decrease of $3.1 million primarily in H.Samuel, the impact of closed stores of $4.8 million, and currency fluctuation of $5.6 million. In Ernest Jones, the number of transactions increased and there was strength in the bridal business and watches (excluding Rolex, which is being offered in fewer stores in the UK). In H.Samuel, the number of transactions declined, resulting in lower sales across most merchandise categories. E-Commerce was a bright spot, increasing 14.5% to $5.5 million.

In its guidance, Signet says it expects the shift of Mother’s Day sales this year partly into the first quarter to impact second quarter sales and earnings performance. In addition, integration costs and the seasonality of the company’s newly acquired Ultra Stores are expected to dilute profits. The company expects Ultra to be a positive contributor to the company’s bottom line by the fourth quarter.

The company also said it plans to open 70 to 80 Kay and Jared stores by the end of the fiscal year.
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Signet Jewelers Ltd., the largest specialty retail jeweler in the U.S. and the U.K., said first quarter sales increased 10.4% year-over-year to $993.6 million. Same store sales increased 6.4% compared to a rise of 1.2% for the same period in the previous year. E-Commerce sales rose 40.7% to $31.1 million.

Operating income increased 10.4% to $142.8 million and diluted earnings per share rose 17% to $1.13 for the company that owns the Kay, Jared and Ultra jewelry retail chains in the U.S. and the H.Samuel and Ernest Jones jewelry retail chains in the U.K.

The U.S. division, which accounts for approximately 86 percent of total company sales, again was the driver in the strong performance. Total U.S. sales increased 14.3% to $858.6 million. Same store sales increased 8.1% compared to an increase of 1.2% for the period. The increases were driven by broad based strength across all merchandise categories in their Kay and Jared jewelry chains, as well as its recent acquisition of the Ultra jewelry store chain. E-Commerce sales increased 48% to $25.6 million.

“We were very pleased with our results throughout the quarter, including Valentine’s Day and the run up to Mother’s Day,” said Mike Barnes, Signet CEO.

The UK division, which accounts for approximately 14 percent of total company sales, reported weak results. Total sales fell 9.1% to $135. Same store sales fell 2.3% compared to an increase of 1.2% in the first quarter Fiscal 2013. The company said the sales decline was due to a same store sales decrease of $3.1 million primarily in H.Samuel, the impact of closed stores of $4.8 million, and currency fluctuation of $5.6 million. In Ernest Jones, the number of transactions increased and there was strength in the bridal business and watches (excluding Rolex, which is being offered in fewer stores in the UK). In H.Samuel, the number of transactions declined, resulting in lower sales across most merchandise categories. E-Commerce was a bright spot, increasing 14.5% to $5.5 million.

In its guidance, Signet says it expects the shift of Mother’s Day sales this year partly into the first quarter to impact second quarter sales and earnings performance. In addition, integration costs and the seasonality of the company’s newly acquired Ultra Stores are expected to dilute profits. The company expects Ultra to be a positive contributor to the company’s bottom line by the fourth quarter.

The company also said it plans to open 70 to 80 Kay and Jared stores by the end of the fiscal year.
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Pandora Jewelry Returns to Strong Profit And Growth

Pandora—whose short history as a publicly traded company was marked by spectacular growth followed by an even more spectacular fall—is back on track dramatically increasing its sales and profit for the first quarter of 2013.

The Danish company, known for its popular charm bracelets, said Tuesday that group revenue for the period increased 40 percent year-over-year to 2.002 billion Danish krones ($348.6 million). Profits increased 29.6 percent DKK 438 million ($76.3 million).

The international company—which manufactures, distributes, retails and markets its branded jewelry—reported extremely strong increases in all regions of the world where it operates. Its regional breakdown for the first quarter is as follows:

* Americas: Up 38 percent (38.6 percent in local currency);
* Europe: Up 50.4 percent (50.6 percent in local currency); and
* Asia Pacific: Up 26.1 percent (27.7 percent in local currency).

The company noted that as it expected, gross margin fell to 65.6 percent for the period, compared to a gross margin of 71.6 percent in the first quarter of 2012. The company did not give a reason for this expected drop. 

“Although it is still early in the year, we have had a strong start,” said Pandora CEO Bjørn Gulden, who will leave the company at the end of the month to join sports brand Puma. “Revenue and earnings increased across all regions, positively impacted by the delivery of the Valentine's Day collection in Q1 2013, instead of, as historically, in the fourth quarter. Even more importantly, our sales-out in ‘Concept’ stores (branded stores owned by the company) has also strengthened with double digit growth in our four major markets. Some of this increase is due to the fact that Easter was in Q1 this year compared to Q2 last year, but we believe most of it is due to better products, improved marketing and better execution in the stores.”

The company’s financial guidance was unchanged from the prior quarter. It expects revenue of to be above DKK 7.2 billion ($1.25 billion) and expects an EBITDA margin above 25 percent.

Other highlights of the first quarter 2013 report

* EBITDA increased by 60.3 percent to DKK 643 million ($112 million), corresponding to an EBITDA margin of 32.1 percent, compared to an EBITDA margin of 28.2 percent in the first quarter of 2012.
 
* Free cash flow was DKK 406 million ($70.6 million), compared to DKK 118 million ($20.5 million) in the first quarter of 2012.
 
* Pandora bought back 398,153 shares corresponding to DKK 61 million ($10.6 million) as part of the on-going DKK 700 million ($121.8 million) share buyback program.
 
* Pandora expects to open approximately 150 Concept stores in 2013.

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Pandora—whose short history as a publicly traded company was marked by spectacular growth followed by an even more spectacular fall—is back on track dramatically increasing its sales and profit for the first quarter of 2013.

The Danish company, known for its popular charm bracelets, said Tuesday that group revenue for the period increased 40 percent year-over-year to 2.002 billion Danish krones ($348.6 million). Profits increased 29.6 percent DKK 438 million ($76.3 million).

The international company—which manufactures, distributes, retails and markets its branded jewelry—reported extremely strong increases in all regions of the world where it operates. Its regional breakdown for the first quarter is as follows:

* Americas: Up 38 percent (38.6 percent in local currency);
* Europe: Up 50.4 percent (50.6 percent in local currency); and
* Asia Pacific: Up 26.1 percent (27.7 percent in local currency).

The company noted that as it expected, gross margin fell to 65.6 percent for the period, compared to a gross margin of 71.6 percent in the first quarter of 2012. The company did not give a reason for this expected drop. 

“Although it is still early in the year, we have had a strong start,” said Pandora CEO Bjørn Gulden, who will leave the company at the end of the month to join sports brand Puma. “Revenue and earnings increased across all regions, positively impacted by the delivery of the Valentine's Day collection in Q1 2013, instead of, as historically, in the fourth quarter. Even more importantly, our sales-out in ‘Concept’ stores (branded stores owned by the company) has also strengthened with double digit growth in our four major markets. Some of this increase is due to the fact that Easter was in Q1 this year compared to Q2 last year, but we believe most of it is due to better products, improved marketing and better execution in the stores.”

The company’s financial guidance was unchanged from the prior quarter. It expects revenue of to be above DKK 7.2 billion ($1.25 billion) and expects an EBITDA margin above 25 percent.

Other highlights of the first quarter 2013 report

* EBITDA increased by 60.3 percent to DKK 643 million ($112 million), corresponding to an EBITDA margin of 32.1 percent, compared to an EBITDA margin of 28.2 percent in the first quarter of 2012.
 
* Free cash flow was DKK 406 million ($70.6 million), compared to DKK 118 million ($20.5 million) in the first quarter of 2012.
 
* Pandora bought back 398,153 shares corresponding to DKK 61 million ($10.6 million) as part of the on-going DKK 700 million ($121.8 million) share buyback program.
 
* Pandora expects to open approximately 150 Concept stores in 2013.

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Pandora Produces Charming Q3 Sales and Profit Gains

Danish jewelry company Pandora said Tuesday that third quarter revenue increased 14.3 percent, year-over-year, to DKK 1.79 billion ($308 million) with double-digit gains across all geographical markets. Net profit for the period increased by 11.4 percent to DKK 380 million ($65.2 million).

This is a strong turnaround when compared with second quarter results in which the company—best known for the manufacture, distribution and marketing of silver charm jewelry—said its sales fell by 9.5 percent to 1.26 billion DKK ($210.2 million) with profit during the same period down 89.9 percent to 63 million DKK ($10.5 million).

Pandora also said Tuesday that its stock balancing plan (replacing discontinued stock) is continuing as planned. In the third quarter, the company received returns of discontinued products with a wholesale value of DKK 86 million ($14.7 million), and replaced it with merchandising costing DKK 127 million ($21.8 million). In 2012 Pandora received returns of discontinued products valued at DKK 609 million ($104.6 million), and replaced DKK 599 million ($102.8 million).

Revenue by geographic region is as follows:

• Americas increased by 21.9 percent (9.5 percent in local currency), with U.S. sales up 15.8 percent (2.6 percent in local currency).
• Europe increased by 13.1 percent (11 percent in local currency).
• Asia Pacific decreased by 10.7 percent (17.3 percent in local currency).

Branded revenue as percentage of total revenue increased to 81.3 percent, compared with 73.6 percent in third quarter of 2011. Gross margin was 64.1 percent, compared with 73.6 percent in the third quarter of 2011.

EBITDA margin was 28 percent, compared with 34.2 percent in Q3 2011, a decrease of 6.2 percent to DKK 503 million ($86.3 million). EBIT margin was 25.8 percent compared with 32.2 percent in Q3 2011, an 8.5 percent drop to DKK 463 million ($79.5 million).

The company, which sells its jewelry through retail jewelers and its own branded retail stores, updated its outlook, saying it expects revenue for 2012 to be above DKK 6.3 billion ($1.08 billion), from its previous guidance above DKK 6 billion.

“I am happy to report that we continue to perform in line with our ‘18 months turn-around plan,’” said Björn Gulden, Pandora CEO. “Third quarter developed even a little better than we expected and we have, based on the tailwind from the currency development, decided to slightly upgrade our revenue guidance. One of our major initiatives ‘The stock balancing campaign’ was continued, mainly impacting the U.S. and third-party distribution, during Q3 2012. We have now largely concluded the campaign and it will, as communicated earlier, be finished by end of 2012.”

Gulden added its spring merchandise sold well and its fall merchandise had a strong start for the third quarter.

“The year is not yet finished,” he said. “We have our most important quarter to come, but we feel confident that our improved product, our lower prices and our other operational improvements will put us in the position of achieving our updated financial goals for the full year.”

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Danish jewelry company Pandora said Tuesday that third quarter revenue increased 14.3 percent, year-over-year, to DKK 1.79 billion ($308 million) with double-digit gains across all geographical markets. Net profit for the period increased by 11.4 percent to DKK 380 million ($65.2 million).

This is a strong turnaround when compared with second quarter results in which the company—best known for the manufacture, distribution and marketing of silver charm jewelry—said its sales fell by 9.5 percent to 1.26 billion DKK ($210.2 million) with profit during the same period down 89.9 percent to 63 million DKK ($10.5 million).

Pandora also said Tuesday that its stock balancing plan (replacing discontinued stock) is continuing as planned. In the third quarter, the company received returns of discontinued products with a wholesale value of DKK 86 million ($14.7 million), and replaced it with merchandising costing DKK 127 million ($21.8 million). In 2012 Pandora received returns of discontinued products valued at DKK 609 million ($104.6 million), and replaced DKK 599 million ($102.8 million).

Revenue by geographic region is as follows:

• Americas increased by 21.9 percent (9.5 percent in local currency), with U.S. sales up 15.8 percent (2.6 percent in local currency).
• Europe increased by 13.1 percent (11 percent in local currency).
• Asia Pacific decreased by 10.7 percent (17.3 percent in local currency).

Branded revenue as percentage of total revenue increased to 81.3 percent, compared with 73.6 percent in third quarter of 2011. Gross margin was 64.1 percent, compared with 73.6 percent in the third quarter of 2011.

EBITDA margin was 28 percent, compared with 34.2 percent in Q3 2011, a decrease of 6.2 percent to DKK 503 million ($86.3 million). EBIT margin was 25.8 percent compared with 32.2 percent in Q3 2011, an 8.5 percent drop to DKK 463 million ($79.5 million).

The company, which sells its jewelry through retail jewelers and its own branded retail stores, updated its outlook, saying it expects revenue for 2012 to be above DKK 6.3 billion ($1.08 billion), from its previous guidance above DKK 6 billion.

“I am happy to report that we continue to perform in line with our ‘18 months turn-around plan,’” said Björn Gulden, Pandora CEO. “Third quarter developed even a little better than we expected and we have, based on the tailwind from the currency development, decided to slightly upgrade our revenue guidance. One of our major initiatives ‘The stock balancing campaign’ was continued, mainly impacting the U.S. and third-party distribution, during Q3 2012. We have now largely concluded the campaign and it will, as communicated earlier, be finished by end of 2012.”

Gulden added its spring merchandise sold well and its fall merchandise had a strong start for the third quarter.

“The year is not yet finished,” he said. “We have our most important quarter to come, but we feel confident that our improved product, our lower prices and our other operational improvements will put us in the position of achieving our updated financial goals for the full year.”

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Pandora’s Troubles Continue as Q2 Profit Falls 90% and Revenue Drops 9.5%

Pandora Group, home of the international silver jewelry brand that became famous for its charm jewelry, had another disappointing quarter.

The Danish company with manufacturing facilities in Thailand said that year-over-year sales for its Pandora branded jewelry fell by 9.5 percent to 1.26 billion Danish krone ($210.2 million) in the second quarter of 2012. Profit during the same period fell 89.9 percent to 63 million Danish krone ($10.5 million).

Pandora reported losses in every region it operates. The company noted that a stock rebalancing campaign launched in the first quarter is a major reason for the disappointing results, which the company said are in line with expectations. It said it received returns of discontinued products valued at 183 million krone ($30.5 million) and replaced it with 310 million Danish krone ($51.7 million) worth of new inventory.

Björn Gulden, Pandora CEO, said the company will continue with the stock rebalancing program and will cap it at 800 million krone ($133.5 million).

“The execution on the stock balancing campaign continued into Q2 2012 and was very well received by our retail partners across all our markets,” Gulden said. “Even though the stock balancing campaign, short-term, hurts our revenue, cost ratio and profitability in 2012, the campaign has proven to be the right action to help our retailers improve the quality of their stock.”

By region, revenue results are as follows:

* Americas decreased by 5.1 percent (14.6 percent decrease in local currency)

* Europe decreased by 16.6 percent (17.4 percent decrease in local currency)

* Asia Pacific decreased by 8.1 percent (14.1 percent decrease in local currency)

Branded revenue as percentage of total revenue increased to 75.3 percent in the second quarter of 2012, from 73.4 percent in Q2 2011; and gross margin was 67.9 percent in Q2 2012, compared to a gross margin of 74.4 percent in Q2 2011.

Pandora projects revenue for 2012 to be above 6 billion krone ($1 billion), down from 6.66 billion krone ($1.1 billion) in 2011.

“Feedback from our retailers on our Autumn/Winter 2012 collection has been very encouraging and with an additional 94 new Concept stores opened in H1 2012, we are on track to deliver on what we have promised the market in our financial guidance for the full year,” Gulden said.

Pandora also announced a number of organizational changes. Among them:

* Scott Burger, former COO of Pandora North America, was named president for Pandora North America, succeeding John White, who is taking up a position outside Pandora.

* Sten Daugaard, chief development officer, has been assigned to head Pandora's Asian headquarters in Hong Kong “in order to secure senior management attention to an important future region.”

* David Allen, former VP of Sales of Pandora Australia, has been named president of Pandora Australia with the responsibility for commercial operations in Australia, New Zealand and the Pacific, succeeding Karin Adcock, who retired as planned on July 1.

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Pandora Group, home of the international silver jewelry brand that became famous for its charm jewelry, had another disappointing quarter.

The Danish company with manufacturing facilities in Thailand said that year-over-year sales for its Pandora branded jewelry fell by 9.5 percent to 1.26 billion Danish krone ($210.2 million) in the second quarter of 2012. Profit during the same period fell 89.9 percent to 63 million Danish krone ($10.5 million).

Pandora reported losses in every region it operates. The company noted that a stock rebalancing campaign launched in the first quarter is a major reason for the disappointing results, which the company said are in line with expectations. It said it received returns of discontinued products valued at 183 million krone ($30.5 million) and replaced it with 310 million Danish krone ($51.7 million) worth of new inventory.

Björn Gulden, Pandora CEO, said the company will continue with the stock rebalancing program and will cap it at 800 million krone ($133.5 million).

“The execution on the stock balancing campaign continued into Q2 2012 and was very well received by our retail partners across all our markets,” Gulden said. “Even though the stock balancing campaign, short-term, hurts our revenue, cost ratio and profitability in 2012, the campaign has proven to be the right action to help our retailers improve the quality of their stock.”

By region, revenue results are as follows:

* Americas decreased by 5.1 percent (14.6 percent decrease in local currency)

* Europe decreased by 16.6 percent (17.4 percent decrease in local currency)

* Asia Pacific decreased by 8.1 percent (14.1 percent decrease in local currency)

Branded revenue as percentage of total revenue increased to 75.3 percent in the second quarter of 2012, from 73.4 percent in Q2 2011; and gross margin was 67.9 percent in Q2 2012, compared to a gross margin of 74.4 percent in Q2 2011.

Pandora projects revenue for 2012 to be above 6 billion krone ($1 billion), down from 6.66 billion krone ($1.1 billion) in 2011.

“Feedback from our retailers on our Autumn/Winter 2012 collection has been very encouraging and with an additional 94 new Concept stores opened in H1 2012, we are on track to deliver on what we have promised the market in our financial guidance for the full year,” Gulden said.

Pandora also announced a number of organizational changes. Among them:

* Scott Burger, former COO of Pandora North America, was named president for Pandora North America, succeeding John White, who is taking up a position outside Pandora.

* Sten Daugaard, chief development officer, has been assigned to head Pandora's Asian headquarters in Hong Kong “in order to secure senior management attention to an important future region.”

* David Allen, former VP of Sales of Pandora Australia, has been named president of Pandora Australia with the responsibility for commercial operations in Australia, New Zealand and the Pacific, succeeding Karin Adcock, who retired as planned on July 1.

Please join me on the Jewelry News Network Facebook Page and on Twitter  @JewelryNewsNet. 

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