Danish jeweler Pandora AS swung to an unexpected third-quarter net loss and cut its revenue growth guidance Tuesday as the company continues to work through an extensive turnaround program.
The company PNDORA, -11.72% posted a net loss in the quarter of 119 million Danish kroner ($17.8 million) from a profit of DKK951 million in the same period a year earlier, as revenue fell 11% to DKK4.42 billion.
Analysts polled by FactSet had expected net profit of DKK455 million on revenue of DKK4.68 billion.
The gross margin fell to 62.2% from 72.3% while the earnings before interest and taxes margin fell to minus 4.5 from 24.0%.
The company, which sells charm bracelets, rings and earrings at around 7,700 stores world-wide, said its Now turnaround program is on track. It has been busy cutting promotions and buying back inventory, improving products, stores and marketing, as well as cutting costs and shaking up its organizational structure.
Pandora said it expects an improving performance during the fourth quarter with strong Christmas trading, but disappointing results in China hit October’s like-for-like sales.
“Our brand initiatives that started in late August receive good feedback from consumers, and the early positive indications are supporting our expectations for solid Christmas trading,” said Chief Executive Alexander Lacik.
“3Q financial results were marked by our deliberate commercial reset, and we will continue to make any necessary decisions that support the long-term health of Pandora,” he said.
Pandora now expects organic sales to fall by 7% to 9%, from earlier guidance for a fall of 3% to 7%, with a pre-items EBIT margin of 26% to 27% from 26% to 28%.
After strong progress on its cost-reduction program, Pandora raised the cost savings target for 2019 by DKK50 million to DKK650 million, and the 2020 run-rate target is increased by DKK100 million to DKK1.3 billion.
Capital expenditure for 2019 is now expected at around DKK1 billion from previous guidance of DKK1.0 billion to DKK1.2 billion, while net concept store openings in 2019 are still expected to be around 50.