(BFM Bourse) – Listed on the Copenhagen Stock Exchange, Pandora recorded growth of more than 70% over one year. Which demonstrates the relevance of the personalization strategy at the heart of the group’s model.
What if Pandora was the group to favor on the stock market in jewelry this year? Founded in 1982 by a couple, Per and Winnie Enevoldsen, the Danish jeweler has been listed on the Copenhagen Stock Exchange since 2010 and is currently in contact with its all-time highs of 2016.
Above all, its stock market dynamics are impressive. In a luxury and/or consumer goods sector that is hardly evident at the start of the year, as evidenced by the profit warnings from Burberry and JD Sports, the company is doing well with an increase of 6.3%. since the beginning of the year.
Above all, over one year, the value increases by more than 70% (71.8%). No luxury group comes remotely close to this performance. The car manufacturer Ferrari, often associated with luxury, takes 34% and Hermès takes “only” 18.6%. Despite its spectacular increase on Friday (+12.8%), LVMH remains in the red over one year (-2.4%), as does Kering (-28% over one year). We will also note the good performance of the small Italian group Brunello Cucinelli (+24.1% over one year in Milan), which is thriving in the sector, as well as L’Oréal (+16.8% over one year).
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“Hard Luxury”
Certainly, anchoring Pandora in the luxury sector can be debated, like other companies elsewhere. We can think of Essilorluxottica, which is above all an optical group, or the British Watches of Switzerland, which distributes watches.
But Bank of America places the action in the world of “luxury goods” and Royal Bank of Canada considers the value as part of “hard luxury” (that is to say jewelry, as opposed to leather goods, described as soft luxury), in the same way as Piaget and Cartier, owned by the Swiss Richemont.
And Pandora remains above all a jeweler. Even if its products seem accessible. The prices of its bracelets range between 25 and 249 euros. However, this is to forget the principle of the group’s products, with the “charms”, these small pendants costing several dozen euros which then adorn the necklaces. So the customer personalizes their own necklace by choosing the “charms” that suit them to obtain a piece of jewelry that suits them. These “charm” bracelets represent the heart of Pandora’s reactor, with around three-quarters of its revenue.
Moreover, personalization constitutes one of the pillars of the “Phoenix” strategy which aims to transform the company into a pure “jeweler” (and not a jeweler-distributor), and thus change the perception of the market, while orienting the design of its jewelry to the customer. At the end of last year, the group explained that it sold three pieces of jewelry every second.
Bigger on the stock market than Renault or Vivendi
The idea is also to launch a brand elevation strategy. At the same time, the group highlights a sustainable development aspect: its two manufacturing sites in Thailand are LEED certified (“Leadership in Energy and Environmental Design, an American environmental quality standard for buildings) and mainly use gold and money recycled, according to the company.
Its market capitalization currently stands at 84 billion crowns, or around 11.3 billion euros, more than several CAC 40 groups, such as Vivendi, Renault or Unibail-Rodamco-Westfield. But still light years away from the world number one in luxury LVMH (388 billion euros).
“In our view, Pandora’s success can be attributed to an acceleration in brand momentum and market share gains in key geographies driven by a focus on consumer, retail, innovation of products, as well as reinvestment of the brand”, explains Bank of America.
The stock has recently been supported by excellent preliminary results for 2023. Revenues increased by 8% on a comparable basis last year, including 12% in the last quarter alone. The operating margin stood at 25%, with 34% in the fourth quarter. The group exceeded or matched its own objectives and exceeded analysts’ expectations. Pandora, however, has not given an outlook for 2024, which should occur on February 7.
“Phoenix 2026”
Pandora believes it has room to maneuver to continue its good momentum. The Danish company held a day dedicated to investors last October to present an update of its “Phoenix” strategy, which became “Phoenix 2026”.
The company intends to significantly strengthen its position in several regions. Its global jewelry market share in 2022 remained relatively modest, at around 1.3%, due to a share of less than 0.5% in the largest market, China, and 2% in the second. , United States. The group is counting on robust growth in these two countries, as well as in France and Germany where its market share is around 5%. It also plans to increase its presence in Japan and South Korea (where it has only twelve and one stores respectively) and penetrate the Indian market, these opportunities not being included in its quantified objectives.
As a result, the company estimates that it can significantly outperform its market, whose growth is estimated at around 3.6% per year over the period 2022-2027, according to Euromonitor. Pandora intends to increase its revenues by 7% to 9% per year on a comparable basis over the period 2023-2026, thanks in particular to the expansion of its distribution network (which will contribute up to three percentage points), and generate a operating margin between 26% and 27% in 2026. The group plans to generate 16 to 17 billion Danish crowns in cash from 2024 to 2026, or between 2.1 and 2.3 billion euros. And 14 to 17 billion crowns will be returned to shareholders in the form of dividends or share buybacks, which would represent almost 20% of its market capitalization.
Still potential on the stock market?
Obviously there remains the question of its stock market potential, after the enormous rally of 2023. Royal Bank of Canada is very cautious, with an “underperformance” rating (equivalent to “sell”) and a price target of 720 crowns compared to 992 crowns currently. “Pandora performed well in a moderate consumption environment in 2023, despite fairly uneven trends between regions,” admits the Canadian bank.
“But if the macroeconomic backdrop weakens, we expect downward pressure on its trajectory. From there, we remain cautious given the strong share price performance in 2024 and a valuation less favorable in our opinion,” she adds.
Bank of America is much more optimistic, with a buy recommendation and a price target of 1,100 crowns, i.e. a potential of more than 10%.
For the American establishment, the Danish group is far too cheap on the stock market, even though it should improve its earnings per share by 18% per year over the period 2024-2026 and return nearly 20% of its capitalization to its shareholders. stock market by 2026.
“We believe that the current valuation does not reflect the ‘equity story’ (the story that a company tells the market to seduce it, Editor’s note) of Pandora, which continues to gain momentum, thanks to the launch of new collections, accessible prices and retail excellence. We believe that continued strong execution will allow a further revaluation of stock market multiples compared to current levels”, develops the bank.
Julien Marion – ©2024 BFM Bourse