Pandora’s share price has risen by +22% since the release of its Q1 2025 results on May 6th. This rally coincided with broader market optimism following the 90-day pause on U.S. tariffs and the signing of an initial trade agreement with China.

Today, our focus is not only on Pandora’s quarterly performance but also on assessing the potential impact of tariffs on its business and evaluating the company’s ability to navigate these external challenges effectively.

DISCLAIMER: This article is not a recommendation to buy or sell any financial instrument, the content is educational and my personal opinion. Each person has to make his own analysis. Any action or decision you take as a result of viewing this article is your sole responsibility.

Podcast Generated from the Write-up

To give you more options to enjoy the write-up I have used Google NotebookLM to generate a podcast of the present write-up that you can listen to while running, during your commute or whenever you like.

The AI-generated podcast does a great job summarizing the article and making the content more accessible. However, if you really want to get a detailed overview I strongly recommend you to read the full article.

Support Independent Analysis

This newsletter will always be FREE! If you’d like to help sustain it, consider buying me a coffee. With your contribution I will cover any annual costs I might incur and search for alternatives to enhance the experience.

Executive Summary

• Revenue Growth: Revenue grew by 7.5% year-over-year, a solid performance given the challenging comparison against Q1 2024's 18% sales growth, with strong contributions from the USA and Rest of Pandora.

• Gross Margin Expansion: 80.4% (+110bps YoY) was achieved as the transition to store ownership continued, countering silver and gold higher prices.

• Operating Margin Headwinds: Despite the reported 22.3% operating margin (+30bps YoY) FX headwinds and the uncertain impact of tariffs will be headwinds during the rest of the current year and probably also 2026.

• Product Portfolio Diversification Continues: Pandora Core segment approx 72% of sales vs approx 75% during 2024.

• Strong EPS growth: Net income surpassed DKK 1.1 billion, what represents a +14.1% YoY growth. EPS growth outpaced net income growth (+18.6% vs Q1 2024) supported by effective stock repurchases.

• Unchanged 2025 Outlook: Sales outlook for 2025 was maintained although EBIT margin was reduced by -50bps, “from around 24.5%” to “around 24.0%” due to FX headwinds.

Income Statement

Revenue

After reporting a +18% organic growth (+11% LFL growth) back in Q1 2024, Pandora managed to organically grow +7.5% in Q1 2025, reaching DKK 7,347 million in sales.

Like-for-like (LFL) sales grew strongly by 6% year-over-year, and together with a 4% contribution from network expansion, drove another quarter of double-digit revenue growth. However, as anticipated in the FY24 earnings report released in February, revenue growth was impacted by a 3% drag from the phasing of sell-in and other temporary factors. Management remains confident this impact will ease over the course of the year, as it primarily reflects timing of shipments to partners, along with ongoing softness in some multi-brand partner stores and certain calendar effects.

Gross margin improved by 110 basis points year-over-year, reaching 80.4% in Q1 2025. The increase was primarily driven by the impact of last year’s price adjustments and continued favorable channel mix, supported by a higher proportion of revenue from Pandora-owned stores. The latter was partially offset by strong online performance, which carries a lower gross margin due to last-mile freight costs partly absorbed by Pandora.

However, the most interesting part of the gross margin reporting was the disclosure of the gross margin credited by each product segment: “Fuel with more” has a gross margin of 83.9% compared to “Core” with a gross margin of 79.1%.

Geographical Revenue Distribution

Starting with Pandora’s largest market, in the first quarter of 2025, the US accelerated sequentially to 11% LFL. This strong result was driven by continued growth in traffic both into the stores and online.

The four separately disclosed European markets reported a combined LFL sales decline of -2% in Q1 2025. This sequential deceleration was primarily driven by the expected normalisation in Germany (+1% LFL) following an extraordinary performance last year, as well as ongoing operational challenges in Italy (-9% LFL). In contrast, both France (-6% LFL representing a slight sequential improvement) and the UK (+2% LFL) showed signs of improvement.

Outside Europe, Australia delivered LFL growth of +2% in Q1 2025.

China continued to face significant challenges, with LFL sales down -11% in the quarter. As part of the strategic optimisation of the store network, the company closed 10 concept stores in Q1. While China accounted for 9% of total sales in 2019, it now represents only around 1%. Although the decline is not currently material to the overall business, China remains a long-term strategic opportunity and potential future growth driver.

The Rest of Pandora segment reported robust LFL growth of +8% in Q1 2025. Growth remains broad-based, with several markets—including Spain, Canada, Turkey, Portugal, the Netherlands, and Chile—delivering double-digit LFL increases.

Product Revenue Distribution

The positive momentum remains evident in the among all product lines results, with LFL growth of 2% in the “Core” segment and a strong 12% LFL increase in the “Fuel for More” segment during Q1. Robust LFL growth was recorded across all collections outside the charms category, alongside a return to growth in the “Collabs” segment—limited-time charm collections launched through Pandora’s collaborations with select IP partners. According to management, the rebound in Collabs is attributed to a weak year compared to 2023, no strong partnership compared to 2023 Marvel & Disney collections, plus a well-received Princess Rings from Disney collection released in 2025.

Additionally, the lab-grown diamonds collection is on track to surpass DKK 400 million in sales.

Network Development & Performance

As shown in Figure 5, Pandora directly operates 2,797 points of sale, accounting for 41.7% of its global retail network. This indicates significant potential for continued integration of third-party stores into the owned network. According to the company, such integration is highly value-accretive, with owned stores achieving EBIT margins of 35–40% and payback periods of less than one year.

The superior performance of Pandora’s owned stores is further illustrated in Figure 6. While they comprise just over 40% of the total retail network (excluding the online channel, which grew +17% vs Q1 2024), these stores generated more than 60% of total sales last quarter.

Operating Income

Operating margin improved by +30 basis points compared to Q1 2024, bringing operating income for the period to DKK 1,641 million, an increase of +8.9% year-over-year. This operating leverage was primarily driven by strong control over administrative costs, which rose by just +3.5% YoY—well below the growth in sales.

In contrast, distribution and marketing expenses increased by +10% YoY, outpacing revenue growth by +250 basis points. It is also important to highlight that marketing expenses increased by +12% in constant exchange rate, representing 13.8% of the revenue. The company has mentioned multiple times that they are willing to outpace revenue growth through their marketing expenses to build brand desibility.

Net Income

Net income for the period reached DKK 1,101 million, reflecting a +14.1% year-over-year increase. Finance costs remained flat, while income tax expenses declined compared to the previous year, supported by a new tax agreement between Denmark and Australia for the 2022–2024 period. This agreement resulted in a one-off tax benefit of DKK 44 million. Adjusting for this non-recurring item, normalized net income grew by +7.9% YoY—slightly outpacing revenue growth by +40 basis points.

Share repurchases boosted EPS growth, reaching 14DKK/share, up +19% vs Q1 2024.

Balance Sheet

No major changes to comment on.

Cash Flow Statement

Capital allocation

1. CapEx & acquisitions

   Pandora's capital expenditures included DKK 240 million for the purchase of property, plant, and equipment (PPE), a decrease of 6% year-over-year. Excluding the purchase of intangibles, DKK 180 million was spent on acquisitions. This represents a substantial increase of 56.5% compared to the previous year and is only DKK 14 million less than the total expenditure on subsidiary acquisitions for the entire year of 2024. While construction of a 2^nd facility in Vietnam and the implementation of a new ERP system are still ongoing, these figures suggest that Pandora is strategically focusing on acquiring existing franchises in 2025 as a means to expand its point-of-sale network.

2. Working capital

   The company invested DKK 320 million in NWC during the quarter. Inventories increased by just +4% while Days Sales Outstanding (DSO) were reduced

3. Shares repurchase

   DKK 1,011 million were used to repurchase stock, with an additional DDK 2,989 million available for repurchases during the rest of the year. Moreover, 3 million shares were cancelled as approved during AGM 2025.

   Moreover, the company didn’t significantly accelerate the share buybacks during the market’s April dip. Due to the high-level of uncertainty that could have impacted Pandora I think it was a conservative approach that hindsight seems unjustified.

4. Dividends

   DKK 1,567 million were paid in dividends, +6.5% vs Q1 2024.

FCF Generation

In Q1 2025, Pandora's reported Operating Cash Flow (OCF) was negative at DKK -289 million, a significant change compared to the positive DKK 168 million in Q1 2024. This negative performance was primarily driven by substantially higher income taxes paid during the current quarter relative to the previous year.

As is typically the case for the first quarter, the company experienced cash burn due to seasonality factors such as working capital and payments timing, with Free Cash Flow (FCF) standing at DKK -834 million. This represents more than double the cash outflow seen in Q1 2024, when FCF was DKK -238 million.

Risks

Before directly jumping into the earnings call with management let’s provide an overview of the main two risks the company faces and its context coming into Q1 2025:

1. Raw materials prices

   Pandora is exposed to the commodity prices of silver and gold, raw materials it uses to manufacture its jewelry. The company phases raw materials headwinds as its 2026 EBIT targets were set with a silver price of 23.6$/oz. However, the current silver price will exceed 30$/oz. Pandora stopped hedging silver prices last year and implemented a cost saving program as well as a price increase to offset the commodities skyrocketing prices in order to meet 2026 EBIT targets.

   In early April 2025, Pandora took advantage of commodity market volatility to increase its hedging of silver exposure for the 2026 Profit & Loss (P&L). As a result, the company has now hedged approximately 70% of its projected silver and gold requirements impacting the 2026 P&L. The average hedged price for silver specifically, covering the 2026 P&L exposure, is around 31 USD per ounce.

   

   Figure 9: Pandora’s commodities hedging overview. Source: Q1 2025 report, page 36.

2. USA tariffs

   Pandora manufactures the majority of its jewelry in Thailand, while also building a second facility in Vietnam, and sources raw materials from China. Recent US trade policy announcements on the Liberation Day (2^nd of April 2025) introduced new potential tariffs on imports from these key locations. A 10% baseline tariff was established, alongside proposed higher "reciprocal" tariffs including 36% on goods from Thailand, 46% on goods from Vietnam, and an initial 34% on goods from China (up to 150% at some point).

   While these higher reciprocal tariffs were subject to a temporary 90-day pause for negotiation, their prospect presents a dual challenge for Pandora: the United States is not only its largest and most robustly growing market, but the company has also historically sourced products for its Latin American and Canadian markets through the USA.

Management Call & Guidance

Management Call

Firstly, let’s start with the answers and assessment the management provided regarding Italy’s market situation. Italy is Pandora’s third largest market (7.8% of sales) and it has stagnated since 2021. Their preliminary diagnosis is that they need to fix issues in three key areas: driving traffic, depth of assortment in the opening price points and driving cultural relevance.

He also emphasized that there is no issue with the distribution network in the country when asked about it:

Moreover, I really liked how Alexander Lacik highlighted the scale advantage Pandora has as the largest jewelry manufacturer in the world. The quote shows how it will take many many years for any jewelry competitor to scale to Pandora’s size even by using OEMs capacity on an asset light model.

2025 Outlook

Pandora's Q1 2025 performance exceeded expectations, with Like-for-Like (LFL) growth of +6% surpassing the guided 4-5% range in what is typically the company's weakest quarter. However, it is important to consider the calendar effect influencing this result, as the fiscal year commenced on December 30th, and Q1 2025 did not include an early Easter impact, unlike Q1 2024. Adding 5 extra trading days, that is +5.6% more trading days compared to Q1 2024, what would have entirely driven LFL growth in the last quarter.

Still, achieving approximately +1% LFL growth against the toughest comparison in the past two years (Q1 2024 saw +11% LFL sales growth, as shown in Figure 11) demonstrates strong execution in my view.

Looking ahead, I believe the negative scenario outlined in Figure 10 is quite likely. This scenario assumes a negative impact on revenue ranging from DKK 250 million to DKK 500 million, which would consequently reduce Pandora’s full-year revenue growth prospects to the 4-5% range, representing a significant decrease from previous expectations.

Furthermore, the EBIT margin guidance for the year was revised downwards by 50 basis points to "around 24%". This adjustment was made primarily due to the anticipated impact of the 90-day period tariffs and negative FX movements.

Closing Remarks

Overall, I think it was a quarter that met the expectations. 

On the one hand, Pandora managed to improve execution in some of its mature markets return to the growth trend some of them like Australia and UK while solid execution is continuing in the USA thanks to the lack of penetration yet.

Moreover, the company is successfully diversifying from bracelets and charms by successfully introducing new collections that compliment their assortment. Network expansion also is developing as expected while the company effectively creates shareholder value by repurchasing its own stock with the excess cash not invested in the business.

Tariffs can significantly impact a company’s growth prospects and profitability. In the case of Pandora, the imposition of tariffs could weigh on short-term margins. However, I believe that over the long term, Pandora is well-positioned to weather these challenges and even gain market share. With gross margins exceeding 80%, the company has a strong cushion compared to competitors. This allows it to absorb some or all of the tariff-related costs without necessarily passing them on to customers, preserving its value proposition.

Moreover, Pandora’s broad entry-level price offerings make it particularly resilient in the face of a potential global economic slowdown. By offering affordable options, the brand can continue attracting budget-conscious consumers. Additionally, Pandora has the flexibility to redirect inventory or expand its presence into new markets it highlighted in CMD23—specifically India, South Korea, and Japan. These regions present promising long-term growth opportunities, especially as the company seeks to diversify revenue sources geographically.

That said, this expansion effort has been one of the more disappointing aspects of Pandora’s recent execution. Since they have shared the intentions of expading into those countries in November 2023, there has been little visible progress or communication regarding its entry into these key Asian markets. Hopefully, the pressure from U.S. tariffs will prompt Pandora to accelerate these diversification efforts. I look forward to updates on this front and hope to see tangible signs of execution soon.

Hope you enjoyed this earning review of Pandora. So please leave a comment, give it a like and share!

If you would like to receive new posts and support this type of content… do not hesitate, subscribe!