Pandora A/S Ord

Good morning, everyone, and welcome to the conference call for Pandora's Q1 2026 results. I'm Bilal Aziz from the Investor Relations team and I'm joined here by our CEO Berta de Pablos Barbier, CFO Anders Boyer and the rest of the IR team. As usual there will be a Q&A session at the end of the call. If you could kindly limit yourself to two questions at a time that would be great. I also would like to draw your attention that at 12 o'clock CET today there will be a national Danish emergency alarm system test so you might hear some background noise but hopefully that doesn't interfere. Please pay notice to the disclaimer on slide two and turn to slide three. I will now turn over to Berta.

Thank you, Bilal, and welcome, everyone. I am going to first start with a brief summary of our quarter one performance before turning to an update on the strategic initiatives we outlined back in February on how we were going to re-energize growth. So let's start. In quarter one, the quarter played out broadly as expected. we deliver 0% life-for-life growth and 2% organic growth. We deliver this in a challenging consumer environment, and yet we are clear that there is more we can do to drive a stronger life-for-life growth, and I will come back to that. On profitability, EBIT margin remains solid. This continues to reflect our high gross margins, where efficiency gains continue to offset most external headwinds. combined, of course, with tight control of our OPEX. Finally, returns remain high at close to 40% despite the external environment. So please, let's move to the next slide. Turning to guidance, we are maintaining both our top line and EBIT margin guidance. For the top line, we continue to target organic growth of minus one to 2% with light for light growth of minus three to 0% and network expansion of around 2%. We have started the year toward the upper end of this range, which is a solid start. That said, it is still early in the year, and the external environment remains uncertain. Since we last reported, the geopolitical backdrop has become more volatile, and the implications for consumer demand are not yet clear. Given this, We believe it is appropriate to maintain our guidance at this stage. At the same time, we do see the need to step up execution across a few areas. The benefits of this will progressively build over time. On EBIT margin, we continue to target 21 to 22%. This implies a broadly stable margin versus 2025, when adjusting for external headwinds, which reflects continued investment in the business while still maintaining a high level of profitability. In terms of current trading, we are tracking around flat so far, flat life or life growth in this quarter. So let's move this to the next slide. Now, let me just do a very brief recap of what we covered back in February, and you probably recognize this slide. I am not going to go into detail today, but it's important just to set the basis. Our vision is to be the most desirable accessible jewelry brand. We do see significant headroom to deliver sustainable long-term growth in Pandora. This translates into three clear strategic shifts across design, marketing, and go-to-market, alongside progress on the new materials. Overall, the priorities are very clear for us. Accelerate life for life growth while protecting profitability. So let me just show how we are starting to deliver again this, and we'll see that on the next slide, please. This chart is as well something that you will recognize from the full year results. and it's showing how we are evolving our growth engine. The three areas that I mentioned, design, brand, and market, and we are already starting to put this in motion. We are not standing still. On design, the priority is to re-energize our collections. Product development takes, of course, time, but it's a clear focus, and we are accelerating where possible. I have a couple of examples later on. We have appointed a new chief product officer, Philippa Newman. She is reporting directly to me and elevating design is a central driver and a clear priority for her. Later today, I will introduce a new program, Pandora Wonders, that is designed to step change creativity and the perception of our craftsmanship. On brand, we have already started shifting towards activation-led engagements. with earned media as a core KPI. So, investment is already being reallocated towards channels and activations that are focused on driving cultural impact and earned reach. Last but not least, on markets we are moving towards a model that is more calibrated by market maturity, supported by stronger local capabilities. Just to name one example, in Italy, a key market for us, we have already started to refresh some visual merchandising, update layouts on our store to better showcase our collection and some new introduction plan. We are confident this is how we will drive growth going forward. So let's go please to the next slide. This is again, you will recognize this is the key is starting with design. Remember that I mentioned last time that when you look at the left-hand side, which is where we operate today, a large share of our business sits within a relative narrow aesthetic space in the market. It is what we are calling playful, where our main, our core sits, especially our moments collection. So, this is where the portfolio is most mature and where our design effort has been focusing on. But growth. is coming from elsewhere. Underrepresented aesthetics, while smaller for Pandora today, are big in the market and thus deliver a disproportionate share of incremental growth when we invest behind them. The direction is very clear. First, we need to refresh the core with more distinctive design in our largest business. Second, we build depth in underrepresented aesthetics where the growth opportunity is higher. We have already started, we are already seeing early signs. Talisman that was launched last year continues to drive growth. And the Bridgerton Limited Edition is another example of something that we introduced in quarter one. Now, the opportunity is to scale this more systematically across the portfolio as part of our Evolve growth model. We are accelerating this work with impact building progressively from 2026 and more meaningful from 2027. Can we please go to the next slide? So building on that, we are starting, as I was saying, to bring this to life. As we have outlined, we are increasing distinctiveness across our collection. This is a new program that will be introduced in a couple of weeks. We call it Pandora Wonders and it's a key part of that. Pandora Wonders is a multi-year platform to elevate desirability and drive demand through a step change in creative expression. So each year, we will partner with a leading creative voice to reinterpret the materials we work with and how we craft them through limited edition capsules. This is intended to drive excitement, traffic, and reinforce our growth model of distinctive newness and earned media. We will start with Act 1, which will be a playful reinterpretation of the organic pearl. It will be brought to life through a signature artisanal technique that is the pearl micro-piercing. Now, we are building this platform over time, so you will see more coming every year. You will hear more as we do, and as you may notice, we are not focusing on silver, but bringing a new material to Pandora that we are showcasing. A second piece of the news today is that we are adding carbon footprint labeling to our lab-grown diamonds. This means that consumers will be able to see the climate impact of every Pandora diamond and compare that with a mine diamond. And the CO2 emissions of our diamonds are 90% lower than a mine diamond. So Pandora is about being accessible. And being accessible is also about being transparent. We do think that this will reshape how the environmentally conscious consumers will be choosing within the category. And as the leader, we have to be present providing the facts. We are actually presenting this today as we speak at the Copenhagen Fashion Summit, along with one of our ambassadors, Pamela Anderson. And if you want more information, everything is now on our website if you are interested. Now, let's move to the next slide, please. I mentioned earlier that my second priority is clearly to protect our profitability. You know that a key lever here is our response to rising silver prices. In February, we introduced platinum-plated jewelry on our proprietary Evershine alloy. As you know, the alloy has been optimized for platinum plating, delivering a strong durability, including tarnish and water resistance, as well as being hypoallergenic. So for consumers, as I mentioned before, This brings platinum, which is a precious metal, into a more accessible format, which improves everyday use. Now, this launch was prepared over the last year, 2025, with extensive consumer testing and validation that confirmed the strong acceptance of platinum plating within the white metals. So later this year, we have selected designs that will be introduced, and I remind everyone that the broader rollout will happen from 2027. We will be the first jewelry brand to bring platinum plated jewelry to scale. Now it's important to know that plating is not new to Pandora. Today over a third of our sales already come from outside silver. So plating today is pretty much a quarter today of our sales. So we've been operating plating at a scale and high quality already for several years. This is a capability that we already run across the business. This is all I was planning to detail in terms of the strategic update. So I think it's good time now to turn to the quarter one performances. For quarter one, we delivered flat life-for-life. You can see the growth speed between the core and the fuel with more here. In the core, we delivered minus 1% life-for-life growth. This was supported by good growth in our distinctive design, Talisman, and the limited edition Bridgetons. But of course, this decline also underpins the need to refresh the rest of the portfolio, which is what we are working on and we have already identified. For Fuel with More, we deliver 1% growth, which was supported by the new collections of Pandora Essence and newness in Timeless. Let's move to the next slide. As I mentioned earlier, as part of our strategy, in addition to design, is how we bring the brands to market. We are becoming more deliberate in how we use cultural activations. Bridgeton was only one example. But you see that in Quarter 1, we partnered with Cat's Eye to support performance in Minis, the Minis collection. We activated new brand ambassadors across selected markets. As going forward, earned media impact will be a key metric for us. And these are just early examples about how we are applying this approach. The focus now is to scale this more systematically across the group, combined with a strong product execution. Now let's go to the next slide. Here you can see how we've been executing Bridgerton. It's a good example of what we mean by cultural relevant collaboration. It's not just a partnership. But it's about being fully integrated into this cultural moment. It's about using talent from the show in our campaigns. It's about integrating our products into the show. And it's working in close collaboration with Netflix for the release day of the show. This is why this has resonated globally and actually performed ahead of plan. The global Bridgestone activation ran across more than eight markets, dropped 6% increase in earned media value through PR and influencers, and by the way, 11% on the key titles that really have a strong visibility. So, importantly, we saw how all this activation translated into demand across the broader assortment, both in a store and online. Very important as well, we over indexed with Gen C, and we also saw higher cross-shopping, So a clear halo effect that actually Timeless benefited from. So this approach, of course, will not be a one-off. We are now scaling the model across markets and collections, leveraging our design capabilities and making sure that we benefit from our vertically integrated business model to execute consistently at a scale. And you will see every quarter more plans on this. Let's go now to the next slide, please. Now, of course, being in retail, we can also need to touch on the in-store experience. We are also working extensively to elevate this. We are including piloting new formats with an updated visual merchandising. We are working on bringing more curated and clarity of our collections, a clear aesthetic segmentation that is designed to drive sales beyond charms and making sure that the new customers that come into our store can see what Pandora is all about. Now we are testing in Italy between other markets and the plan is to scale that more broadly over time. In parallel, we are rolling out our digital screens across store facades to better showcase our collection and to strengthen our storytelling with the objectives of drive traffic into our stores. We also have plans to open flagship stores in Barcelona and in Milan later this year. This will showcase the full breadth of the Pandora brand. It will elevate storytelling and it will set a new benchmark for the customer experience. Let's move to the next slide, please. And I would like to finish before I pass it to Anders on our regional performance in quarter one, which was, as you can see, somehow mixed. If we start with the EMEA region, our largest region, we deliver a 2% life-or-life growth, broadly stable sequentially. In Spain, Poland and Portugal continued to perform well, but this was more than offset by weaker performance in Italy and the UK. And you can see, of course, that the performance was minus 2% life-or-life. In Italy, we have now implemented a new go-to-market approach, This includes shifting marketing investments away from traditional video towards influencer, PR, and more locally relevant activation. In North America, similar to EMEA, growth slowed down to minus 2% and performance was impacted by lower store traffic, which really reflect a softer consumer environment. The brand remains healthy. And we will continue to drive traffic through targeted brand activations. I just touched on some of them before. Now, in Latin America, the life of our growth accelerated to 6%. There, the price repositioning was introduced early this year. And it's now in place. We also drastically reduced promotion. And all this is driving positive results. We are, of course, supporting this. with a strong local activation, influence, and engagement in line with our evolved growth model. And finally, in Asia, we delivered a strong growth of 12%. Our rollout in Japan continues to progress very well. Yes, we do remain in the early stages of building the brand awareness and reach there through increased marketing engagement, but nevertheless, it's an encouraging start. And with that, I'm very happy to pass it over to Anders.

Thank you very much, Berta. Good morning, everyone. Please turn to slide 19. Berta has already commented on the top line KPIs. I'll just focus on a couple of the other metrics. And the key messages from us today is that we continued to manage the quite significant external headwinds in an effective way here in the first quarter and our core P&L balance sheet and cash metrics remained healthy. In Q1, our gross margin ended just below 80% at 79.5 and thereby it was down only 90 basis points versus last year driven by the external headwinds of actually almost 400 basis points from the tariffs, foreign exchange and the higher commodity prices. And this cross margin performance was held by good cost efficiencies in our vertically integrated value chain, some promo detoxing as well as some cost phasing as well. As you can see in the table, we've shown two KPIs for working capital, including and excluding commodity hedging. And the 6.5% net working capital includes some significant unrealized commodity hedging gains, just like in the last quarter. So to understand the performance it's better to look at the KPI excluding commodity hedging and here you can see that working capital is around 3.5% and roughly the same as last year. Speaking about working capital, we would like to add some words to the inventory development during 2026. As you probably recall from back at the full year announcement in February, we did not initiate a share buyback program because of the increase in commodity prices. And the commodity prices impact the business in two ways. It will impact earnings, mainly next year in 2027, until the transition to platinum plated is completed. And it will also impact inventories and thereby cash flows, and that happens already this year, as you probably know. At the current spot prices, inventories by the end of 26 will increase by around 2 billion Danish kroner year over year due to the commodity prices. On top hereof, we need to hold more inventory during the transition to platinum plated jewelry and we are making a few selected investments in inventory to improve stock availability. So, all in all, inventories by the end of this year, in the 26th, will increase by up to 3 billion kroner versus last year. Now, it's important to know that this is mostly a temporary impact during the transition. As we complete the transition to platinum plated jewelry, inventories will of course come down again. The exact sequence and exact timing is still in the making, but we wanted to make sure that you have this overall storyline. Next slide, please. Here, on slide 20, we break down revenue growth in the quarter. Bert has already covered the key elements on light for light, but on the network expansion, And that's the purple building block sitting at 3% in the quarter. That continues to track well and the contribution in the quarters was largely due to the revenue from store openings last year ramping up quite well. Next slide please. On the EBIT margin our performance was solid, down only around 100 basis points. year over year, despite over 400 basis points of external headwinds, as you can see in this bridge. As some of you have probably noticed, we did end a bit higher on the EBIT margin than our own expectations for the first quarter. And we did see a combined cross-facing benefit of around 200 basis points in total in the quarter. That's straight across a couple of P&L lines. And it's partly related to lower re-mail cost that sits in the cost of goods sold and to lower marketing which ended 140 basis points below last year as a percent of revenue. But this will be neutral for the full year of 2026. We are keeping a tight control on our cost in this subdued revenue environment, and our OPEX ratio was basically flat year over year on a constant currency basis. We've been executing on the Silverstone cost program, and it's good to see those savings coming through to help the bottom line. And then please go to slide 23. As Berta already said, we've left our organic growth guidance unchanged. On a like-for-like basis, we started Q1 at 0% like-for-like, and April has been roughly in line with that. So clearly we are trading at the higher end of the like-for-like guidance range of between 0% and minus 3%. So a couple of comments to why we leave the guidance unchanged. First of all, it is obviously early on in the year Secondly, the consumer environment remains weak and the border macro risk has not become lower since we initially guided back in February. On the contrary, you're all aware of the geopolitical backdrop and that obviously increases uncertainty going forward for consumers. We don't know how this will play out, so you should read our guidance range to account for some of this macro uncertainty. Thirdly, we are indeed working on quite a few initiatives to drive a step change in light for light growth. We've seen some positive signs in Latin America and in Asia already, and we're working on measures in other important markets as well. But these initiatives will take time to feed through into a tangible improvement in like for like. And as we said back in February, 2026 is very much a transition year. Next slide, please. On the EBIT margin guidance, we've left things unchanged at 21 to 22% margin. That's a few moving pieces within that guidance, but it all nets out to no overall change. But let me just quickly comment on the underlying moving pieces. First of all, on the tariffs, the headwind is a bit lower due to the 150-day pause at a 10% tariff rate. After that 150-day pause, we assume that tariffs move back to the original 19% rate on Thailand. Secondly, we have lowered the upper end of the range for the headwind from commodities by 50 basis points to now sit between 1.5% and 2% headwind. And that's because the hedge ratio for this year is now between 95% and 100% versus previously between 90% and 100%. And finally, you will also note that we have accounted for some one-off costs amounting to between 50 and 100 basis points related to the transition to platinum-plated curing. And that includes, among others, additional resources that we need to drive this forward at high speed. Some inventory write-downs, some tech investments, etc. And that's one more thing that we wanted to make sure you are aware of in terms of the EBIT margin. We mentioned back in the full year announcement that the guided decline in the EBIT this year would be most visible in Q1 and then gradually improve sequentially. But due to this cost-facing that I mentioned earlier on, which helped the first quarter, this has changed things slightly, and we now expect the year-over-year decline in the EBIT margin to be most visible in the second and third quarter, and then be much less material when we get into Q4. Next slide, please. Now we will transition a significant part of the business from silver to platinum plated in the years to come. And we thought it would be good to help you visualize this transition a little bit better. The chart on the right on this slide is meant to help you visualize the transition to platinum plated. and the related reduction of our exposure to silver. And just a few comments on this. As a starting point and in line with what we said previously, we will transition 80% of the silver revenue to platinum plated jewelry. So that's 80% of the 65% number that was shown in the left column on the slide here. Then in 2027, we will transition roughly half of that 80%, and that's the red part of the middle column. And then in 2028, we will transition the remaining part of that 80% from silver to platinum plated. The endgame after the transition to platinum plated will be that our P&L and margin exposure to commodity prices will reduce significantly. And that's because the exposure to silver will decrease far more than the exposure to platinum will increase. This lower commodity exposure will be partly offset by higher labour costs as it requires more crafting time to work with plating. but labor cost is a more stable and predictable cost element than commodities. Next slide, please. So let's see what this transition means for Pandora's profitability. And some of you will remember this bridge from back in February. We are on track. There's no change to the message, so I won't spend too much time on this slide. But we want to emphasize once again that with this transition, Pandora will remain a structural high margin company. And you can see that on the slide to the far right, where we show that we expect to get to more than 21% EBIT margin in the midterm. So in essence, this means that there will be no fundamental changes to our financial model. As you saw in the previous slide, the transition to platinum as such will probably be finalized during 2028. But before we get production scaled, optimized and fine-tuned to the level where we will hit the above 21% EBIT margin, we need a little bit more time. For 2027 specifically, we continue to target an EBIT margin of at least 14% before one-off costs and at least 12% including those one-offs. And we know that some of you have already noticed that the bridge here is based on a silver price of $82, which is where the prices were when we initially issued it back in February. The spot rate this morning is a little bit lower, but it doesn't change the overall messaging. Because remember that during this transition, our sensitivity to silver in 27 will drop to around 14 basis points of EBIT margin for every one US dollar move on silver prices. down from 30 basis points just a few years back. And that sensitivity drops even further to about six basis points after the transition. And on that note, I will hand back over to Greta.

Thanks, Anders. So to conclude this call, let me just highlight a few key points. We have started the year in line with expectations. That is not to say that life-or-life growth is where we want it to be. but we are very clear on the actions required and we are moving decisively. This includes a step change in how we approach design, marketing and go-to-market execution in selected markets. We are seeing encouraging signs in some areas and we are scaling these actions more broadly. Importantly, our brand remains strong. which give us really confidence in our ability to deliver on these actions and build sustainable growth. At the same time, we continue to demonstrate a strong cost discipline of setting a significant part of the external headwinds. As a result, profitability remains solid. We are also taking actions to protect profitability over the long term, including the rollout of our platinum-plated offerings. Looking ahead, we continue to target mid-term EBIT margins, about 21%, as Anders was explaining, while generating a strong free cash flow. So with that, I just want to thank you for your attention, and we can open now to the Q&A.

Thank you. If you wish to ask a question, please press 5-star on your telephone keypad. To withdraw your question, you may do so by pressing 5-star again. The first question is from the line of Chris Juan from UBS. Please go ahead. Your line will now be unmuted.

Hello. Hi. It's Chris from UBS. Thanks for taking my questions. I'll do two. The first one on regional trends, if you would be able to share some regional color within that slap pitch like-to-like in Q2 to date in terms of which markets are performing, which markets are relatively soft. And connected to that, could you please elaborate on the markets that accelerated in Q1 within APAC in Latin America, or if we look at Reset and Draw, which was impressively up 7% in Q1. I'm just trying to understand a little bit more on the exact markets that have been driving that acceleration sequentially. My second one on margins. So, Anders, you clarified that the margins deteriorate, expecting a more meaningful year-over-year decline. at either level in Q2 and Q3. I'm just wondering if you can help us a little bit more on quantification of how we put that 200 bits cost-pricing bucket of Q1, how do we put it into Q2 and Q3? Thank you very much.

If I take the first one, Chris, then Hannah with the first one, then Anders in that order. We won't get into too much detail on April, but for now you can just assume the trends are broadly consistent with what we saw in Q1. So, yeah, Latin America, Asia-Pacific still doing reasonably okay. and offset slightly by some weakness elsewhere. So more of the same, really, Chris. And on that note, I'll hand over to Berta on Latin America and Asia Pacific, specifically in Q1. And what drove that?

Yeah, in Q1, pretty much every market in Latin America was growing. So just on a few, we had Argentina, Brazil, Colombia all growing in Q1. And Mexico was about sluggish to one. So good performance across all the region. In Asia, the biggest contributor was Japan, where we got a big growth, a life-or-life of 220. But we also saw growth in Taiwan, Hong Kong, and Singapore as well. So these are the main countries that we grew in Asia. And with China, by the way, delivering a slight growth as well in quarter one.

And Chris, to your question about the even margin facing, it will be Q2 and Q3, where you will see all of that 200 basis points coming back, and more so in the third quarter than in the second quarter. That's broadly the storyline. And this, yeah, I'll leave it at that.

Thank you. I'm sorry if I can just follow up on that Latin American comment. I think the presentation mentioned a bit of price and positioning. So, are you able to help me a little bit on how much of that like-to-like strength is coming from price and how much is coming from volumes actually?

Yes. One of the things that we have done in the Latin region is that Latin America until quarter one this year, it was running in a different price corridor. So, the prices in Latin America, were in average 50% higher than the rest of the world. And this strategy was a high-low, so basically high prices and then a lot of promotions. So what we have done is actually bring back Latin America in line with the global price corridor. So a consumer can compare similarly in the U.S. or European prices. That's what they are getting in Latin. And at the same time, we are reducing the promotions. So what we see is really that this is impacting the main driver of the 6%. Just for information, I don't know if you remember, we talked about it, I think, in the quarter four call. We did this after having run an extensive test in Colombia. So seeing increasing Colombian quarter one after more than six months running this strategy, it is definitely delivering the growth that we are announcing now on Life for Life.

Okay. Thank you very much.

The next question is from the line of Lars Toppen from D&B Carnegie. Please go ahead. Your line will now be unmuted.

Yes, I will. Yes, I will also stick to two questions for now. So, Bertil, you highlight all the strategic initiatives you're taking, but also highlight that 2026 is a transition year, but that your strategic initiatives should lead to stronger, like for light growth, and be full effect during 2027. And I'm not asking for a 2027 guidance, but just as you have very specific targets for long-term profitability, can you elaborate a bit on what is the success criteria for this exercise? Should, like for like, return to what you say, the old CMT targets of mid-single digits, or what would you be satisfied with, and when should we begin to see this? And then a question, number two, goes to platinum plating, which I understand initially you planned to test in Holland, and then you decided not to do that anyway. So I just wonder if you can put some comments on that, and maybe in connection with that, I also comment on what Anders said, that there had been some write-downs. Was that on platinum plating? Thank you.

Okay, so thank you, Lars. Sorry for interrupting you before. You did have two questions. Thank you. Yes, so on the long term, this is my ambition is to bring Pandora to the success of Pandora, which is the new single digit growth. And this is what we are all working towards. And as you rightly say, in 2026, we are activating as much as we can. But design and product development, which is the key one, is taking us a little bit more time. So that's it. On the platinum plated, the plants are still to test. In Holland, we did have a delay for commercial reasons. One of the things that is key when we introduce this to the consumers, and that came very clearly on all the validation that we did, is that water resistance, as well as, you know, the targeting system, the fact that they can take it to the seawater, it was critical. And then we did have a delay on one of the certifications for the water resistance. Therefore, we are just moving to the next cycle. So everything is still on plan to roll out this year, still in Holland and other markets. And the transition in 2027 is still on plan and on time.

Very clear. That's a fair question on that, Lars. The inventory write-down that sits in this one-off cost back pocket is not on the platinum-plated products, it's on the expected re-melt of silver products happening next year. The way that it works from an IFRS perspective is that even though the transition... will only start happening next year, so the physical re-melt, so to speak, of silver jewellery will happen in 27. Then, so once the decision has been made, then the cost will have to be taken already in 2026. So that inventory write-down is related to the expected rebuild of silver products next year as part of the overall transition.

And how much does it hurt earnings this year?

It's included in this 50 to 100 basis point overall. It is one of the reasons that we have arranged is that there's some uncertainty exactly how much is the inventory write-down going to be. There will be some, there's also some levers to minimize it and avoid doing too much. But of course, when you transition over a couple of years, 50% of your revenue from a product being produced in one way to another, there will be some right doubt, but exactly how much we can reduce it is still to be seen. So that's why we will keep a range on that one-off cost.

Thank you so much. I have more questions, but I'll jump back into the queue. Thank you.

The next question is from the line of from Bank of America. Please go ahead. Your line will now be unmuted.

Hi. Can you hear me? This is from Bank of America, and I have two questions. First one, you saw a meaningful acceleration in Asia for revenue momentum. And while you mentioned changing the go-to-market strategy in Latin America, what has changed in APAC for you? Is it better underlying macro, or are you also changing something in particular to really accelerate growth there? What are you doing differently in Asia compared to history when this was really a more challenging part of the business? And my second question would be on... main European markets, when do you think we can expect an inflection there, considering also some strategic changes that you have been implementing across those geographies? Thank you so much.

Yeah, thank you. I think I'll take both questions. Thank you. On Asia, we are basically focusing on it. And let me just elaborate on that. On the Southeast Asia, we operate mainly through distributors. And we basically now open a new office in Singapore. And we have dedicated teams working with the distributors to drive growth. Not long ago, we just had a distributor summit to bring them back all the growth plans that they could get and all the tools for Pandora. So focusing on those distributors. On Japan, it's an own and operated market. And there we are implementing our marketing model of reach and relevance. We have increased marketing budgets to continue to increase the awareness of the brand and we are working as well on with local cultural relevance activation in Japan. So very simply implementing what we are saying that we were going to do and doing that in Japan either in owner operated but also focusing on the distributor markets. That's for Asia. And your second question on the European market, well, it is basically the whole diagnosis that I presented in quarter four, and I have briefly reminded everyone. While it's true that we are starting to do certain things into 2026, we cannot really activate the biggest pillar, which is new product development in our core. The plans for that will start from 2027. Rest assured, I'm doing everything I can with the teams in Pandora to see we can accelerate something for quarter four. But we need basically the entire program, which is product and marketing, to be able to start delivering. So 2026, we expect still to be a transition year in Europe. markets of Europe, of course. We have still Spain and Poland and Turkey and all that growing at high levels, but especially on the mature markets like UK and Italy.

Thank you very much.

The next question is from Andrei Tormann from Danske Bank. Please go ahead. Your line will now be unmuted.

Yes, thank you for taking my questions.

I just have two. First of all, on lab-grown diamonds, I wonder if you can elaborate a bit on the second quarter of quite a bit of decline in that category. What are you seeing there, most particularly in the U.S., I guess? And then second, on the re-melt, I wonder if you can talk a bit about why this won't be a tailwind the rest of the year as well. Thank you.

Yes. Should I start on the diamond? Okay. So on diamonds, I think you were talking about our performance or the market, our performance, right? Yes. So what we feel on the lab-grown diamonds is that we are actually sharpening the strategy. So we have a part of our lab-grown diamonds where they're high carat, so the one carat, the two carat at high prices for the consumer. There are not many that come to Pandora to spend $1,000 to $1,500 and above. So that part of the business we are slowing down and is a big chunk of the decline. However, what we are investing now is on what we call the micro-fine diamonds, so where the sweetest spot of pricing is between $250 on rings and a small pendant. That part is growing, and this is the part of the business that we'll be focusing on from now on. Really, and if you look at that price between the 200 and 500, actually the light for light is positive in both in value and units, whereas it's declining on the above 1,000, and this is, of course, now carrying the entire business down.

And then, Andrea, on the question about re-mail write-down for the rest of the year, it's actually a good question, well spotted. When we made the guidance originally three months back, then in the budget, in the way that we did the guidance, the re-mail cost for the year was based on a silver spot price of $82. That was the spot price. Back then, now it's 75 based on the assumption in the updated guidance as of today. So that gives a little bit of more headwind compared to when we made the guidance three months back. So that's why that re-meld upside basically nets out for the remaining part of the year compared to the original assumption. Thank you. The logic works the other way around, right? When we speak about rebuild, then a lower silver price gives a little bit more headwind.

See you.

Thank you.

The next question is from the line of Mr. Chebyshev from D&B Paribas. Please go ahead. Your line will now be unmuted.

Yes, thank you very much for taking my question. It's something from the BNP. I have just two, please. The first one is on the gross margin phasing. Do you expect any disruption in Thailand and Vietnam facilities stemming from the conflict? And will it be fair to assume gross margin at the 100 dips, 1 up, so 78.5% to be rather similar in the next three quarters? Is the plus and minus between... between the components. My second question is on space. Even the performance that you are delivering versus guidance, but also it was the case last year. It seems that your new openings over the past 12 months are performing quite well. So just curious to know if going forward, as space into the light for life, would you say that the light for life will be even more supported by those and if there is anything to keep in mind on this?

Thank you. Thanks for those questions, Anthony. On the impact on the cross market, if I understood the question correctly, The way to think about it is that of course we do spend some energy. We have energy cost in the P&L. We do have some freight cost in the P&L. But in the big scheme of things, it's not a lot of money. So there will be a little bit higher cost, but not something that has been big enough for us. to talk about it as part of our guidance and in the cross-margin. We don't have any critical suppliers in the Middle East, so from that perspective we're also okay as well. In general, I think it's also maybe worth noting that the electricity supply in Thailand as a country It's not that dependent on the Middle East. If I understand it correctly, it's just about 10% of energy or electricity in Thailand that comes from the Middle East. So, we're not that exposed apart from fuel through the consumer behavior, obviously, and the macro. On the question about the good performance on the stores that we have opened, I think the way to think about it is that, as you know, during the first 12 months of a new store being opened, it counts in organic growth only, not like to like. But now we're just getting a bigger base to start from to calculate like for like once the stores have been open for more than 12 months. So as a like for like contributor, that's not a factor.

The next question is from the line of Grace Morley from Morgan Stanley. Please go ahead. Your line will now be unmuted.

and the slowing you've seen in recent quarters in the U.S., do you attribute that slowing fully to macro and what we're hearing in terms of the K economy? Or have you also identified any sort of Pandora-specific factors that are also playing into that weakness into the U.S. and any actions that can be taken to help drive improved trends in the U.S. outside of relying on improved macro? And then just a follow-up on the implications from the Middle East. I appreciate the situation is changing very quickly, and you've spoken through the supply chain considerations, but could you just also comment on whether you've seen any knock-on impact from the recent developments on consumer sentiment in any of the European markets in the last couple of months? Thank you.

Yes, so on the U.S., yes, we do see the impact of the macro. and the K-shaped economy as you were referring to. What we see is that the consumer sentiment is disproportionately degrading with the middle and the lower income. As a reminder, Pandora over-indexed on middle income. So, of course, this macro is not helping us. What we see is a decline in traffic fundamentally. A conversion and average basket and all that remains pretty much stable, but what we are really seeing the impact is on the traffic. But again, we are not just standing still. These are the things that we cannot control, and that's why we continue to invest in the U.S. That are the plans as well for this year and continue to bring excitement and marketing and product, et cetera. The second question was on... Yes, and again, how much of that is coming because of the Middle East and how much it's impacting? I cannot say. What I can say is that It was already declining in quarter four in the U.S., and it continues to deteriorate. Of course, the situation on our consumer daily life with high oil prices, all that is definitely having an impact. The amount of disposable income that they may have for discretionary categories may be impacted. How much, I cannot tell you. In the Europe, what we are seeing is that it's been low. We haven't seen a major deterioration in quarter one. It's not improving. It's not going down, but it's still a stable low, especially on the market that we're having some trouble like UK, et cetera. Okay, very helpful. Thank you.

The next question is from the line of William Mutt from Bernstein. Please go ahead. Your line will now be unmuted.

Hi, good morning. The first question is just on pricing. Could you just comment on how much pricing you've got through in quarter one? And then just interested in EMEA specifically, obviously on the two-year stack, it's a bit of a slowdown there in the like-to-like. How much pricing have you put through in EMEA? And do you think the elasticity there specifically is still around one, or do you think you've seen a deterioration in the elasticity? Thank you.

On the first question, William, on pricing, year of ENQ1 is to the tune of 4% as a global average number. It's not new. Bilal is just clarifying. It's the year-over-year numbers. It's not the Q1 action. We actually didn't change pricing during the first quarter. But year-over-year, based on the actions that we've done prior 12 months, it's a 4% ASP uplift. And thereby with a 0% like-for-like in the quarter, then units are down equivalently.

Understood, thank you. Any comments specifically on the mayor and the elasticity or anything to say?

Yeah, it's broadly in line with the expectations we have, Will, so it's around one, the elasticity in the mayor as well. So no change at all in that.

Understood, thank you.

The next question is from the line of Thomas Chopin from Citi. Please go ahead, your line will now be unmuted.

Good morning, everyone.

My first question on tariffs, Anders, perhaps. Can you indicate the status of your tariff fund with the U.S. administration? I think you talked about this earlier this year. What is the amount that you claimed, and is any of that part of your margin guidance? Secondly, on your 2027 margin guidance, have you started hedging silver, and if so, at what price? And just a follow-up for Bertha on North America, please, and the LSL turning negative. Come back to the new pricing strategy in the U.S. and how the consumer is responding. And if you're not touching the entry price points, is it why perhaps there is a bigger gap now between fuel with more which I think was stable, and Core, where you have a lot of chance, I think, where prices are not touched. I think the GM gap between the two has widened in the first quarter. Thank you.

Thanks so much. I'll start out with the Martin questions. On the tariffs, the gross tariffs, amount of tariffs that we paid under the IEPA scheme is just above 70 million US dollars, 70 million US dollars. And in our guidance, we have not assumed that any of that will come back. So if that should happen, then that would be an upside to the guidance whenever that might happen one shiny day. The only upside on tariffs that we have built in is the temporary lower tariffs level during this 150 days pause that runs until I think it's early July, mid-July. On the silver hedging, you're right that now will be a little bit of additional hedging that we've done since we met last. That is some of the P&L for 2027 that is hedged. And if you dig into the bottom of the company announcement, you can see that the first quarter of 2020, The P&L is hedged at a blended rate of 46 USD. So if you took that specifically into the 27 margin guidance, then that would translate into 70-80 basis points of EBIT margin upside for next year. That's not built into the slide in the investor.

presentation yet but as we're not specifically guiding for next year but on an isolated basis 70-80 basis point of upside for next year locked in yes I think on the gross margin of fuel with more is basically driven by the growth in timeless so timeless is today 80% of fuel with more so because timeless has been growing and then the gross margin of fuel with more is growing it's as simple as that

Thank you.

The next question is from the line of from SEB. Please go ahead. Your line will now be unmuted.

Thank you. So just a question on the platinum-plated products. So based on the website in the Netherlands you had up for a short while, can you confirm the intention to raise prices for the silver products and that this is not included in the market bridge? And then furthermore, on the decision of the platinum-plated products to be priced at a one-to-one to the silver prices as they're priced today, and just wondering based on precious metal plated products today already priced higher than the solid silver prices you have. So and then furthermore the platinum plated products they have better capabilities both in terms of water and tarnish resistance so yeah which are important to consumers so wondering why these products are not priced higher

I think I got all the questions, but we had a little bit of a noise here. But if I missed something on my answer, please correct me after I have finalized. Yes, so we can confirm that the test that we are putting this year will be about raising silver higher than the platinum plated products. The reason for that is very simple. Silver prices are increasing, and if we keep them at the same price, our gross margin will severely deteriorate. So we are really trying to understand that. Having said that, the reason why we are keeping the platinum plated as well versus silver, it came out of all the extensive testing that we did last year, as a reminder. We went to 35,000 consumers and what the consumer willingness to pay for the platinum plated product was actually slightly lower than for solid silver. So we are pretty much respecting the learning. Again, having said that, we will learn more from the test that we are going to be having into this year. That's what we are testing and not going straight into rollout. So if the insights are different, we'll come back on that, of course.

Okay, that's actually very clear. Thanks a lot. I'll come back to you.

Thank you.

The next question is from the line of from RPC. Please go ahead. Your line will now be unmuted.

Okay, thank you. Good morning, everybody. So I just have one question on the P&L profile and margin composition. So as you move towards a mid-term EBIT margin of above 21%, now we were just wondering what level of gross margin that would assume and how we should think about the evolution of operating costs as the business transitions to its new raw materials mix. Thank you.

Thanks for that question, Viral. I think in broad terms, you should think about it as the gross margin coming back to the level where we will be in 2026. This year, we have guided for an EBIT margin of 21 to 22, and basically saying that that's where we're getting back to in a couple of years. And structurally, there will be no difference between GM and OPEX ratio. So implicitly we're saying that the gross margin gets back to where we would land this year. Now we're not specifically, not guided for where the gross margin sits this year, but it will be in the very high 70s. That's the way to think about it. So in a way, if you look at the surface on the P&L in a couple of years, it would look very much like today. It's just if you double-click on the cost of goods sold, then there will be a different commodity exposure. It's more diversified and lower than what it would otherwise have been, and then there's more labour costs sitting in the cogs, but otherwise it's the same business.

Thank you, Anders. So just as a quick follow-up, if we may. Could you just help us understand why you have higher labor costs? Sorry if we may have missed that, but is it just a more complicated process? Is there more labor cost per unit in terms of the manufacturing side of things? Yeah, any help there would be greatly appreciated.

Oh, that's a super fair question. The way to think about it, if you produce a charm in silver today, it's one process in a very simplified finance language. But if you then produce it in platinum plated going forward, you first produce the core, which is basically the same as doing the silver solid charm. But then with platinum, that's a step two where you need to add the plating process, which is somewhat labor intensive. So it's the second step that adds the labor cost going forward, just like on our gold plated products today.

And I just think to our understanding very well, but important to know that that's why we've been working on this signature alloy that we call Evershine, because then it can behave the same as silver, and therefore the first step of the production will not suffer or will not be impacted. So it's only on the second part, which is just the plating part.

Very clear. Thank you very much.

The next question is from the line of Eric from . Please go ahead. Your line will now be unmuted.

Thanks. Hi. Eric here with . Two questions for clarification. Firstly, could you just repeat what you said regarding the inventory buildup? Where should we expect inventories to end up and how long do you expect it to take to normalize it? And are there any offsetting effects on working capital or should we basically expect the inventory buildup to fully flow through into higher working capital?

Yeah, thanks for that question, Erik. Very valid. Inventory. Last year, total inventories ended at 5 billion kroner. End of this year, think about it in round numbers as being going up to around 8, so from 5 to 8. And of that 3 billion kroner increase, Two is very mechanical. It's simply that silver and gold prices will be higher, plus the tariffs that will be sitting on inventory. And the other up to a billion kroner will be, most of that will be driven by that we are getting ready for the platinum plated transition. So we will at the end of this year both be holding. silver jewelry and platinum plated jewelry for the same designs. And then the last but smallest piece is that in a couple of areas decided to increase inventories to reduce the amount of stock out, so improve the stock availability in the stores. So that's the 25 to 26 journey. Then we will stay at that elevated level through 27 as we go through the transition. and then step by step through 28 and probably into 29 maybe even that's still to be determined we will get back almost towards the level where we started out. Probably not all the way down to five, but somewhat above that. So that's very round thinking, but that's the shape of it. And you're of course very right that when you pay more for your gold and silver from the refiners, it hits you on inventory but our trade payables will go up as well so that's an offsetting offsetting effect and I'm just looking at my IR colleagues here so maybe you remember but I think underlying the networking capital so the way to think about it is underlying we ended at minus one last year, and we've got to end at mid-single-digit-ish this year. So a 6% to 7% increase in net working capital, and I'm just doing the math here in my head. So the 3 billion kroner increase in inventories, let's call that 10% increase, and then that 4%-ish point is going the other way with trade payables, not the least. leaving a net increase in networking capital of round six. I know there's a lot of numbers verbally, I hope it makes sense Erik, otherwise happy to follow up.

That's great, thanks for clarifying, very helpful. And then just finally, on the 50 to 100 basis points transition costs that are included in your 2026 margin guidance, Just to basically confirm, are these, these are not incremental to the costs already communicated for 2027? Or does it reflect the phasing so that the transition costs will be lower in 2027? Just wanted to double check that.

It's good that you double check on that. Our current thinking is that it's incremental, so on top of the two points of one-off costs, transition costs next year. And a couple of things. even more extra labor during the transition than what we thought a couple of months back. So that's one element. The tech costs in making the systems, our systems able to handle the transition and I can elaborate on that if needed but that requires a bit more tech cost than what we had thought and then we build in honestly a buffer for potential inventory write-downs when we sort of stop selling silver then how much is left on inventories and how much do we need to remelt building a little bit of buffer there because it is a big transition so Long story short, the 50 to 100 basis points is on top of the 200 basis points next year.

Perfect. That's very helpful. Thanks.

Next up, we have a follow-up from Lars Toppen from DNB. Please go ahead. Your line will now be unmuted.

Yes, it's actually related because you, of course, suspended buying back your own stock because of A, the margin pressure, which is temporary, but also the higher needs for working capital. So how should we think about when you might be able to resume share buybacks? It's obvious EBITDA will be lower in 2027. But are you willing to temporarily increase leverage, knowing that that will be a trough and that margins will ramp up again? Or have you any view on when you could begin buybacks again? Thanks.

Robert, it's a very relevant question, Lars. The short answer is yes, I think that there could be a situation where we say it's okay to have a higher leverage than the capital structure policy for a short period of time. But if we started, went out initiating a share buyback program today, then we would be above the capital structure policy for, let's say, two years. which is probably too long also for the credit agencies to think that that's a good idea. So we also have that in the back of our mind. But could that be somewhere in between where we say now it's X quarters where the leverage might be a little bit elevated, not too crazy, but a little bit elevated? I think that that could be. But before we reach that point, we're still some quarters down the road.

Yeah, of course, I realize that, but I could just foresee a 27 where your capex will come down because your present and plating investments peak this year. And also, if you see the jump in working capital this year and then let's call it stable next year, then your cash flow from operations should improve quite significantly. So you would be looking into potentially a big free cash flow here. acceleration in 2027 but is it completely far out to discuss buyback in 2027?

I think the way I would answer Lars is that the hurt on the net working capital this year and inventories that will come back at a point in time so there will be as we are in the unfortunate situation that we don't do a share buyback this year there will also likely be a point in time where you can do more than what you would normally do because your inventories and networking capital is building back down again. Exactly then when that comes and triggers a share buyback, it's too early to talk about it at this point in time.

That's fair enough, Anders. Thank you.

And the last question for today's call is from Klesen Godiksen from SED. Please go ahead. Your line will now be unmuted.

Thank you. So just in relation to the confidence level you have in terms of the newness recently designed in order to trigger an acceleration in like-for-like, that would be the first one. And then maybe following up on that, I guess also, should you not see a step up in like-for-like in the first quarter due to newness, both in terms of the new designs coming in, but also the expansion of the Talisman you comment are something that consumers take well in? and then also the easier comms and then maybe the second part of the question being of if you could comment a bit on the expected split in terms of the terms of the design variations launched within the different aesthetics moving forward thank you yes so let me let me just try to address this in a synthetic way so the

Impact of the newness that we are seeing so far is that when we have launched distinctive newness, the consumer is responding to it. So again, we have seen Talisman, we have seen Bridgerton, and we have seen Essence. So we know that when we do it, the consumer responds positively. So the level of confidence is high. what is coming on the rest of the year you will have to be patient and see what we are doing but you rest assured that whenever I can accelerate we are doing so as a reminder our development timing you can have a point of view whether it's long or short but it's about 18 months from a sketch to product in market so again trying to do our best with those development times and then for the rest of the year we are keeping guidance it's too early to know how the world is going to develop. That doesn't stop us from keep working at it, but I cannot say anything else.

Okay. And on the expected split in terms of design variations within the different aesthetics?

Oh, sorry, yes. So there, the way you need to see, again, I'm not going to go into my whole collection plan and line plan by aesthetic, but the way to think about it is that the first priority is that we need to address what is happening on our core business. We need to make sure that our core business or the playful aesthetic continue to be refreshed and exciting. And that's why the small program that we are launching, Pandora Wonders, is exactly doing that. It's playful aesthetic. It's played exactly into Pandora DNA. And we are bringing a state change in creativity that is not what consumers is looking forward to. So that will be exciting. By all means, our number one and number two and number three priority is to bring that core back to growth. And then on the remaining, you should not expect us moving into more aesthetics. So you have them in that chart. So the bold, the playful, on that it will be pretty much equal weight. So disproportionate and playful.

Okay, thank you. And then just a very short follow-up. Thank you.

Sorry. We saw that decline mainly coming from the U.S., and I can only say what we just said before. We are seeing really tough situation over there. It's impacting both. So, yes, you see that happening mainly in the U.S. We haven't done anything differently, seen anything differently, just traffic going down both online and offline.

Perfect. Thanks a lot, Pina. Paul, thank you very much, everyone, and we hope to speak to you in August. Thank you. Take care.