Pandora A/S Ord

Good morning everyone and welcome to the conference call for Pandora's Q2 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 limit yourself to two questions that would be great. Please pay notice to disclaimer on slide two and then turn to slide three and I will hand over to Berta.

Thank you Bilal and welcome everyone. I would like to start with a small reminder and providing some context that 2026 is a year of deliberate change for Pandora. We are rolling our new growth model with greater focus on distinctive design, cultural relevance and a stronger local execution. Now, in addition, we are also expanding our retail experience with some pilots, intending to inspire discovery and giving the consumers more reasons to buy. We will be scaling across markets as we see Proofpoint that is working. and, importantly, we are also improving the quality of growth, substantially reducing promotions and heavy discounting. And you can see this implemented particularly in our core markets. Now, all these actions, of course, are intended to strengthen brand desirability and relevance and to build a healthier platform for sustainable growth. I will expand a little bit later and you will be able to see some examples. But with all that, let me turn to quarter two. Quarter 2 played out broadly as we expected. We delivered 1% life-for-life growth and 3% organic growth. Growth in this quarter reflects a deliberate reduction in promotional activity, particularly in core markets, so of course it has moderated growth in the near term, but is the right choice for both the health of the brand and the quality of our growth. Profitability remains strong. EBIT margin benefit from the refund of previously paid US tariff. But even if we actually exclude this effect, the business has continued to demonstrate a disciplined cost control and very resilient profitability. And finally, our returns remain high at close to 40% despite the external environment. Let's now move to the next slide, please. I would like to turn to guidance now. We have adjusted both our top line and EBIT margin guidance for the year. Now, for the top line, we are now targeting an organic growth of 0 to plus 3%, and the main change on this guidance is actually our life-for-life growth, which we are now increasing to minus 2 to plus 1, and this compares to the previous minus 3 to 0 on life-for-life. Now, why this upgrade? Well, this upgrade reflects our performance in the first half of the year, but at the same time, we have to be careful because we continue to operate in a volatile macroeconomic and geopolitical environment, and the implications for consumers still remain uncertain. Now on EBIT Margin, the upgrade of our guidance to 22 to 23 from 22 to 23 compared to the 21-22 previously. Anders will be taking you through the guidance in a little bit more detail shortly. Now let me talk a little bit about current trading. The Life4Life growth in the quarter so far has been around mid-single digital levels. Of course, this has benefited from the timing of our end-of-season sale, which was more weighted towards July this year versus June last year. But I want to be very clear while we start the quarter, and the quarter at the beginning is encouraging, July is not representative of the underlying run rate of the business, so it should not be extrapolated forward. It is important to keep this thing in perspective. Now let's get into more detail on the Q2 performance drivers. If you can pass to the next slide, please. Now, quarter two, we deliver a 1% life-for-life growth. And you can see the split between the core and the few with more on this slide. Now, the way to read this result is where we have distinct product newness with high impact activation, we are driving growth. In other areas, there is more work to do and actions to put this in place are starting with high focus, of course, on our core business. Core deliver minus 1% life-for-life growth in line with Q1. The growth in the core continued to be supported by the strong performance of the collection launched last year, Talisman. Now in moments, our playful aesthetic, the opportunity is still there to bring a stronger, more distinctive newness. And as I said before, this is where all our focus is now. Now in field with more, where we have higher mix of distinctive design, we deliver 3% life-for-life growth. And that performance was very supported by Timeless, which is our new Garden of Dreams collection, and Pandora Essence. Let's go into the next slide to talk about markets. Our regional performance in Q2 remained mixed. Let me start with the EMEA region, which is our largest region. There we delivered a life-for-life growth of minus 2%. Now Spain, Poland, Portugal continued to perform very well, and that was upset by weak performance in some of our mature markets like Italy and the UK. Now, growth in these markets, Italy and UK, reflects, as I mentioned, a significant reduction in promotional days versus last year. In these markets, in addition to implementing the new growth model, we are also piloting an evolved retail experience with a clear objective of strength and desirability, inspired discovery, and give consumers more reasons to buy Pandora. We are bringing collections into curated looks, elevating the product presentation and strengthening visual storytelling. Early signs are encouraging and we will continue to refine and scale what works. Now in the US, our larger mass market, the life-for-life growth was flat in the quarter. Now performance continued to be impacted by softer consumer sentiment and lower store traffic. But against this backdrop, the brand remains healthy and strong, and we continue to focus on what we can control, strengthening demand creation through more impactful brand activation and locally relevant execution. So overall, for the region North America, there was a stable growth around minus 1%. In Latin America, our life-for-life growth accelerated to 18%. The price repositioning that we introduced earlier this year continues to deliver strong results. This is supported by a strong local activation and influence engagement, which I'll touch a little bit more later as well. and finally in Asia we deliver a strong growth of 10%. Our rollout in Japan continues to progress very well and we still remain in the early stage of building that brand awareness that reach through continual increased marketing investment. Now let me show some examples of what do we mean by our new growth model is coming to life to drive demand. We can go to the next slide. I did mention last quarter that we have started to rebalance our marketing investment, and the introduction of the Garden of Dreams campaign is a good example of this shift in action. The campaign basically brought together some of our most distinctive designs of the season with a stronger, more focused amplification across touchpoints, events, influencers, You can see some examples in the picture. And this reinforced a point that I made last quarter. When we bring a strong product design and marketing that is relevant, they work hand in hand and deliver growth. So this absolutely translated into growth across all markets. And you can see that reflected in the strong performance of the timeless collection and therefore our fuel with more segment in this quarter. Let's go to another example on the next slide. You can see here as well how we are bringing our new growth model to life. Following the success of Bridgerton in quarter one, in July we launched Pandora Wonders, a multi-year creative platform that is designed to build desirability and drive demand through design, craftsmanship, and cultural relevance. Now our first action was co-created with Harry Lambert and was launched during Paris Haute Couture Week. And this is exactly what we want to do more, is really create cultural moments for Pandora, is bringing Pandora into the cultural conversation through distinctive design and high impact activation. Now, this campaign was launched in key markets. It's early, but response has been very strong, particularly on our early media and PR coverage. So it is encouraging and that we are seeing as well the first sign of early engagement from new customers coming to the brand and being attracted by the Pandora brand. Now, what matters most is the long-term opportunity of this platform as this year we will bring a new creative voice to play and reinterpret our materials and our craftsmanship through limited edition capsules. Of course, you will hear more of how this campaign performed on the quarter three, which will have the entire KPIs. Let's go now into the next slide, please. Now, of course, we do continue to invest in our store network, both expanding our footprint, but most importantly, or equally important, elevating the experience of our existing stores. So we do continue to roll out our digital screens, our store facades, which is allowing us to bring the collections and the brand storytelling to life with much greater impact. Now during the quarter we open new flagship stores in Barcelona and Milan. And this store is a good opportunity to bring together the full breadth and inspiration of Pandora and set a new benchmark of how consumers experience the brand. I really encourage you if you find yourself in either city to visit some of the stores as you will see and understand better what the great expression of Pandora can be on the brand experience. Now let's go to the next slide. I'm just going to bring everything I have just said together by reminding the direction that we set out in February. You will recognize this slide. You have seen some concrete examples of how this is now coming to life. More design-led newness, more effective marketing, and Stronger Locally Relevant Execution. As you see, Garden of Dreams show that and brought that into practice and also proved that we have opportunity to get Pandora into new categories, necklace, rings, et cetera, where you know we have a still opportunity to grow. So these actions are in motion. We are seeing encouraging proof points, but they are not yet fully reflected in the performance of the business today. So as I said, 2026 is a deliberate year of change. We're bringing more discipline and scaling what works. You will hear more on the quarter three, where we are bringing together a strategic update. But now we can go into the next slide. Now, of course, growth is one part of the equation, but of course, as you remember, the biggest second priority for Pandora and for myself is to protect profitability. Equilibrium is our response to our rising silver prices. Now, in February, we introduced the platinum plated jewelry on our proprietary Evershine alloy, which is going to transition a part of our existing white metal portfolio over time into platinum plated. Now, this is supporting profitability, but equally and most importantly, it is a compelling consumer proposition. Y is bringing platinum, which is a precious metal, into a more accessible format with a strong durability for everyday wear. Now, I think it's important to remind that Pandora has already evolved beyond a single material proposition. That what matters also is that consumers choose Pandora for our design, our craftsmanship, our quality, and our meaning across different materials. We don't need to speculate. A proof of that is the success of our gold-plated jewelry, which continues to grow strongly. Now, of course, as you remember, we have been working on this transition for more than a year. This transition has been supported by extensive consumer testing and validation. So all of us give us confidence in the acceptance and adoption of platinum plating as a wide metal proposition. Now, during the quarter as well, we have started our pilot in the Netherlands with five key carriers, four bracelets and one necklace. Now this is early but the initial response I have to say has been encouraging on the adoption and we are also using the pilot to learn and refine our execution before the global rollout next year. We will extend as well this year with more selected design across more markets and this will be a good source of learning for us. Now, important to remember, this is an evolution of our product platform that is bringing greater choice to consumer while strengthening the long-term resilience of our business. We expect, and it's very obvious, that we'll be the first jewellery brand to bring platinum-plated jewellery to scale. We will be providing more detail on the rollout and as well on the latest financials and EBIT margin implications with our Q3 strategic update. But on that note, I'd like to now hand over to Anders to take you through the rest of the presentation.

Thank you, Berta, and good morning, everyone. Please turn to slide 14. Berta has already commented on the top line, so I'll focus on a couple of the other financial metrics. And the key message for the quarter is that margins remain solid. That's both on the gross margin and EBIT margin level, and that we continue to manage all of the external headwinds quite effectively. And as I'm sure you've read, we did get a one-off benefit this quarter from the partial refund of our US tariff claim, and we've broken the impact out on the margins for you so you can track the underlying performance. This one-off meant that our gross margin was up 120 basis points in the quarter, but even when you exclude the one-off, you'll see that our gross margin was still above 78%, and thereby only down around 100 basis points compared to last year, despite that we faced just under 300 basis points of external headwinds. So quite a strong margin and highlighting the good cost efficiencies that is still being delivered but also a deliberate reduction in promotions as Berta said. Next slide please. And here we break down the revenue growth in the quarter as usual. We've talked about the like-for-like building block already so I'll touch on some of the other On the network expansion, the purple building block at 4% that continues to track well, generating healthy topline growth in wide space areas and with no cannibalization, and generating very healthy margins. You also noticed that this quarter specifically, we saw two percentage points drag from the bucket that we called sell-in and other. And there's two elements to this. One is just phasing between quarters that we will always see. And then secondly, some of it is linked to lower sell-in to certain partners. Next slide, please. On the EBIT margin, performance was strong. The EBIT margin was up 210 basis points year over year. And as you can see from the bridge here, it was held by the partial refund of our claim on the US tariffs, and that accounted for 250 basis points on EBIT margin level. It is a one-off of course, and there will be more of that coming in the second half of 2026, and I'll speak about that shortly. If you exclude that one-off impact, you can calculate that the EBIT margin was broadly in line with last year. And some of you will probably point out that even that was a bit better than what we have communicated about phasing through the year earlier on. And that's fair. And the reason is that just like in Q1, we did see some cost phasing benefit of around 200 basis points in the quarter. And that phasing includes the level of marketing spent, where we ended up deciding to spend, which you can also see in the announcement today, that it is a bit below last year. But that phasing will be reversed in Q3 and Q4, and then be neutral for the full year. And overall, you should read from this that we are of course keeping a tight control on our costs in this current subdued revenue and macro environment, and we will continue to offset a large proportion of the external headwinds that we are facing. And with that, let's move on to the guidance. As Berta already said, we've upgraded both our revenue and EBIT margin guidance. And let me tackle revenue first. We upgraded our organic growth guidance by one percentage point on both low-end and high-end. to now being 0-3%. This upgrade is driven by higher like-for-like expectations for the full year. where we now see like-for-like growth of between plus one and minus two versus previously between flat and down to minus three. And the low end of that range continues to factor in the fact that the consumer environment remains weak and the geopolitical uncertainty remains quite high. and we do not know how this will play out for consumers even on a short time horizon. The high end of plus one basically calls for similar growth in the second half as we saw in the first half, so keeping the run rate of our like-for-like growth to what we've already seen. We do acknowledge that our comp base is getting easier in the second half of the year, and here's a couple of thoughts on how to think about that. First of all, we are planning a promotional detox in the second half of the year to further protect brand equity. And secondly, if you dig into the comp base, you will see that the two-year stack mostly gets easier in the US. But the US is at the same time the market with particularly high macro and geopolitical uncertainty, and it's also the market where we see the K-shaped economy impacting our consumer base. And lastly, we do not expect to repeat the growth levels that we've seen in Latin America and Asia Pacific in the first half of the year. Some of this will naturally moderate. And when we say this, and that's not to ignore the impact of the initiatives that we're working on to reignite the growth engine, but these will take time to feed through into sustainable improvement in like for like every quarter. And as we did say back in February, 2026 is a transition year. As you can also see in the bridge, we have increased our network guidance to plus 3% organic growth contribution, up from 2% initially. And this increase is then offset by slightly lower sell-in to certain partners, and we now expect sell-in and others to be around minus 1%, and then those two components net out. And then if we could go to the next slide, please. On the EBIT margin guidance, we've upgraded it to 22 to 23 percent from 21 to 22 percent before. So an increase of 100 basis points in both the low end and high end of the range. And this change in the guidance you can see here relating to the purple box that we call tariff refund and the 100 basis points being the income we expect from the refund of tariffs that we have previously paid. We already got an impact as we just talked about in the second quarter equivalent to just around 50 basis points of full year EBIT margin impact. and we expect to have another similar 50 basis points positive impact sometime during the second half of the year. And again, this tariff refund is a one-off benefit for the year, so keep that in mind when you think out to 2027. And all other building blocks are broadly unchanged. And on that note, I'll hand back over to Berta.