Pandora A/S Ord

Good morning everyone and welcome to the conference call for Pandora's Q3 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 incoming CFO Paulo Garcia and of course the rest of the IR team. As many of you probably know we will be providing a strategic update on today's call. We'll therefore start with a quick download of the Q3 results and then move into the strategic update. With that, as usual, there will be a Q&A session at the end of the call. If you could very kindly limit yourself to two questions at a time, that would be great. Please pay notice to the disclaimer on slide two and turn to slide three, and I will now hand over to Berta.

Thank you, Bilal, and welcome everyone. Let me start with our third quarter results. We deliver 6% organic growth. That includes a 4% life-for-life growth with all four regions contributing positively. This is, of course, an encouraging step forward against a challenging consumer backdrop. Of course, importantly, we continue to see the impact of the actions we have taken to strengthen demand. Profitability also remained strong. The gross margin reached just under 84% and EBIT margin close to 16%. Both increased versus last year and benefit from the one-off income of previously paid US tariffs. However, there is also an underlying strength in the business, as excluding this refund, gross margin improved by 100% basis point, which was supported by healthy underlying drivers and a very good cost discipline. So overall a solid performance despite many external headwinds. An encouraging quarter, there is of course more work ahead, but we are confident in our plans to turn this progress into consistent quality growth. We have spent this year deepening our understanding of consumers so that we can sharpen our choices and create consistent demand. And later I will show you how this comes together in our new demand model. Let's now turn to guidance and to the next slide, please. So based on our performance year to date and our outlook for the remainder of 2026, we are upgrading our full year guidance. We now expect organic growth of 2 to 3% compared with our 0 to 3% previously. We are also upgrading our EBIT margin guidance to 22.5% to 23% and that comes from a 22% to 23% previously. This growth update reflects the higher life-for-life expectations now at 0% to 1% for the full years versus what we communicated previously, minus 2% to 1%. Okay, so now let me address what this implies for quarter four. We are encouraged by the improvement in quarter three, but we are not assuming that the recovery will follow in a straight line. The consumer environment remains uncertain, geopolitical risks are high, and some of our initiatives will take time to deliver their full potential across all markets. It's also important to note that in Q3, Japan accounted for nearly 2 percentage points over the entire L4L growth. And that is a market we expect to moderate in due course. So, balancing confidence in the action and realism about the environment in which we operate. Anders will take you through the guidance a little bit more detail later. And on current trading, by the way, October landed at plus 1%. Now, let's now look a little bit more closely at our performance in the quarter. So let's go to the next slide, please. If we look at performance by segment, both parts of the portfolio deliver positive life-for-life growth in Q3. Core returned to grow at 1% and this was supported by the second Talisman Collection launch, the continued strength of our collaborations and also relevant newness introduction in our playful charms with the Blue Ocean Collection. Fuel with more accelerated to 9% life-for-life growth with sustained momentum in timeless and double-digit growth in essence. Let's go to the next slide, please. You see in this slide something that I like to spend a little bit of a moment, which is a talisman. We first introduced this collection last year in a distinctive new collection within the bold aesthetic. In Q3 this year, we expanded talisman with zodiac-inspired design and extended its distinctive design language into new jewelry category. Rings, earrings and new necklaces. So, we also amplified the collection for our customers with events in different cities like London and Los Angeles. We brought together press and influencers which generated a strong earned media coverage. So if I'm focusing on this, it's because Talisman is a good illustration, a good example about how can we build enduring design platforms that consumers recognize as Pandora while we renew with fresh creativity and amplify through cultural relevance. That combination generates excitement, earned media value, and of course, commercial returns. This is how we plan to build lasting desirability, by evolving designs over time rather than relying on a succession of launches. So let's move to the next slide please. If we turn to our regional performance, all four regions delivered positive life-for-life growth in Q3. I would like to highlight that during the quarter we deliberately reduced promotional activity, since we want to build demand through the strength of our product brand and consumer experience rather than relying excessively on promotions, and in Q3 we were able to do that. In North America, life-for-life growth accelerated to 3%, that was supported by better in-store execution, product newness, and targeted brand activation. Consumer sentiment and traffic, however, remained subdued. EMEA improved to 1%. Spain, Poland, and Portugal continued to perform well, while UK, Italy, and Germany improved sequentially. Latin America delivered 6% L4L growth that was supported by the actions implemented earlier this year, which included, if you remember, our price repositioning model, partly offset by the planned promotional reduction in Mexico. Asia-Pacific continued to deliver strong growth at 20% led by Japan. As I mentioned earlier, the growth in Japan contributed to nearly two percentage points of the total Group Life for Life in Q3. Now, the success that we have in Japan demonstrates our demand model in new markets. So, we still remain encouraged by the opportunity in the region, but of course, these growth levels will moderate as we move forward. And with that, I'm very happy to hand over to Anders to give you a run through the quarter three financials.

Thank you, Berta. And please turn to slide 10. And let me start with some of the financial highlights for the quarter. Starting with the gross margin, you will see that it was just below 84%, so a very high level. And similar to the second quarter, this did benefit from a one-off gain of around 340 basis points coming from the refund of tariffs. But even excluding that, the gross margin was above 80%, and thereby 100 basis points above the level last year. And that means that we more than offset all of the headwinds coming from commodities and the ongoing tariffs. The lower promotional activity in the third quarter comes through positively on the gross margin as well. And then at the same time, we saw favorable channel mix, operational efficiencies, and also some other one-off income that all supports the gross margin. Networking capital excluding the impact of commodity hedging was higher versus last year at 7.2% of revenue, as you can see in the table here. And as mentioned earlier on this year, this was expected and is driven by the inventory build relating to first of all higher commodity prices, but also our transition to platinum plating and our decision to improve stock availability a little to drive revenue. So now let's look at revenue development in more detail at the next slide. Third quarter delivered 6% organic growth, supported by like-for-like of 4%. And Berta has already covered the like-for-like driver, so I'll just touch on one building block in the bridge here, and that's the minus 2% impact from sell-in and other. And that reflects a couple of different elements, including lower sell-in to some partners, but also some phasing into Q4. So we expect some of that to reverse next quarter or this quarter Q4 and thereby remain at minus 1% for the full year as planned. And then let's turn to profitability on the next slide. EBIT margin, the performance was strong. The reported EBIT margin increased 190 basis points to 15.9 as you can see in the bridge here. Similar to the second quarter, this was held by a refund of our claim on US tariffs, and that accounted for 370 basis points on EBIT margin level, as you can see here with the largest building block in the bridge. You can also see a slight negative net operating leverage in the quarter despite LifeLike being at 4%. And that's simply mainly the reversal of the positive cost phasing which helped operating leverage positively back in Q1 and Q2. And you will remember that we had called that out earlier and we still expect this phasing to be neutral for the full year. Without the one-off effects facing external headwinds, you can also see from this bridge that the underlying margin is broadly flat versus last year. And then let's move to the guidance, please. We have upgraded both our revenue and EBIT margin guidance, and let me tackle revenue first. We've upgraded our organic growth guidance to 2-3%. The upgrade is driven by higher like-for-like expectations, where we now see like-for-like growth of between 0 and 1%, while before it was between minus 2 and 1%. And I'm sure that most of you have figured out that for Q4 this implies lifelike growth of between, let's say, around minus 3 and around flat. And that's despite an easier comp here in Q4. So that deserves a few more words. The low end of the guidance continues to factor in the fact that the consumer environment remains weak and that the geopolitical uncertainty remains very high. And even though we only have eight weeks left of the year, we do see an elevated risk that geopolitics can impact consumer behavior with short notice. The high-end calls for around-flattish growth in Q4, and a few points around that. Roughly half of the growth in the third quarter was driven by Japan, and we do not expect that to continue. And on that note, Japan is comping more than 100% like-for-like growth last year here in Q4. And secondly, on the comp base, if you dig into the comp base, you will see that the comps do get a fair bit easier here in the Q4. And it's not least in the US, where the comps base gets easier, 4 percentage points, in fact, from Q3 to Q4. But the US, in a way, is just a hard environment to call these days. So let's see how the holiday season plays out during the next couple of months. And finally, as we have reported, our like-for-like growth so far here in Q4 was plus one. It was negatively impacted by lower promotional activity, and the underlying trends remained healthy and closer to 3% like-for-like growth. So summing it up, we are very pleased with the progress that we have seen so far in 2026. We are pleased with what we have lined up for the peak season ahead of us, but we have to keep in mind that the consumer environment is not strong and the short term is subject to elevated uncertainty. So next slide please. On the EBIT margin, we have upgraded our guidance slightly and now expect a margin between 22.5 and 23%. So basically it's an upgrade towards the high end of our previous range. And you can see our updated and quite detailed bridge here. There's been a few small moving pieces between the building blocks since last quarter. But basically the upgrade accounts for a slightly higher amount related to the refund of our tariff claim and slightly lower one-off cost related to the platinum transition. And on that note, I'll hand it over to Berta for the strategic update.