Pandora takes advantage of property downturn as it opens new stores

The Danish jeweller Pandora, one of the few retailers currently increasing the number of stores it operates, is taking advantage of the property downturn to improve its rents and secure better locations.

Alexander Lacik, the jeweller’s chief executive, said that before the Covid-19 pandemic rents were “running hot” and it was hard to get the best store locations in city centres or shopping malls.

“Now as times are tougher, there are lots of opportunities to get good rents, but even more importantly to get triple A locations,” he told the Financial Times.

Known for its charm bracelets, Pandora is one of the world’s biggest jewellers by pieces sold and competes in the mass market rather than the higher end like luxury groups such as LVMH.

Last year, the Danish group opened 88 new stores on a net basis and expects to open a further 50-100 in 2023. It had 2540 stores around the world by the end of 2022, two-thirds of which it operates itself. The rest are run by franchisees or other distributors, while their goods are sold in nearly 4,000 other locations such as shops within larger retailers.

“Half of our customers are men. Men need help with jewellery. We need to know what you are looking for. Bricks and mortar are super relevant for us. I’m going to be dead before this changes,” Lacik said.

Pandora’s stores boosted its operating profitability within a month or two and were cash flow positive within a year, he added.

Many retailers are moving away from physical stores as online sales increase in importance. H&M, the Swedish fashion retailer, for instance closed 336 stores last year — about 7 per cent of its total — on a net basis, and said it would shut another 100 in 2023.

Ecommerce has also increased for Pandora with it representing 12 per cent of total sales in 2019 and 21 per cent last year. But its in-store sales have also increased over the same period, by close to 20 per cent. Revenues last year were DKr26.5bn ($3.8bn), and operating profit was DKr6.7bn.

Lacik said that when he set up a global real estate group at the Danish group “the first thing I asked for was to get me out of all long leases”. Now, Pandora can get out of “the vast majority” of its shops within 3-4 years.

He then asked his group to rediscuss terms with landlords. “I want more flexibility and a better location. If it’s at the same cost, that’s OK,” Lacik said.

Pandora is forecasting sales growth of between minus and plus 3 per cent this year, something that means its profitability will be “untouched”.

Lacik added: “The reason a lot of retailers are closing shops is that they [go] from black to red pretty quickly. Rents are high, staff costs are high. I can lose half the volume and still be break-even.”