Pandora Wins “Massive” Market Share As Lab-Grown Diamonds In Hot Demand

Pandora, the world’s largest jewelry brand, upgraded its full-year revenue outlook following a solid second-quarter earnings report. As the industry faces a contraction, the Danish jewelry giant is capturing a significant market share due primarily to the soaring demand for its lab-grown diamonds. 

“Given our solid performance so far, our updated guidance now sees another year of positive organic growth,” Pandora CEO Alexander Lacik wrote in a statement. 

Pandora updated its full-year projections, anticipating an organic sales growth of 2% to 5%, compared to the previous estimate of -2% to 3%. Before today’s announcement, Wall Street analysts were forecasting 3% sales growth for the year based on a survey provided by the company.

Lacik told Bloomberg in a phone interview that the company is winning a “massive” market share this year as it grows amid mounting macroeconomic uncertainty and an industry in contraction. 

Lacik said, “We’re building market share in a very tough environment, which just shows that the brand is growing stronger and stronger all the time.” 

He said, “Pandora is back to growth,” the plan is to introduce new collections with lab-made diamonds to all the company’s top markets.

Even though lab-created stones made up less than 1% of the revenue in the first half, these cheaper alternatives to mined gems represented Pandora’s fastest-growing segment. 

Hot demand for synthetic stones is likely due to thrifty consumers who no longer can afford the real thing. 

Here are the earnings highlights from the second quarter:

• Ebit before significant items DKK1.19 billion, estimate DKK1.17 billion

• Revenue DKK5.89 billion, estimate DKK5.73 billion

• Organic revenue +5%, estimate +3.06%

• Net income DKK778 million, estimate DKK819.8 million

• Ebitda DKK1.69 billion, estimate DKK1.7 billion

And full-year:

• Sees organic revenue +2% to +5%, saw -2% to +3%, estimate +3.08% (Bloomberg Consensus)

•  Still sees adjusted Ebit margin about 25%, estimate 25.6%

Analysts were overwhelmingly pleased with the results, with Jefferies highlighting the ability to navigate the challenging US market. 

Here’s more commentary from analysts (courtesy of Bloomberg):

RBC Capital Markets, Piral Dadhania (underperform)

• Pandora posted better-than-expected results, with revenue and gross margin coming ahead of expectations

• Dadhania sees “modest” consensus earnings upgrades

 Jefferies, Frederick Wild (hold)

• Results show Pandora is navigating a difficult US market “surprisingly well”

• Expects debate to stay focused on resilient organic growth dynamics against the uncertainty inherent in a margin guidance that so heavily relies on 4Q inflection

• “But the fact remains the stock has managed to navigate challenges in key markets relatively well, even as peers have struggled”

Bloomberg Intelligence, Deborah Aitken and Andrea Ferdinando Leggieri

• “Pandora’s upgraded 2023 organic-growth outlook to 2-5% could still be cautious given its 2Q revenue beat and accelerated trading in 3Q to date”

Shares of Pandora in Copenhagen are flat after the earnings release. Shares have rebounded in the last year after peaking around DKK 937 in late 2021. 

Lab-grown diamonds are gaining popularity, a reflection of a more budget-conscious consumer.