Pandora re-instated its 2020 financial guidance in the Q2 2020 Interim Report to adhere to the legal obligations outlined by the Danish FSA (Finanstilsynet). The financial guidance was adjusted in early October and assumed, among others, no major lockdowns and that less than 10% of physical stores would be closed due to COVID-19. With the lockdowns in the UK, France and Belgium and general very restrictive government guidelines across Europe, the most important assumptions behind the guidance are no longer fulfilled.
Due to the uncertainty related to the current escalation of COVID-19, it is currently not considered meaningful to announce updated assumptions and an updated financial guidance. Based on the current trading and the currently announced COVID-19 lockdowns, Pandora maintains the financial guidance but the recent escalation of COVID-19 and potential further escalation represent a clear downside risk. Once there is more clarity on the COVID-19 lockdowns - including duration and geographical escalation - Pandora will immediately publish updated information.
Consequently, Pandora will closely evaluate the current trading and financial guidance on an ongoing basis. Due to these extraordinary circumstances, Pandora will also, when relevant, release current trading statements to the capital markets.
Financial guidance for 2020 (unchanged)
- Organic growth: -14% to -17%
- EBIT margin: 17.5% to 19.0%
Total sell-out growth for 2020 is expected to be roughly equal to the organic growth.
The cost reduction initiatives of Programme NOW continue to be executed at a solid pace with additional cost potential uncovered. The 2020 run-rate cost reduction target is increased from DKK 1.4 billion to DKK 1.6 billion. DKK 50 million hereof is expected to materialise in 2020.
Programme NOW restructuring costs are now expected to amount to DKK 1.2 billion in 2020 compared to previously around DKK 1 billion (and DKK 1.3 billion before wave 1 of COVID-19), mainly driven by re-initiation of initiatives which were slowed down during wave 1 as well as costs required to realise the higher cost reduction target. The healthy progress of the Programme NOW initiatives means that the formal restructuring programme will be completed in 2020 despite COVID-19 disruptions. Consequently, there will be no further Programme NOW restructuring costs after 2020.
Pandora expects around 50 net permanent store closures in 2020 (unchanged). CAPEX in 2020 is still expected to be approximately DKK 0.6 billion and the effective tax rate is also still expected to be between 22-23% for the full year.
By the end of Q3, Pandora had DKK 4.6 billion in drawn debt and DKK 10 billion in available committed facilities which will not expire before 31 December 2021. Pandora thereby has ample liquidity for 2021 and can sustain a 70% revenue decline in 2021 compared to 2019.
Mid-term financial aspirations
Pandora’s aspiration for the mid-term horizon is to deliver sustainable positive organic growth and industry-leading profitability. Organic growth will be driven by positive total like-for-like growth.