Pandora Reports Sharp Drop in Revenue, CEO Resigns

(IDEX Online News) – "Inadequate operational sales, and marketing execution," as well as a combination of rising commodity prices and an increase in retail prices have hurt Pandora's performance in the second quarter. In what looks like an emergency reaction, the company is replacing its CEO.

Pandora CEO Mikkel Vendelin Olesen has resigned and Board Member Marcello Bottoli will become interim CEO while the company is searching for a new CEO, Pandora said Tuesday morning.

Pandora said revenues in July dropped by approximately 30% year-on-year. Based on this and the yet to be announced results of the second quarter of the year, the jewelry firm has lowered its guidance from expecting a revenue growth of no less than 30% for 2011 and an EBITDA margin of minimum 40% to revenue in 2011 in line with 2010 and EBITDA margins in the low thirties.

The company expects capital expenditures to total DKK 230 million ($44 million).

"Our growth has been impacted by the cumulative effect of substantial price increases in the light of soaring commodity price increases. In addition our sales, marketing and operational execution has been poor in many cases and is as big a contributory factor," the company said.

Allan Leighton, Chairman of the Board said, "Although our price increases combined with some destocking are significant contributors to our slowdown in sales and profitability, our own inadequate operational sales, and marketing execution is as big a factor."

The cumulative effect of Pandora's recent global price increases of approximately 15% on top of price increases already implemented in the U.S. and UK in 2010 has had a negative volume impact on sales "in an environment where consumers are becoming increasingly value conscious."

In addition, sales have been harmed by some retailers' destocking, due to an uncertain economic outlook, on top of already high levels of Pandora inventory.

The company announced that its focus now is to reset its affordable luxury positioning, improve operational execution and restoring growth trajectory. "This reset will take up to 18 months to see through."

In addition, the company has instigated a strategic review to test or confirm certain elements of the company strategy.

In another step aimed at restoring investor confidence, second quarter results will be released later today and not of August 16 as previously planned.