Author Topic: CPH:PNDORA - PANDORA A/S  (Read 2259 times)

John Hjorth

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Re: CPH:PNDORA - PANDORA A/S
« Reply #10 on: August 07, 2018, 08:54:22 AM »
Here's a quick & dirty translation weeding out the worst of the translation effects:

Quote
Pandora CEO Anders Colding Friis has failed to put many of his communications legs right since he joined three years ago. The stock is spalshed on the asphalt with a decrease of 50 percent last year. Read column from January 2018 here.

What's worse, the trust of the Pandora top is not existing. Most of all, it looks like a top management, moving around in a cheese bell. From a shareholder perspective, Colding Friis is not an asset for Pandora, but a liability that draws down the assessment.

Pandora is well and thoroughly tied up in a solid communication and leadership crisis.

It's not that much that Pandora guidance downgrade. Output markets go up and down, something succeeds, other things fail, currencies are constantly changing value, so yes, of course, a company can’t draw a line four years ahead and clockwise frame development quarter by quarter.

So no, it's not the downward adjustment in itself. Pandora is not in an existential crisis, but Pandora is well and firmly tucked in a solid communication and management crisis. Symbolically, the fact that Colding Friis and the Board had sent out a few lines with the downgrade after late Monday stuck their heads in the bush, and then closed down for further communication.

It is possible that the Pandora peak in its communication strategy has internally drawn some lines and set some times for when management wants to say words to the masses, but that’s not how a stock market work. The geniet is out of the bottle, which is analyzed and analyzed, and then the top management must pinpoint and explain.

Here's my column from January 2018: Pandora boss Anders Colding Friis lives on borrowed time.

On Pandora's website you can read that the dialogue with shareholders is above all else. "We are committed to maintaining a constructive dialogue with our shareholders." - read here. Hm! It is not credible when the dialogue is totally absent in Pandora management.

Perhaps the Pandora is paralyzed of a stubbornness at the top, which means that the management has more focus on fighting the media, the stock market and its analysts.

Analysts across a broad crest are puzzled and are now doubting what essentially Pandora management can deliver. I.e. Sydbank in its update: "The downward adjustment [of the guidance] will also increase investors' suspicion for Pandora management's announcements to the market."

Perhaps the Pandora action slurry is a stubbornness at the top, which means that the management has more focus on fighting the media, the stock market and its analysts, rather than delivering a sober, credible communication about ups and downs around the world in Pandora's hunting markets.

It has become something "them" and "us" at Pandora. With Colding Friis & Co. throbbing after the diminished expectations the stock market itself prices into the Pandora stock.

If it is true that it is first and foremost the interests of shareholders, which is on the mind ofthe Board, it can be hard to see that trust can be restored with the current daily top management.

The problem for Pandora's top manager Anders Colding Friis and Chairman Peder Tuborgh is not that sales growth is adjusted down from being in the range of seven to ten percent up to now in the range of four to seven percent, as well as a minor downgrade of earnings expectations (EBITDA margin) from 35 percent to now 32 percent.

Pandora's communication and leadership crisis is so much more surprising when looking at the board that is behind. Extremely competent business bosses who otherwise know how to communicate.

Among others, the head of the Dansk Supermarked A/S, Per Bank, former Pandora boss Bjørn Gulden, Axcels, Christian Frigast and chairman Peder Tuborgh are the successful chief executive for the last 13 years.

There is no doubt that the Pandora Board at this time goes from crisis meeting to crisis meeting. A replacement of Anders Colding Friis will of course also be a failure for Tuborgh and the the rest of the board. It may be that Colding Friis has the qualifications needed to lead a company such as Pandora. If, therefore, the dialogue written in the vision was present in the world of reality.

If it is true that it is first and foremost the interests of shareholders, which is the focus ofthe Board, it can be hard to see that trust can be restored with the current daily top management.
« Last Edit: August 07, 2018, 08:58:33 AM by John Hjorth »
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Spekulatius

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Re: CPH:PNDORA - PANDORA A/S
« Reply #11 on: August 07, 2018, 10:14:36 AM »
What do you think is the fundamental threat here? High ROIC stocks don't trade on 6x unless the market fears they face an existential threat. What is it?

The fundamental threat is that Pandora’s jewellery is a fad that is past its peak and declines quickly. I actually think that is the case here and if I were to go long this stock, I would need evidence of Pandora being a durable brand. The idea to encourage repeat purchases , making it easy for the buyer ( men) by making jewellery a collections is a good one, but few of these thing are really durable and once it goes downhill, there is almost no way to arrest the slide.
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John Hjorth

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Re: CPH:PNDORA - PANDORA A/S
« Reply #12 on: August 07, 2018, 10:39:20 AM »
Todays PNDORA trading and broker statistics attached.
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whiterose

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Re: CPH:PNDORA - PANDORA A/S
« Reply #13 on: August 07, 2018, 01:11:36 PM »
Re: statistics: I'm not sure what it means; that clients at Anonymous Brokers (undefined?) sold and all others bought?

Quote
What do you think is the fundamental threat here? High ROIC stocks don't trade on 6x unless the market fears they face an existential threat. What is it?

I actually think it's not a fad. Sure, they started out with "charms" (may be a fad) but then diversified into other areas: rings, necklaces, earrings etc. One can observe a long term shift into branded jewellery over time, based on their sources and also Richemont said this before.

The product as such is cheap aka affordable, but that's just (jewellery) market segmentation. There is real demand for this stuff out there, think kids/girls/teenagers/students or low to mid-income (young) couples etc. also single women who want to treat themselves. Customer base is pretty varied, also on the age-spectrum.

The in-house production line in Thailand looks pretty efficient and they even innovate some new processes and improve on existing ones.
I think it's overall just a management issue. The board should think about replacing the CEO. Maybe they become a target for an activist? Or like I said a buyout from an informed investor could be an option.

Parsad

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Re: CPH:PNDORA - PANDORA A/S
« Reply #14 on: August 07, 2018, 01:23:02 PM »
Pandora A/S (often styled PANDORA) is an international Danish jewellery manufacturer and retailer.
Pandora is known for its customizable charm bracelets, designer rings, necklaces.
The company has a production site in Thailand and markets its products in more than 100 countries on 6 continents with more than 7,700 points of sale.

The share price development looks ugly, they guided down today, price dropped again 20%.
Fundamentally it's looks really cheap.
Large FCF, growth is slowing.
A good sized share buyback is in place (although you can argue too early)
Dividend yield is now at 10%
Some Analysts are questioning the management quality.
Float Short% about 8%

https://www.bloomberg.com/news/articles/2018-08-06/pandora-slashes-forecast-as-jewelry-maker-s-misery-grows-deeper

Looks like it could be of value to a strategic buyer or even a PE-firm (taken private?)

What do you guys think?

Berkshire subsidiary, Ben Bridge, runs and operates all of the Pandora stores in North America.  I would imagine that Berkshire could take out Pandora if they wanted the whole company.  Cheers!
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John Hjorth

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Re: CPH:PNDORA - PANDORA A/S
« Reply #15 on: August 07, 2018, 01:55:25 PM »
Re: statistics: I'm not sure what it means; that clients at Anonymous Brokers (undefined?) sold and all others bought? ...

whiterose,

What you see in the statistics as "anonymous broker" are foreign [non-Danish/Scandinavian] brokers with access to NasdaQ OMX Copenhagen trading in the stock today on behalf of their clients. So massive trading in the stock today, where foreign [non-Danish/Scandinavian] investors are dumping the stock, and Danish investors picking it up, to the best of their ability [wallet size], with Danske Bank clients being the exception [net selling].

Personally, I agree with your overall perception of the company. Please take a look at the January 2018 Investor Day presentation. There is to me personally no doubt that what Mr. Colding Friis is up to ref. the business plan is the right thing to do. His intention is to revitalize and to revamp the company, morphing & diversifying the company from a "one pillar" company [bracelets] to "general jewelry - Pandora style".

This is a communication mishap [ref. above], which likely will cost Mr. Colding Friis his job. Time will tell.

Edit:

Annual Report 2017, p. 46:

Quote
As of 31 December 2017, institutional investors in Denmark held 12% of the share capital, institutional investors in Europe held 47% of the share capital (of which 29% was held by UK investors), and institutional investors in North America held 16%. As of 31 December 2017, 12% of the PANDORA shares were held by Danish retail investors.
« Last Edit: August 07, 2018, 02:39:51 PM by John Hjorth »
”In the race of excellence … there is no finish line.”
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John Hjorth

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Re: CPH:PNDORA - PANDORA A/S
« Reply #16 on: August 07, 2018, 02:09:56 PM »
Berkshire subsidiary, Ben Bridge, runs and operates all of the Pandora stores in North America.  I would imagine that Berkshire could take out Pandora if they wanted the whole company.  Cheers!

Yes, Sanjeev,

I also wonder if Mr. Arnault would be interested in this thingy. They could both do it easily. No anchor investors here to say no.

Edit:

Annual Report 2017, p. 46:

Quote
As of 31 December 2017, there were no single shareholders owning more than 5% of the share capital and voting rights in PANDORA.
« Last Edit: August 07, 2018, 02:38:13 PM by John Hjorth »
”In the race of excellence … there is no finish line.”
-HH Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates and Ruler of Dubai

DooDiligence

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Re: CPH:PNDORA - PANDORA A/S
« Reply #17 on: August 07, 2018, 04:00:57 PM »
Pandora A/S (often styled PANDORA) is an international Danish jewellery manufacturer and retailer.
Pandora is known for its customizable charm bracelets, designer rings, necklaces.
The company has a production site in Thailand and markets its products in more than 100 countries on 6 continents with more than 7,700 points of sale.

The share price development looks ugly, they guided down today, price dropped again 20%.
Fundamentally it's looks really cheap.
Large FCF, growth is slowing.
A good sized share buyback is in place (although you can argue too early)
Dividend yield is now at 10%
Some Analysts are questioning the management quality.
Float Short% about 8%

https://www.bloomberg.com/news/articles/2018-08-06/pandora-slashes-forecast-as-jewelry-maker-s-misery-grows-deeper

Looks like it could be of value to a strategic buyer or even a PE-firm (taken private?)

What do you guys think?

Berkshire subsidiary, Ben Bridge, runs and operates all of the Pandora stores in North America.  I would imagine that Berkshire could take out Pandora if they wanted the whole company.  Cheers!

I looked in the local store today & was somewhat impressed.
I thought they just sold beads with CZ's?

You get what you pay for with Thai manufacturers.
Many are quite good.

I'll take my exposure through BRK.
« Last Edit: August 07, 2018, 06:15:10 PM by DooDiligence »
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petec

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Re: CPH:PNDORA - PANDORA A/S
« Reply #18 on: August 08, 2018, 12:35:30 AM »
@ John: can you explain why you are so certain to sell this in the long run? I get that they sell tat, but there's a big market for tat, and customers are almost evenly spread across the income classes. The financial characteristics are excellent and there seems to be a coherent plan to reinvigorate innovation and efficiency after a period of over-expansion. For me the key question is: is this the Inditex of jewellery or is it just a fad? What do you think is the key issue that will make you sell?

EDIT: I'd add that margins here are so high that it's quite hard to make it look expensive. Even if sales fall 10%, gross margins fall 500bps, and operating spend rises 5%, it's still on about 12x.

@ whiterose, why do you think there is a management issue here? And is it really a management issue (i.e. are they doing a bad job of running the company, which I care about very much) or is it a communications issue (which I really don't care about on 6x earnings).
« Last Edit: August 08, 2018, 01:02:36 AM by petec »

John Hjorth

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Re: CPH:PNDORA - PANDORA A/S
« Reply #19 on: August 08, 2018, 04:41:17 AM »

@ John: can you explain why you are so certain to sell this in the long run? I get that they sell tat, but there's a big market for tat, and customers are almost evenly spread across the income classes. The financial characteristics are excellent and there seems to be a coherent plan to reinvigorate innovation and efficiency after a period of over-expansion. For me the key question is: is this the Inditex of jewellery or is it just a fad? What do you think is the key issue that will make you sell?

EDIT: I'd add that margins here are so high that it's quite hard to make it look expensive. Even if sales fall 10%, gross margins fall 500bps, and operating spend rises 5%, it's still on about 12x. ...

Pete & Spekulatius,

Please disregard my severely biased comments yesterday about calling it a piece of crap. We got some fun and good humor out of that I got carried away. whiterose also politely pointed out, that there is actually a quite strong demand for products sold by the company, at very good margins. Those comments were about the products, based on personal taste - I can't come up with something more subjective than that.


The whole luxury industry is making money by putting a global tax on vanity.

Actually, the mild pushback I got yesterday on here made me check today the spread on a high end bracelet and a low end, simply taking it to the extremes with regard to charms on the bracelet [here I'm using UK prices, for Pete]:

A bracelet with ten Majestic Crown, gold charm, 0.108ct TW h/vs diamonds will set you back a bit north of GBP 6,000. [Please note, that this particular charm is marked "trending product", and if you click on it, it's right now out of stock, indicating to me that it's going like hot bread.

We live a few kms from a mall called Rosengårdcenret located in the South-East part of Odense, where there is a Pandora shop. We visit that mall frequently, but I haven't paid any attention to that particular shop before. I'll go scouting a bit there tomorrow after normal working hours to get a perception of how the experience is.

Pandora is basically GARP investing, while I think it's actually cheap right now, because of the actual company situation.

My concerns are about its size. It's a mini in the luxury industry, and it is only in one segment of the whole industry. That risk of getting tasken out of the investment at a price buttom plus some premium to that I consider real. The company is basically up against behemoths like LVMH, Richemont & Kering.

That line of defensive thinking also implies, that one will never hit the next Inditex, naturally.

Attached is an industry report from Deloitte.
« Last Edit: August 08, 2018, 04:57:34 AM by John Hjorth »
”In the race of excellence … there is no finish line.”
-HH Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates and Ruler of Dubai