Pandora CEO on Tariff Impact, European Market, Lab Grown Diamonds, Prices

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00:00You reported second quarter earnings and your stock tumbled after your revenue missed analyst

00:05estimates. What surprised you about the current backdrop? So we delivered eight percent organic

00:09growth. We delivered three percent like for like. We had an eight percent like for like

00:14growth in the U.S. So I have to say I'm quite surprised by this this big reaction from the

00:20market. I mean we were a hair off. We reconfirmed the guidance for the year.

00:24We reconfirmed the profitability of the group. So so actually Pandora is in a really good shape.

00:33So so the reaction from the market I think is is is quite volatile actually. You did mention some

00:39challenges in Europe and I'm curious as to which specific markets are seeing

00:44more weakness versus those that are better positioned. So if we look back over the last

00:5012 months there is no change in trajectory in our European business. The underlying business

00:57continues to be either weak or strong. It's the same story as we've had in the prior quarters.

01:02So overall Europe was plus one percent which you know in this context it looks like a pretty solid

01:07number compared to my peers. My Iberian business continues to be on WG growth. Eastern Europe

01:13continues very strongly. A number of other markets in Europe. UK we have a calendar shift because Mother's

01:19day fell in a different quarter this year. So if you look at the first half number UK it's minus

01:24three which is probably in lockstep with the market and similar to where we've been before.

01:29France we've been having some issues that's been kind of cruising around six seven and negative

01:34as the prior quarter. So there was no no change in trajectory there. The same goes for Italy. Germany

01:41which has posted very very strong growth in the last couple of years and in the last three years we've

01:45literally doubled that business. We were up against a baseline of 65 percent growth of quarter two in

01:522024. So there was never an expectation that we would surpass that. So but underlying that business

01:58continues to be very healthy. So if I look at the structure of the business in Europe it is in in the

02:03same shape that it's been for a while. So no no actual change there. You've already raised prices a few

02:09times in the last 10 months. I'm wondering what you're thinking is on future price increases. So

02:15we're not going to do any more this year. That's for sure. What remains to be discussed is obviously

02:22the impact of the tariffs in the U.S. But I think we'll now have to see a little bit how the market

02:27settles and then we'll go from there. But for the remainder of this year there is nothing else planned.

02:32You've said that U.S. consumers will have to foot the bill for tariffs and I know that that's a moving

02:37target. We don't have any certainty on this right now but I'm curious as to how you think about whether

02:42or not you will pass on the full cost of tariffs maybe half of it less than half. What is the

02:46discussion on that like? The situation is that most if not all jewelry makers in in the U.S. they import

02:55from from Asia somewhere which means that we're all faced with the same let's say challenge of the

03:00tariffs and how do you now deal with that. So I think that the conversation over the next I don't

03:05know 12 to 24 months is going to be to watch how the market is moving. It's quite obvious that some

03:12or all of these tariffs at one point will be be moved over to to the consumer's pocket. Is it going

03:19to happen all in one go or in several iterations? That I don't know and I think the market is is probably

03:25going to move in steps here. So we will have to watch the space and and then we'll react accordingly.

03:31What continues to be very important for Pandora is our reason to be in the jewelry market is that we're

03:37an affordable proposition. So that relative position cannot change in my mind. So therefore

03:44we will have to be quite dynamic in our thought process on on how we ensure that the consumer still

03:49views Pandora as a very good option for gifting or for themselves. Is Pandora considering moving any

03:55production from Asia from places like Thailand to the U.S. in order to perhaps mitigate the impact

04:01of tariffs. Well the answer to that question relies on two things. First of all wherever we move our

04:11production it has to go into a place where I can find enough people that are familiar with the craft.

04:18Okay and and where we source currently in in primarily in Thailand they have a long-standing

04:24tradition of of this type of craft. As we've looked on on across the globe from a sourcing standpoint

04:31we don't see that that tradition sits anywhere in in the North American continent not to the tune of

04:39the amount of people that we need. For perspective we have roughly 15 000 people that are working in our

04:45factories in Thailand. So there is no place in U.S. which could actually offer up that level of skill.

04:51So so it's not like I'm moving a machine from one country to the other that would be a different

04:55conversation. But here is a matter of finding the right skill. Then secondly of course if you find the

05:00right skilled labor then it has to come at a competitive price which is incredibly important for us

05:06since we are offering affordable jewelry we also need to then make jewelry in a very cost efficient manner.

05:13So if I look kind of at the labor cost if I compare let's say the Asian region versus U.S. for this type

05:19of labor if we now could find it U.S. is simply not competitive irrespective of the tariff levels.

05:27So but as I said the first hurdle to overcome is to find enough skilled labor and and that somehow

05:33doesn't work for us in North America. So right now there is no view that we would move production.

05:38I want to ask about lab grown diamonds because that certainly has changed your industry quite a bit.

05:42It's growing in popularity we know especially among younger consumers like Gen Z.

05:46Do you see this as a permanent shift? What we have when it comes to lab grown

05:50diamonds is the fact of the matter is a diamond is a diamond irrespective of whether it came from

05:55the ground or whether we managed to to create this in labs is kind of so the outcome or the result

06:03is a diamond. So it's the same. Now the diamonds that come from labs come with a very different cost

06:09profile. So the value proposition on lab grown diamonds obviously challenges the norm from mine

06:17diamonds and consumers are voting with their wallet. This is the long and short of it. And today there

06:23are more lab grown loose stones sold in the U.S. than there are mined. So the consumer has already

06:29voted in favor of lab grown diamonds. So the value proposition simply is superior and we should not lose

06:35sight of that this is actually a technology revolution. And if you go back in the history of mankind

06:40whenever we when humans innovate and find better solutions to the ones that were there before

06:46consumers will move along at one point. So yes this is a permanent shift.

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