How did Pandora fare in Q1 with Corona hitting Physical Stores Hardest?

Pandora A/S (PNDORA DC) released its Interim Financial Report Q1 2020 today (May 5, 2020). January and February showed very encouraging sales trends, but then Corona hit the physical store networks. How did Pandora cope with the lockdowns?

This is not investment advice. Please read the disclaimer. I might own discussed stock(s) currently or at a later time. I might transact in any securities at any time.

I do currently own shares (economic interest) in mentioned companies.

Pandoras Q1 2020 materials can be found online: announcement, interim financial report, presentation. Shares are trading higher after earnings release, earnings call. Q1 highlights are:

Short Term Issues

Pandora is hit hard by corona, based on its vast physical store network, even when online stores soften the blow. Manufacturing is running smoothly so far and inventories are healthy. Most important, Pandora is in a strong financial position, enabling Pandora to prepare for a rebound.

Online Store

Manufacturing

Financial Position

Preparations

Long Term Implications

Organic sales growth for the first two months (+1%) is encouraging and is supporting my notion that Pandoras turnaround will be successful in the long run.

Several strategic plans seem to be going forward as planned. Understandably, the testing of new physical store designs takes longer.

• concept stores decreased by -24 during Q1 2020 (vs Q4 2019)
• adjusted gross margin was 77.4% compared with 75.9% in Q1 2019
• Total operating expenses (excluding restructuring costs) increased +1% YoY, driven by increased media spend and commercial initiatives conducted in the early part of the quarter.

The below closing remarks sum up Pandoras situation quite well. The financial position is strengthened.

Valuation Update

My last Pandora valuation after the trading update in March 2020 indicated a fair value per share of DKK 702 ($ 103, € 94); see all my Pandora posts. This valuation should not change dramatically, based on:

• financial position is strengthened and survival secured
  • sale of 8m treasury shares will be dilutive (c. 8.7%), though.
  • kind of an insurance to survive short term and being able to capture the long term earnings stream
• a successful turnaround seems more likely now, in ther longer term
  • will be key to carry brand and sales momentum in the post-corona time, thus targeted marketing spend

With updating some valuation inputs, I get a fair value per share of DKK 644 (€ 86, $ 93), and I believe my valuation to be conservative.

A second wave of severe global lockdowns in Q4 is a key risk for Pandora since the last quarter (christmas) provides high revenues and profits. Other risks are manufacturing or supply chain disruptions.

Outlook

I will update my valuation and calculate a new fair value per share once more when some uncertainty is (hopefully) removed in the coming months. Currently I do not plan to buy more shares, since (a) I already own a large chunk of Pandora (relative to my portfolio) and (b) my recently started concept site quality assessment indicates an overall low quality score (in the preliminary result section).

Hope you enjoyed my post!
Keep safe and stay healthy!
Best, s4v

What is your opinion on Pandora, currently?

Update

Pandoras shares soared higher on Thursday (+10% 8.5%). The timing ob my last Pandora purchase (below) seems to be a better timing than my recent purchase of SES. But its never about buying at the bottom, since it does not work (see quotes). Regarding the timing of Pandora purchases:

• I bought Pandora four times before (5 times in total).

Reductions in short positions were reported.

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