Good morning, everyone, and welcome to the conference call for Pandora's Q3 2026 results. I am Bilal Aziz from the Investor Relations team, and I am joined here by our CEO, Berta de Pablos-Barbier, CFO, Anders Boyer, and incoming CFO, Paulo Garcia, and of course, the rest of the IR team. As many of you probably know, we will be providing a strategic update on today's call. We will therefore start with a quick download of the Q3 results and then move into the strategic update. With that, as usual, there will be a Q&A session at the end of the call. If you could very kindly limit yourself to two questions at a time, that would be great. Please pay notice to the disclaimer on slide two and turn to slide three, and I will now hand over to Berta.
Thank you, Bilal, and welcome, everyone. Let me start with our third quarter results. We deliver 6% organic growth. That includes a 4% like-for-like growth, with all four regions contributing positively. This is, of course, an encouraging step forward against a challenging consumer backdrop. Of course, importantly, we continue to see the impact of the actions we have taken to strengthen demand. Profitability also remained strong. The gross margin reached just under 84%, and EBIT margin close to 16%. Both increased versus last year and benefit from the one-off income of previously paid U.S. tariffs. However, there is also an underlying strength in the business, as excluding this refund, gross margin improved by 100 basis points, which was supported by healthy underlying drivers and a very good cost discipline. So overall, a solid performance despite many external headwinds. An encouraging quarter.
There is, of course, more work ahead, but we are confident in our plans to turn this progress into consistent quality growth. We have spent this year deepening our understanding of consumers so that we can sharpen our choices and create consistent demand. Later, I will show you how this comes together in our new demand model. Let us now turn to guidance and to the next slide, please. Based on our performance year to date and our outlook for the remainder of 2026, we are upgrading our full-year guidance. We now expect organic growth of 2%-3%, compared with our 0%-3% previously. We are also upgrading our EBIT margin guidance to 22.5%-23%, and that comes from a 22%-23% previously.
This growth update reflects the higher like-for-like expectations, now at 0%-1% for the full year versus what we communicated previously, -2% to 1%. Okay, now let me address what this implies for quarter four. We are encouraged by the improvement in quarter three, but we are not assuming that the recovery will follow in a straight line. The consumer environment remains uncertain, geopolitical risks are high, and some of our initiatives will take time to deliver their full potential across all markets. It is also important to note that in quarter three, Japan accounted for nearly 2 percentage points of the entire like-for-like growth, and that is a market we expect to moderate in due course. Balancing confidence in the action and realism about the environment in which we operate. Anders will take you through the guidance a little bit more detail later.
And on current trading, by the way, October landed at +1%. Let's now look a little bit more closely at our performance in the quarter. So let's go to the next slide, please. If we look at performance by segment, both parts of the portfolio deliver positive like-for-like growth in quarter three. Core returned to grow at 1%, and this was supported by the second Talisman collection launch, the continued strength of our collaborations, and also relevant newness introduction in our playful charms with the Blue Ocean collection. Fuel with More accelerated to 9% like-for-like growth, with sustained momentum in Timeless and double-digit growth in Essence. Let's go to the next slide, please. You see in this slide, something that I like to spend a little bit of a moment, which is Talisman.
We first introduced this collection last year in a distinctive new collection within the bold aesthetic. In Q3 this year, we expanded Talisman with zodiac-inspired design and extended its distinctive design language into new jewelry category, rings, earrings, and new necklaces. So, we also amplified the collection for our customers with events in different cities like London and Los Angeles. We brought together press and influencers, which generated a strong earned media coverage. So if I'm focusing on this, it's because Talisman is a good illustration, a good example about how can we build enduring design platforms that consumers recognize as Pandora while we renew with fresh creativity and amplify through cultural relevance. That combination generates excitement, earned media value, and of course, commercial returns. This is how we plan to build lasting desirability, by evolving designs over time rather than relying on a succession of one-off launches.
So let's move to the next slide, please. We turn to our regional performance. All four regions deliver positive like-for-like growth in quarter three. I would like to highlight that during the quarter, we deliberately reduced promotional activity since we want to build demand through the strength of our product brand and consumer experience rather than relying excessively on promotions. And in quarter three, we were able to do that. In North America, like-for-like growth accelerated to 3%. That was supported by better in-store execution, product newness, and targeted brand activation. Consumer sentiment and traffic, however, remain subdued. EMEA improved to 1%. Spain, Poland, and Portugal continued to perform well, while U.K., Italy, and Germany improved sequentially.
Latin America delivered 6% like-for-like growth that was supported by the actions implemented earlier this year, which included, if you remember, our price repositioning model, partly offset by the planned promotional reduction in Mexico. Asia Pacific continued to deliver strong growth at 20%, led by Japan. As I mentioned earlier, the growth in Japan contributed to nearly 2 percentage points of the total group like-for-like in quarter three. Now, the success that we have in Japan demonstrates our demand model in new markets. So, we still remain encouraged by the opportunity in the region, but of course, these growth levels will moderate as we move forward. And with that, I'm very happy to hand over to Anders to give you a run through the quarter three financials.
Thank you, Berta. Please turn to slide 10. Let me start with some of the financial highlights for the quarter. Starting with the gross margin, you will see that it was just below 84%, so a very high level. Similar to the second quarter, this did benefit from a one-off gain of around 340 basis points coming from the refund of tariffs. Even excluding that, the gross margin was above 80%, and thereby 100 basis points above the level last year. That means that we more than offset all of the headwinds coming from commodities and the ongoing tariffs. The lower promotional activity in the third quarter comes through positively on the gross margin as well. At the same time, we saw favorable channel mix, operational efficiencies, and also some other one-off income that all supports the gross margin.
On working capital, net working capital, excluding the impact of commodity hedging, was higher versus last year at 7.2% of revenue, as you can see in the table here. As mentioned earlier on this year, this was expected and is driven by the inventory build relating to, first of all, higher commodity prices, but also our transition to platinum plating and our decision to improve stock availability at retail to drive revenue. Now let's look at revenue development in more detail at the next slide. Third quarter delivered 6% organic growth, supported by like-for-like of 4%. Berta has already covered the like-for-like driver, so I will just touch on one building block in the bridge here, and that's the -2% impact from sell-in and other. That reflects a couple of different elements, including lower sell-in to some partners, but also some phasing into Q4.
We expect some of that to reverse next quarter or this quarter, Q4, and thereby remain at -1% for the full year as planned. Let's turn to profitability on the next slide. EBIT margin, the performance was strong. The reported EBIT margin increased 190 basis points to 15.9%, as you can see in the bridge here. Similar to the second quarter, this was helped by a refund of our claim on U.S. tariffs, and that accounted for 370 basis points on EBIT margin level, as you can see here, with the largest building block in the bridge. You can also see a slight negative net operating leverage in the quarter, despite like-for-like being at 4%. That's simply mainly the reversal of the positive cost phasing, which helped operating leverage positively back in Q1 and Q2.
You will remember that we had called that out earlier, and we still expect this phasing to be neutral for the full year. Without the one-off effects to phasing external headwinds, you can also see from this bridge that the underlying margin is broadly flat versus last year. Let's move to the guidance, please. We have upgraded both our revenue and EBIT margin guidance, and let me tackle revenue first. We have upgraded our organic growth guidance to 2%-3%. The upgrade is driven by higher like-for-like expectations, where we now see like-for-like growth of between 0% and 1%, while before it was between -2% and 1%. I am sure that most of you have figured out that for Q4, this implies like-for-like growth of between, let's say, around -3% and around flat. That's despite an easier comp here in Q4.
That deserves a few more words. The low end of the guidance continues to factor in the fact that the consumer environment remains weak, and that the geopolitical uncertainty remains very high. Even though we only have eight weeks left of the year, we do see an elevated risk that geopolitics can impact consumer behavior with short notice. The high end calls for around flattish growth in Q4, and a few points around that. Roughly half of the growth in the third quarter was driven by Japan, and we do not expect that to continue. On that note, Japan is comping more than 100% like-for-like growth last year here in Q4. Secondly, on the comp base, if you dig into the comp base, you will see that the comps do get a fair bit easier here in the Q4.
It is not least in the U.S. where the comp base gets easier, 4 percentage points, in fact, from Q3 to Q4. But the U.S., in a way, is just a hard environment to call these days, so let's see how the holiday season plays out during the next couple of months. Finally, as we have reported, our like-for-like growth so far here in Q4 was +1%. It was negatively impacted by lower promotional activity, and the underlying trends remained healthy and closer to 3% like-for-like growth. Summing it up, we are very pleased with the progress that we have seen so far in 2026. We are pleased with what we have lined up for the peak season ahead of us, but we have to keep in mind that the consumer environment is not strong, and the short term is subject to elevated uncertainty.
Next slide, please. On the EBIT margin, we have upgraded our guidance slightly and now expect a margin between 22.5% and 23%. Basically, it is an upgrade towards the high end of our previous range. You can see our updated and quite detailed bridge here. There has been a few small moving pieces between the building blocks since last quarter, but basically, the upgrade accounts for a slightly higher amount related to the refund of our tariff claim and slightly lower one-off cost related to the platinum transition. On that note, I will hand it over to Berta for the strategic update.
Thanks, Anders. Can we please turn to slide 17? Over the past 11 months, and particularly since February, I have been sharing with you my perspective on what we need to sharpen to re-energize Pandora's growth. You will recognize this slide, which I have shared with you before, and it outlines the strategic priorities we have been discussing and gradually have been implementing in this year. I have talked before about the importance of design, strengthening our brand relevance, and taking a more differentiated approach to win market by market.
But I have also been very clear about the strengths that we have and the strengths we are building from. Next slide, please. Our vision is very clear. It is to become the world's most desirable, accessible jewelry brand. I want to emphasize that accessible here is not just a compromise, it is our foundation, and it will stay that way.
There is no doubt about that. Pandora operates in a large, growing, and still very fragmented market. We are bringing a globally recognized brand, resilient collections, and world-class craftsmanship at scale. Our integrated value chain and store network give us direct access to millions of consumers worldwide. Together, those advantages cannot be taken for granted. They set Pandora apart, and they underpin our strong competitive position. Of course, great awareness, scale on its own will not deliver the consistency of growth we are aiming for. We have built a leadership in a relatively focused playing field. The question is how we evolve that strong foundation for the next chapter of growth. Let's go to the next slide. We have a very simple goal. We want to build a bigger Pandora while remaining unmistakably Pandora.
This means for us that we need to build the brand with discipline and consistency, but we need to broaden our relevance. We have built our leadership mainly on playful charms and charm bracelets, and that success has actually shaped a very narrow perception of the brand. Millions of people know Pandora, but many still associate us with that relatively narrow part of the jewelry market. Our growth opportunity is to give more reasons to existing customers to keep coming back and more reasons for new customers to start choosing us. This is why, throughout this year, we have been conducting deep consumer work, and we have focused on three questions. Pandora, a strong brand, but what is the role that we play in people's jewelry life? What is really making Pandora distinctive? Design is important, but in which aesthetics can we credibly win with our collections?
Last but not least, how consumers experience Pandora across every touchpoint, and we pay a very particular attention to our stores. We have been doing all our homework, we have listened very carefully, and we have a clear and sharper understanding of where our growth opportunities lie. I am going to take you through all of this, so let's go to the next slide. What became very clear through our research is that jewelry is no longer just about adornment or a status. Our research revealed a strong appetite for jewelry that can be personalized, layered, and added on over time. By the way, charms have never been so relevant as they are today. Customers, we learned, want to create their own style and looks, building collections that evolve with them over time.
They choose pieces that become more meaningful as they add to them, because they carry their story. We see this in multiple aesthetics and categories, from charms, but also in rings and necklaces. Also, it is important that this new attitude toward jewelry, it is shared across ages and geographies. It is sparked by Gen Z, which have a strong influence, but it is spread broadly and is not limited by age. What is encouraging about all this information is that the behaviors that are shaping the future of jewelry are already part of Pandora's DNA. It is where we dominate today. Our opportunity is how we use that strength to attract more customers in different ways. Let's go to the next slide. What is it that makes Pandora distinctive in people's jewelry lives?
Well, it first starts with a role that resonates with all customers, the one that purchase Pandora, but also, and very importantly, those that do not buy us today. Pandora gives millions of people more ways to express who they are and what matters to them through jewelry. We are building on that heritage to unlock something bigger, which we refer as unlocking the joy of expressing who you are. Rather than me continue to explain this with words, we thought that it would be a good idea to put together a short film that captured this ambition, the ambition behind this direction. Important, this is not an advertising campaign. It is just a mood film to illustrate everything that I have been saying before, but of course, it will inspire our campaign. Let us just watch it.
[Presentation]
So yes, you have just seen it, unlocking the joy of expressing yourself, unlocking the joy of being who you are. This is more than just a brand ambition. This is about self-expression, and this is the role that Pandora plays in people's life. The jewelry, our Pandora jewelry, is bringing it to life through a very simple truth. Let us go to the next slide. We craft symbols created in culture, worn as identity. This is what makes Pandora distinctive. This is what makes it unmistakably Pandora. From hearts and bows to stars, amulets, and protective Talisman, from mythology and spirituality to animals and the people and places we love. These are all creative opportunities we can scale. Historically, we have been delivering this with charms and bracelets only in one aesthetic, the playful aesthetic.
Now, we can bring these symbols to life in different aesthetics, in different categories, and this unlocks new opportunities to grow. Also, our charms can evolve across different symbols, across different aesthetics. Symbols don't always have to take the form of charms. What I am saying is that this insight can inspire new jewelry design across different categories, and that's why our demand creation model starts with design as the first engine to drive growth. Let's look at it, going to the next slide. Our model brings together three engines to generate demand. Design creates desire and gives customers more reasons to choose Pandora. Brand is building relevance, so more people see Pandora as a brand for them. Experience turns both into growth. They reinforce each other, and together, they drive demand.
More consumers, higher conversion, which combined with our scale and operating discipline, is turning that demand into growth. You have seen that this year, we already have started implementing this new model, and we are seeing encouraging signs. Let me just take you through each of this engine, and of course, we start with design. Let's go to the next slide. Now, with designs, with aesthetic platforms, how have we defined where to play? We did a very in-depth research, and we identified four sizable aesthetic platforms that have the greatest growth potential for Pandora. You can see them on the screen. They are playful, sparkling, bold, and delicate. We are already leading in playful, but we believe we have only scratched the surface of its potential. By bringing fresh creativity, we can still unlock significant opportunity with refreshed designs.
In sparkling, we have already established a strong position. We have there our Timeless collection, but really, we have barely begun to explore the breadth of creative themes it can offer. In bold, where we have Talisman, and delicate, we are just getting started. Our early successes have confirmed that we can win in these aesthetics and that we have credibility to win, and of course, significant room to grow. You have seen what we've been doing on Talisman in the bold aesthetic, and delicate will be a priority for 2027 with a new collection introduction. Today, with playful and sparkling, we've been concentrating in around 25% of the market. By expanding to these new two aesthetics, we are expanding our play field to around 65%. So, we have room to grow where we already lead, and even more when we are getting starting.
At the end, it's about refreshing our designs, and it's about giving more customers more reasons to choose Pandora. Because, of course, we do that through different designs in enduring platforms. The designs evolve, and customers keep finding something to love, but design doesn't need to start from zero every single season. It's building desire over time across platform. Let's see what we mean by going to the next slide. I'll bring it here to life with three collections: Blue Ocean in playful, Garden of Dreams in sparkling, and Talisman in bold. Each of them give a different way to express consumers who they are, and we do that with Pandora jewelry. These three collections, and you can just read there the like-for-like, have been our strongest performers this year, which gives confidence in the growth potential when we expand to new aesthetics.
It's not only introducing the products, it's also the way we launch these collections, the way we brought our model of life, where we combine distinctive design with cultural relevancy to drive success. Yes, if design creates desire, we need the brand activations to turn that desire into demand, and that take us into our second engine, brand. Let's go to the next slide. I think I have been sharing this in previous quarters, so I'm not going to extend here. We are evolving our marketing in three ways. First, we are shifting from broad brand communication that was mainly on linear TV to bring our collections to life through curated storytelling, and this is simply making it easier for our customers to discover our new jewelry and to choose it. The second, we've been very focused on reach, and now we are establishing also reach and cultural relevance.
This is about creating excitement and generating earned media. You see there a picture about the launch in Q3 of Pandora Wonders, which generated record earned media. Of course, from one global expression and one global brand that we keep, but we have to be a stronger local. So it's a global expression with local relevance, so that we keep a global identity, but we have local impact. So, once we have the brand, how we turn that desire and relevance into every interaction that customers have with Pandora? Let's go to the next slide. We need to elevate our customer experience, which is our third growth engine. Of course, experience spans across every interaction that our customers have with us, from the digital channels to our packaging, but to our stores.
Every one of them is an opportunity to inspire purchase, and that's why we have to treat them with a lot of care. I want to focus today on our stores. Why? Because it's our real strength. We have a network that connects us with customers every single day, and we create meaningful connections with our sales associate, and that is a real strength. All our studies and research told us that we can create a warmer, a more engaging, a more immersive experience in our store with a clear zoning, richer storytelling, making discovery of our collection easier, making it more inspiring so that consumers can explore more of Pandora and turn that inspiration into purchase. We have also been rolling this year our digital displays across more stores so that we can showcase those collections on the front of a store.
Another thing that is important is that we are providing more styling ideas. I want to spend a little time on style, because style is now very central about how Pandora shows up. We do create jewelry that customers can wear in many ways, and we are making that versatility visible and desirable. We are not only training our sales team on style, but we are also displaying inspiring looks into the store and using these new digital screens to show how the piece can come together in different ways. At Pandora, we are not dictating how you wear jewelry, but we do need to help our customers choose how to wear it in their own way, in their own style. Now, this is not just words. We've been testing this approach in stores in Italy and in the U.S.
The results are encouraging in the commercial metrics, including conversion, but also in feedback from consumer surveys about the discovery of our jewelry. We are making discovery easier, and we are inspiring consumers to explore more of Pandora. With that, let's turn to slide 29 in the deck. Let me pause here a little bit a moment, because I have been sharing quite a lot of things with you. I've taken you through the three reinforcing engines behind our first priority, and this is about re-energizing growth through design, brand, and experience. Of course, we have a second priority, and it's ensuring that we are diversifying our metal mix to protect our long-term profitability with platinum plating as a key response to the rising silver prices. Let's spend some time on that, and please, let's go to the next slide.
In February, we introduced you to platinum-plated jewelry on our signature metal alloy, which over time will replace part of our existing white metal portfolio. This supports profitability, but is also a very compelling proposition for customers. Why? It brings platinum, a precious metal, into a more accessible format with durability for everyday wear. You may remember that we started with a pilot in the Netherlands in July this year, and the results are giving us confidence in the consumer acceptance of platinum-plated jewelry, and is reinforcing our view that consumers don't come to Pandora to buy grams of metals, but they really come for the design and the brand. Based on that, we have now expanded both the range of products, but also the availability of our platinum-plated jewelry assortment, and we are reaching most of our largest markets.
Again, the early customer response is very consistent with what we saw in the Netherlands pilot. The customers are valuing the lasting shine and also the affordability of precious metal jewelry, so this is giving us now confidence to move forward with an innovation that consumers value, but has also a strong economics for Pandora. Let's move into the next slide, please. Of course, we have been working with platinum plating for more than a year. What is new today, and you can see a little bit animation on this slide, is that although our work with this material has been focusing on transitioning some of our portfolio, we are opening now new design possibilities for Pandora with this new material.
The material properties are allowing us to do more delicate constructions that would be difficult, even impossible, with the product that you see on the screen, to achieve in a sterling silver. This is also giving us greater creative freedom, and again, customers more choices. What you see here is our new celestial chain, and it's a good example. The silver, sterling silver softer properties would not have allowed us to create this bracelet. Platinum plated is valued by consumer, opens up new design possibility, and it protects profitability. On that, it's a good time to hand over to Anders, who will talk you through the transition plan and the EBIT margin framing for not only 2027, but beyond that.
Thank you, Berta, let's go to slide 32. On this slide here, you can see a high-level overview of how the transition is progressing over the next few years. We have been working with and preparing for this transition now for more than a year. As you can see on the slide, we have recently expanded our pilot testing from the Netherlands to a broader geographical coverage to finalize our go-to-market model before starting the transition in 2027. Some of you may have noticed that the size of the silver assortment that switched over to platinum already in 2027 is a bit lower than what we previously indicated, and there is a good reason for that.
The initial plans were based on a silver price of $82, and at that price, it made sense, so to speak, to force through the transition with all levers of our supply network, both internally and externally, even though the costs are higher externally. With the price of silver declining and with Pandora now being 90%-100% hedged in 2027 at a much lower price, it makes more financial sense to optimize the transition pace and thereby cost by rebalancing how we use our external supply network capacity and capability. Therefore, we can take a more measured approach to the transition without a negative financial impact, and to a larger extent, drive the transition in line with how we ramp up our own internal platinum plating capacity.
The transition of the relevant silver assortment to platinum plating is then expected to accelerate in 2028 and be completed by 2029. Finally, as we have communicated before, the journey will not be done by then. We need to continue to optimize and innovate our offering after the initial transition on the existing special metal alloy platform by continuing to drive efficiencies and reduce our exposure to silver. As we said back in February, and in May for that matter as well, this part of the optimization will take place afterwards, and I will speak a bit more about that on the following slide.
Overall from today, you should see it as a, let us call it two-and-a-half-year journey to complete the transition of the relevant silver assortment to platinum on the existing metal alloy platform, and then after that follows a period of optimization and further innovation to support the margins. Now let us have an update on the margins on the next slide, please. On this slide, you can see an updated version of the margin bridge we initially presented back in February, and it builds from 2026 to the left, then to initially 2027, and then from 2027 and into the midterm. Let me start with the key conclusion that you should take away.
What you see here means that after the transition, Pandora will remain a structural high-margin company. You can see that on the slide to the far right here, where we show that we expect to deliver more than 23% EBIT margin in the midterm. Tied to that, our free cash flow generation will also remain unchanged. This means, in essence, that there will be no fundamental changes to our business model and that our strong financial algorithm is intact. The other conclusion you can take away from the slide is that the top-down plans that we presented to you back in February has now been confirmed and validated through extensive work during the last nine months. This doesn't mean that all is signed and sealed, of course, but we know enough to confirm today that there will be no fundamental changes to our business model.
You will probably ask us on the when. What is the midterm exactly? There's a couple of things to understand here. As I just said, the transition to platinum-plated jewelry initially takes place on the existing signature metal alloy platform, and we make the majority of the margin rebuild back towards above 23% based on that. A part of the final margin ramp-up after that is linked to further innovation on this signature metal alloy platform, and this is part of what sat in the bucket that we called crafting optimization and material innovation from the margin bridge back in February. This last piece can only be implemented after the transition to platinum on the existing platform.
We know what to do, but the implementation has to be sequential, and for commercial reasons, we don't want to go into detail with what we exactly have in mind. Long story short, think of midterm as four years, maybe even five years from now, and we will, of course, talk more about that at the CMD next year in 2027. You can see in the bridge here that we have updated the endpoint, as I just said, to more than 23% margin compared to more than 21% previously, and that extra 200 basis points comes mainly from tailwind from lower commodities compared to when we set the target back in February. There's a few other moving pieces, but that's essentially the story.
You can also see on the slide here that the margin target is based on silver price of $50, gold at $4,000, and platinum at $1,500. Now, if we turn to 2027 specifically, the starting point for the 2027 thinking is the 2026 EBIT margin guidance of 22.5%-23%, as you can see all the way to the left in the bridge. Then if you follow me through the bridge, then first, we adjust for the 100 basis point net one-offs this year in 2026, which is mainly the benefit from tariff refunds that we have this year. Then based on the hedged prices of our commodities, we'll see around a 600 basis point headwind next year. Then based on the platinum transition, we will see around 100 basis point of margin uplift next year.
During the last nine months, we've also spent extensive time discussing strategy. As you can see, what we just presented, we do see a clear need to step up the consumer experience in our stores, and we will invest behind that in 2027. That will, of course, support growth over time, and that's one of the reasons that you can see an offsetting operating leverage bucket to the far right in the bridge as well. These investments include the flagship fleet, continued rollout of digital windows, visual merchandising displays, trays, et cetera. This takes us to an underlying EBIT margin of 15.5%-16.5% for next year. There will be certain one-offs associated with the transition next year, and on a reported basis, that takes an EBIT margin between 14% and 15% next year.
A lot of numbers, I know, but I hope that it makes sense. I also know that some of you will ask about cash returns anyway, so let's talk about that upfront here now. As you know, our capital structure policy is a leverage in the range of between 0.5 turn and 1.5 turns of EBITDA. With the EBIT margin guidance in 2027, we are likely to be a bit above that leverage range, assuming that we continue paying a dividend in 2027 also. However, beyond 2027, as leverage will come down in line with the transition, you can be assured that there will be no change in our policy to return all excess cash back to shareholders, and a large part of that through share buybacks.
Exact timing of when we reinitiate the share buyback is still too early to communicate, but you can probably do a bit of back-of-the-envelope math and see that potentially it could be during 2028, although still at a relatively lower scale. On that note, I'll hand it back to Berta.
Thank you, Anders. Very good explanation. As you have probably already read, and let's go into the next slide, please, you probably know that we opened a new crafting facility in Vietnam, and that happened on the 1st of October. When we are actually combining our current facilities that we have in Thailand, we now have total manufacturing capacity of 170 million pieces of jewelry per year. This is second to no one globally. Importantly, with the further investments that we have made this year, we also have a very flexible supply chain. What I mean is that we are now able to produce interchangeably between platinum plating, gold plating, but also solid silver and solid gold. That really leads me to the closing remarks. Let's go, please, to the next slide. I would just like to wrap up before we open to Q&A.
We are very pleased with our Q3 performance. We have delivered our growth in a tough environment. We know that we are not yet where we need to be. Pleased with the results, we are making progress, but we still have work to do. We have sharpened our choices. We have defined how we will continue to create great demand through design, brand, and experience. The goal is very simple. We need to attract new customers by giving them more reasons to choose Pandora, and we need to keep our existing customers coming back again. Execution is underway. We have more to come in 2027 and beyond, and we will be sharing more in person next year in our CMD.
We have successful testing this year on platinum-plated, and this is giving us confidence to roll it out at a scale in 2027, which is really taking Pandora to a truly multi-material offer. This is bringing new design possibilities, a compelling consumer proposition, and, as Anders took you through, stronger economics. As Anders also said, we expect these plans to return Pandora to a strong financial algorithm, which consistent high-quality growth, high EBIT margins, and a very strong free cash flow generation. Our direction is clear, and now we are really focusing on very disciplined execution. Now, of course, you want me to open to Q&A now, and we are going to do that in a second, so bear with me. First, I would like to welcome Paulo Garcia to Pandora. Paulo has been with us since the 1st of October.
Actually, you started in Thailand, getting an understanding of our crafting there, and you will officially assume the role of the CFO from the 1st of December. So I am very excited, of course, to have Paulo on board. He is bringing experience from some of the world's largest consumer goods companies, and I am sure he will get a chance to meet all of you in person in due course. Of course, I also have to sadly say goodbye to Anders Boyer. Anders, you have been with Pandora since 2012. You have been a CFO since 2018, and I think there is no doubt about the legacy that you are leaving behind. Pandora, it is a very different company when you first joined. I have been very lucky enough to work with you for the past two years.
Different words to define you, so it was difficult to choose some, but of course, your integrity, your work ethic, the results orientation, attention to detail, they are a really great credit to you and Pandora. Yes, every decimal counts, as you always remind us. So on behalf of the entire organization, I really would like to congratulate you on your retirement, say a huge heartfelt thank you, and no doubt you will be missed.
Thank you so much, Berta, for those kind words. There are many things that I have enjoyed about being a CFO over the past 20 years, but one of them has no doubt been the interaction with all of you on the call here and in the room, of course, but on the call with investors and analysts. I've always enjoyed these calls and the many meetings and conversations that we've had over the years. I know they have sometimes been challenging, often thought-provoking, and quite frequently quite good fun as well. What I have particularly valued is actually the quality of the dialogue that we've all had, because all of you on the call here, you see many companies, you bring different perspectives and experiences, and you've never been shy about asking difficult questions, and maybe we'll get to that in a second as well.
That has challenged me, it's challenged us as a team, and I genuinely believe it's actually helped make Pandora a better company. So in a few weeks, I will step away from executive life and begin the next chapter in a non-executive capacity, and I'm really looking forward to that. But I know that I will miss the interaction with this community on the call here. So, I simply want to say thank you. Thank you for the dialogue, the challenge, and also the many enjoyable conversations over the past eight years. It has been a real pleasure, but it's not fully done yet because now we can go into the Q&A.
Not finished yet.
Thank you. If you do wish to ask a question, please press five star on your telephone keypad. To withdraw your question, you may do so by pressing five star again. Remember, in the interest of time, we ask that you please limit yourself to two questions. If you have additional questions, please rejoin the queue. We will have a brief pause while questions are being registered. The first question is from the line of Thomas Chauvet from Citi. Please go ahead. Your line will now be unmuted. Thomas Chauvet, please go ahead. Your line is open.
Can you hear me? Hello?
Hey, Thomas, we can hear you.
Yeah, sorry. Thanks for the presentation, and congratulations, Anders, for leaving on a high note. Thank you very much for all your help. We will miss your great professionalism and all the best for your next projects and non-exec roles. My two questions are as follows. The first one, on the outlook perhaps for the jewelry industry. I mean, thanks for a very comprehensive update, Berta. I hope you manage to accelerate that growth in the medium term. But nearer term, could you perhaps share with us your outlook for global jewelry demand in the next 12-18 months? We have seen several of your peers slowing down significantly in both the affordable and the fine jewelry segment, particularly in the U.S., as opposed to Pandora, which has been quite resilient in Q3. So that is my first question. The second one on consumer adoption of platinum-plated.
You have indicated encouraging feedback from the pilot in the Netherlands. What can you share in terms of KPIs that have been maybe more positive than your expectations? Have you tracked, I do not know, conversion, UPT, average basket, returns, et cetera? And curious to know how your sales associates are handling situations where consumers may still be asking for the legacy silver product, if I can say. Thank you.
Yeah. Thanks, Thomas, for the questions. I think I'll take both. Listen, on the U.S., specifically on jewelry, I think you mentioned, we did see in Q3 that it was a moderate growth. Actually, it was a growth about +5%, against some tough comparison the year before. What we see is actually is mainly growth driven by value. We see similar things in some of the other regions as well. For example, in the U.K., it grew about 10%, and again, still mainly on value. So that's something that we are seeing, and driven still by the high-income consumers. The outlook on the jewelry category is positive. Jewelry is a resilient category, so we are cautiously optimistic about the years to come for the category.
On platinum-plated, everything that we have learned for the last 18 months that we've been talking to our consumers about platinum-plated is being confirmed. What is becoming very clear is that when they can compare the same product of silver and platinum-plated, the benefit about the lasting shine, the fact that it's a product that is going to have more durability, is a clear benefit for them, and that is coming as a clear benefit. The second is affordability, and that's when they can compare one versus the other. But what we are seeing as well with the new introduction of charms that are starting from October, and again, early days, is that the consumers are not making any difference. They are basically choosing us because they like the design, they like the meaning, they like the symbol, and they are getting platinum-plated.
Only one month of sales, but those platinum-plated charms are actually between the top sellers so far on the new holiday collection. Then last but not least, I think you've seen this bracelet that I just showed you is actually an intriguing design and a good innovation, so that is, of course, attracting consumers into the purchase. I only show the white metal one, but we also have it in gold-plated, so it's a good example about doing plating in white and in gold, and they are both having, so far, very good results. So, encouraging signs.
Thank you.
The next question is from the line of Zuzanna Pusz from UBS. Please go ahead. Your line will now be unmuted.
Thank you for taking my questions. I will stick to two as well. Maybe, well, mine will be a little bit more general because I am kind of having a look at Pandora. I had previously covered it, and there is definitely a very big difference in your product offering, which is quite impressive. I was just wondering, it does seem like you are trying to target a much broader range of consumers. Would you be able to maybe give us any color on, of course, I know it is early days, but in terms of who is maybe the new consumer you are attracting with the new designs and sort of new aesthetic of the product?
I do not know, maybe if there is any comment you can make on income, on age, or anything like that, just because it does feel like certainly you must be trying to capture a wider range of consumers. That is my first question. Secondly, also related to that, the new demand model, is there any change in the number of SKUs you are targeting within collections? What could be the implications on gross margin or your production, anything like that? Thank you.
Yeah, thank you. Very good questions. On the first question, what we are seeing is that first, we are actually getting a lot of returning customers. By that, I mean that customers that used to purchase Pandora three years ago, they stopped coming to Pandora because we were not offering more choices to them, and then they are coming back. That is actually very important, and that is our big, it is slightly bigger than our new customers. But second, and very close, by the way, in percentages, we have the new customers. What we see is that on the new designs, we are getting a higher percentage of the new customers than on the more traditional one. In terms of income, there is no difference. What we are seeing a difference is mainly in terms of age.
We are attracting higher Gen Z, and then the second group that we are attracting is millennials. Those are the ones that we see over-index when we are actually getting all these new refreshed designs and new collections out there. That was the first question, and the second question was?
SKUs.
Oh, yeah, sorry, about SKUs. Yes, the objective is that we do not increase the number of SKUs, but it is more that we get a more productive assortment. We believe that we have opportunities to rationalize some of our assortment today to focus on the bestsellers and the high productive, and that is actually giving space for the new collections to come. No increase in assortment.
The next question is from the line of Lars Topholm from DNB Carnegie. Please go ahead. Your line will now be unmuted.
Yes, thank you, and Anders, good luck going forward, and Paulo, a warm welcome. A couple of questions from me. The first one is in your 2027 EBIT margin bridge. I do not see any effect from efficiency gains. I do not see any effect from FX tailwinds, and also do not see any effects from channel mix changes. I wonder if you can comment on those three specific factors. Thanks.
All right. Thank you for that question, Lars. Yeah, but it is a super fair question. The same goes from 2027.
You are unmuted.
The same goes in the bridge from 2027 to 2030, because of course, underneath the bridge here, all the way from this year on to 2030, there is all the business as usual movements, if you like, from pricing, channel mix.
Anders, sorry to interrupt, but you faded in the beginning, so I did not hear the first part of your answer. Sorry.
No problem. Thanks for the question, Lars. You are right, in the bridge here on slide 33 in the deck, there is obviously a lot of business as usual building blocks, if I can call it that, pricing, leverage, investments in the business, salary increases, and all of that. The way to think about that, beyond what we have called out here specifically in the bridge, think of that as net zero, both between 2026 and 2027, and 2027 in the midterm. We do have a draft plan for 2027 and in the midterm as well, sitting with us here at Havneholmen, but we will only go into more details on that in the February announcement next year.
That is fair enough. Anders, you talked about the tricky questions you get and how much you enjoy them. So I would like to ask, what was the greenhouse gas emissions from gypsum in Q3? Thank you. No, I am kidding. That is not my question. My question is, you mentioned that due to the law of large numbers, Japan will, of course, not continue to grow 100% forever after. I think you used it as an argument for Japan contributing less to the absolute group growth in Q4. But is it not fair to say that while growth might slow down, Japan's weight on the group numbers equally increases? So why should we think any different from the contribution from Japan?
Yeah. You are absolutely right that the absolute revenue goes up. So if you compare to our 2023 as an example, revenue in Japan is up 5x, around that from 2023 to 2026, and that is including the network expansion, not just like-for-like. But we think that the like-for-like that we saw in Q3, we think it is just too much to bang into a plan that is going to be delivered in Q4 as well. So sequentially, we do think that we have to be a bit more cautious, even though the absolute revenue is still up year-over-year. But the more than 100% growth that we delivered in Q3, we do not want to bank that into a Q4 plan. That would just be too much to hope for.
And then just jumping back to my first question, Anders, if I may. You said I should consider everything else net zero, but even where FX is today, could you single out what impact you see from that next year? Maybe if I mention some of the positives, such as network change and efficiency gains, can you single out some of the factors that are not in your bridge which makes all this net neutral? Thanks.
Yeah. I am just looking into the FX piece, and I think that is based on the spot rate. It was this Thursday, Friday last week. I am looking at Bilal here. The net impact next year would be at 10 basis points drag on the EBIT margin in 2027 from FX. So, well, give and take a zero, specifically on that one. Without going into too much detail, I think it is a bit too early on 2027 yet, but we will continue opening up new stores next year, so there will probably be a tiny bit of margin support from that one. But net-net, in the big scheme of things, the business as usual, if I can call it that, building blocks and part from the more mechanical that we have in the bridge that we showed here today, think about that as plus-minus zero.
Thanks. I let you escape the gypsum question. Thanks.
That is kind. Very kind. Thank you.
The next question is from the line of Daria Nasledysheva from Bank of America. Please go ahead. Your line will now be unmuted.
Hi. Hi, this is Daria from Bank of America. Thank you very much for taking my questions, and thank you for the presentation. Just following up on the question on 2027 guidance just now, can I double-check if there are already assumptions on leverage, deleverage, or any extra investments, and what like-for-like is baked into the guidance? So this is just purely mark-to-market that exists right now. My second question is, when talking about your European performance, you mentioned you saw sequential improvements in U.K., Italy, Germany, which have been quite weak for a while. How sustainable is that, and how much of this is comp-driven versus fundamentally you are actually seeing the strategy working in more mature markets as well? Thank you very much.
Hi, Daria. It is Anders. I can take the first question. It is a, that 14%-15% EBIT margin on a reported basis next year is a real target. It is not just a mechanical update. Even though you cannot see that in the bridge, then behind that is assumptions on all the other levers that obviously impacts margins up and down next year, including our internal thinking about growth, inflation, cost efficiencies, channel mix, and FX, and all of that. But we will only go into the details on all of those assumptions in February, when we give a more formal guidance for 2027. But the 14%, 15% is kind of a real best guess on what the number will look like next year.
Hi, Daria, and I will take the second one. When we look at Europe, we are seeing different things. So if I think about our more mature markets, so U.K. and Italy, we are seeing a sequential acceleration. So directionally, it is becoming better. And when we look at the drivers of that performance, we are seeing that is some of the things that I have been sharing in the call. So it is the new demand model coming to life. So all indicates that this is going to be a sustainable and sequential growth over time. And we have achieved these results while we were discounting less and reducing the days of our promotion. So I think that is encouraging. In France, the situation is still concerning for us, so we still need to look at that. And Germany is going on the right direction as well.
Thank you very much.
The next question is from the line of Kristian Godiksen from SEB. Please go ahead. Your line will now be unmuted.
Thank you. I also limit myself to two questions to start with. Again, congratulations, Anders. It has been a pleasure interacting with you, and I look forward to seeing you again on the road show. The two questions come here. First of all, if you could put some more flavor on the consumer reception on the platinum-plated products, both in terms of what has been the dialogue with consumers in relation to the certificates that you have been waiting for, and between preferences between the metals, and then also whether you have decided on whether to do higher prices for the silver products. Then as you mentioned that the platinum-plated products have been among the top sellers in Q3, whether you expect there could be any potential positive impact on the like-for-like. That would be the first questions in terms of the platinum plating.
Then secondly, just on the margin in terms of the step-up and like-for-like, in terms of the investment in the stores, what could we expect going into 2028 as well on the impact on that as well? Thank you.
I'll take the first question. On the platinum plating, in addition to everything that I have just said on what the consumer are valuing about the platinum-plated product, I think on the question about whether on the bestsellers, will it have any impact on quarter four, the answer is no. What we are seeing is that we are talking about two or three SKUs that are in platinum plated, but the impact on the total sales are not going to be important for the quarter four sales. Regarding the pricing, what we learned from the test in Holland, if you remember, we did it in a store test, and then we did an online test.
We actually tried different pricings of what will be the price of silver and the gap that will be a good place for the customer to continue to buy both silver and platinum plated. We have established on our bracelets, and I'm only talking about the majority of our bracelet here, that a EUR 10 is actually something that the customer was willing to pay. That is the pricing strategy that we have implemented on the rollout in quarter four. Again, very early signs. Let's see, we have to go through our biggest season. But the results so far are positive, encouraging signs there from the results, but also from the feedback that we are getting straight from our stores.
On the investments in consumer experience, Kristian, it's too early to be super specific, but high level, think about it like this, that the step-up where it impacts the margin, that's a 2027 thing, and that's why we call it out. Then in broad terms, it's going to sort of fund itself after that, given based on a like-for-like pickup. We call it out specifically in 2027 because we see that that would be a topic anyways when we announce the guidance in February. Then between 2027 and 2030, as you can see in the bridge as well, it's going to pay back itself, so to speak, through leverage. But it's mainly a 2027 story, is the way to think about it.
Yeah. Okay. Then maybe just a follow-up on the silver prices, or sorry, on the silver products compared to the platinum-plated products. If there is a preference between the two metals for some consumers, is it still a consideration that you want to keep the silver product as well for the same design variations? Then just maybe a household question, the price premium, is that included in the guidance that you want to keep silver products at a premium price to platinum?
Yeah, absolutely. It is all included in the guidance. Just a clarification, this doesn't impact all our silver products. We are only keeping those on the ones where we learned the consumer wanted the choice. Basically, very simplistically, what the consumer told us is that on the bracelets, I still want to be able to choose whether I want to pay more for silver or less for platinum plating, and I have the shine, durability, longer shine. On the charms, the consumers basically told us it doesn't matter. I'm just buying this symbol with this design I like, and that's why we are not seeing any difference. The doubling is only happening on the bracelets.
Perfect. Thanks a lot . I'll jump back.
Thank you.
The next question is from the line of Anthony Charchafji from BNP Paribas. Please go ahead. Your line will now be unmuted.
Yes, thank you very much for taking my question. It is Anthony at BNP Paribas. My first question would be on regional expansion. In your strategic update, you did not mention much potential opportunity in APAC to expand. I was just curious if it is something that might be coming or addressed rather in the Capital Markets Day early next year, or if it is something that is not a priority in the coming quarters. My second question is really just a clarification on the platinum-plated price. I did not understand if the delta versus silver would come with platinum-plated being introduced at the same price of silver and then silver product being increased, or if platinum-plated is being introduced just EUR 10 below the current price, just to think about price mix into the rollout. Thank you.
Thanks for the questions, Anthony. Asia, definitely a big and important strategic topic for us, to your point. We will get back to you next year on that at the CMD, and talk you through our thought process there.
On the other question, Anthony, the way it works is that the platinum-plated jewelry will be introduced at the existing silver price, and then if there is a duplicate on bracelets, as Berta just explained, that would then be at a higher price.
Thank you.
The next question is from the line of Jon Cox from Kepler Cheuvreux. Please go ahead. Your line will now be unmuted.
Yeah, good morning, guys. Jon Cox with Kepler Cheuvreux. Couple of questions for you. You mentioned that pricing was a driver for the improvement, or value was the driver for the improvement in the U.K. and the U.S. Just wondering, looking ahead in the next couple of quarters, I guess your pricing will fade to a certain extent, and you have to start relying more on volume mix. Is that a correct assessment? Second question, just on the platinum, there's a bit of a delay in doing it, and I understand what you're saying, and I think it makes total sense. Just when you're done, let's say 2028, what the split would be with the overall collection. I think originally you said 50% would be platinum, and then if you could just give us the split.
Maybe just a question on, originally, you have a goal for organic sales growth, sort of high single digit. Part of that building block was the 4% like-for-like, which we obviously hit today. Just wondering, you've been so kind to give us sort of an outlook for maybe free cash flow and margin down the road, and that's four or five years down the road. Just wondering, when will all these new initiatives hit sort of critical mass, and we have some of the examples of the strong growth of some of the new ranges to actually ensure that you are at that 4% like-for-like on a consistent basis? Are we talking a quarter or two, are we talking still quite a few years? Thank you.
Thank you very much for the questions. If I take the first one, and apologies if there was slight misunderstanding. I think Berta was initially referring to the market data. In terms of our own performance, pricing was a very little driver, particularly in those markets that you mentioned. If anything, we saw more volume contribute sequentially, at least for us on a group-wide basis, in that sense as well. So, apologies if that was slightly misunderstood. On that, I'll hand over to Anders, please.
Yeah, there was a couple of questions in there. One was about the share of business for the platinum-plated jewelry once the transition is done. You are right that we have previously said about that at the end of the transformation, think about this, roughly 50% of revenue will be from platinum-plated. I think directionally, still thinking in that way, it might be a bit lower, because we do see that yellow gold plated keeps growing very fast. That could be a bit of mix impact there. It is going to be a very sizable part of our total revenue once the transition is done. Then on price versus volume, yeah, definitely, it is our, pricing will always be there. We need to do bits and pieces every year to help fund the P&L, fund salary increases, inflations, et cetera.
There will be continue going forward, be some price increases coming through every year. This is a volume business, so the key driver over the cycle in the midterm of revenue growth has to be volume. That is very clear.
Yeah. To build on that and on the market, the data that I was citing was markets, it was Bank of America data for the U.S. jewelry market. It is the total category. Totally just to reinforce what Anders was saying, what I have been taking you through is the importance of bringing new customers and the existing to come back, and this translates into volume. That is what we are about, is about making the brand more desirable to more people, and therefore bringing more volume.
The top line question, just the midterm organic high single-digit guidance?
We'll get back to you next year.
And the fact you've already hit?
Yeah. I think next year we'll flesh that out in much more detail. So we'll give you much more guidance on that next year, please. But thank you.
Thank you.
The next question is from the line of André Thormann from Danske Bank. Please go ahead. Your line will now be unmuted.
Thank you so much. Just two questions from me as well. First of all, Anders, apologies if I did not catch all the parts in the bridge towards 2027. I just wonder if you can help quantify these different elements. I think I caught some of them, but not all, on the EBIT margin. Then second, in terms of the midterm year, or what to call it, that you now say is in four to five years, is it correctly understood that that was earlier initially? Has it changed or is it the same? Thank you.
Oh, thanks for that, André. Yes, on the numbers between 2026 and 2027 EBIT margin, if you have the bridge in front of you, then very quickly, the one-offs are give and take 100 basis points drag next year. External headwinds, 600 basis points down. Transition of assortment, +100 basis points. Then strategic investments, give and take -100 basis points. That is the ballpark, the numbers.
Thank you so much.
Transition speed. You are right. The transition speed specifically in 2027 is lower than what we said earlier this year. It is, in a way, quite mechanical. When silver prices were at $82 when we originally came with the plan nine months back, it makes sense to, in a way, force through the transition even using excessive sort of external capacity, even though it is much more expensive than producing in-house. Now, the good things have happened, that silver prices have come down, and that means that we can make the transition at a more measured pace without a margin impact, or very little margin impact. So, in a way, see this as a good thing.
We like to say we do the transformation with serenity.
Thanks a lot.
The next question is from the line of Wendy Liu from JP Morgan. Please go ahead. Your line will now be unmuted.
Hi. Thank you for taking my questions. It is Wendy Liu from JP Morgan. I have two. Number one is, I was wondering if you can talk a bit about the divergence between Fuel with More and Core. In particular, I do see that Essence is also coming back to double-digit growth. I think you mentioned about strong perception of yellow gold growing fast. I was wondering, what is overall the growth of gold-plated products? I think it is like 25% of your mix. And what do you see this category growing going forward? Secondly, I was wondering if you already know the sequence of platinum-plated rollout for next year. Is this going to be a bit more second half weighted, or is it going to be evenly growing across the quarters? Thank you.
Yeah, I will take the question. Yes, you are absolutely right. I think yellow gold-plated continues to grow. Today it is about 25% of our business, and in quarter three was even slightly higher than that. And we continue to see growth there. That is actually, you are seeing it in Essence, which is very driven gold-plated, Talisman, which is very driven gold-plated. But also when we see in some of our playful collections, we have launched charms that are also in gold-plated, they are having great traction. And we are seeing across categories. So it can be rings or necklaces or bracelets. So good traction there on yellow gold-plated. The consumer is speaking to us, and they like it. Interestingly enough, we are also seeing increase on the two-tone, so where we are actually mixing yellow and white metal, and that is also growing as well in our business.
Regarding your second question, the way that we are transitioning, in Pandora we have five drops in the year, and then we are introducing in every drop, we are introducing the platinum-plated. So it is not a big bang. It is as we introduce newness, we are just bringing the platinum-plated with different pulses of introduction throughout the year.
Got it. Is this going to be more second half weighted versus first half in terms of how you plan the five drops?
No, we are starting from quarter one, quarter two, quarter three, quarter four. It is just a very proportional introduction, because again, as a reminder, we have been working on this transition for a year now. So, our lines are ready. They are already producing and already for this quarter, although the volume is smaller, as I was saying before. But yes, we are ready to start from early next year.
Great. That is very clear. Thank you so much.
The next question is from the line of Freddie Wild from Jefferies. Please go ahead. Your line will now be unmuted.
Oh, hello. Thank you so much for taking my questions. First of all, on the brand expansion you outlined, historically, when you introduced new product ranges, they came with a slightly higher mix on top line. So, could you help us think about the split of sales growth going forward, post strategic update, into volume and mix components as well? Secondly, on the transition speed, you previously talked about, I think, 60% of silver ranges being transitioned by the end of 2027, 80% by the end of 2028. Could you update us on the speed with which we are going to see it in 2027 and 2028, please? Beyond that, are you experiencing any unexpected challenges in manufacturing behind this maybe slight delay to the realization of that midterm margin increase? Thank you.
On the first question, I do not think you should anticipate the mix of the new collections or introductions to be drastically different from what we have done in the past. The price points will naturally vary between entry price to our classic price ASP as well. So, I would not anticipate much difference.
Yeah, no, I agree. I mean, as I was insisting in the beginning, we are an accessible brand, so we will continue to have an assortment across the different price architecture, and we are building the assortments with that price architecture, absolutely. On the platinum-plated, I will start, and maybe Anders, you can finish if there is any impact on the bridge. But I think Anders said before, really, we are adjusting the pace because we can. I think the silver price is not obliging us to go faster. It is a transformation in our plants in Thailand and in Vietnam. We are building capacity. But if you have more time, you do not need to rush this implementation.
We are also having access to great OEM out there, but every time you go to one, of course, you need to train, you need to bring the quality standards, so that takes time. So, as I said, we are just adjusting the pace because we can.
The next question is from the line of Kristian Godiksen from SEB. Please go ahead. Your line will now be unmuted.
Thank you. A couple of follow-ups here. I was just wondering maybe if you could. The incremental step up in the EBIT margin from the more than 21% to more than 23%, is that solely due to the strategic investments and more leverage, or how much does the lower commodity prices play into this? On the commodity prices, maybe if you could help a bit on what your new updated sensitivities will be for the three metals beyond 2027. Then thirdly, just if you could maybe comment a bit on the slower transition to the platinum-plated products. How should we think about the net working capital going into next year as well? Thank you.
All right. Thanks, Kristian. That sounds like CFO questions. On the first one, the upgrade from above 21% to above 23%, think about that as mainly mechanically driven by the lower silver, gold, and platinum. That's the main storyline there. On the sensitivities, on silver, this year, let's call it around 20 basis points of sensitivity per $1 . That's going to be, give and take, 14 basis points next year. Then ultimately, once the transition is fully done, including what we call the innovation on the Core, then think more about this as 5 basis points of silver price sensitivity per $1 . On gold, there we usually talk about the sensitivity per $100 of change.
That has been going up step by step over the last several years because yellow gold plated has become a bigger and bigger part of our business. This year, think about it as around 8 basis points, sorry, 7 basis points of sensitivity, and then that increases to around nine, given that we expect the yellow gold plated share of business to keep going up a bit. Finally, a lot of numbers here, on the platinum-plated, of course, the sensitivity today is basically zero. Then think about it as 3 basis points next year per $100 of change there, and then ending at around eight in the midterm. Happy to talk you through more of that offline if needed.
On net working capital, I think in broad terms, think about it as this, that the punch on the nose from higher silver prices, we take that this year, the higher commodity prices. So, inventory is increasing towards the DKK 8 billion level this year. Then, give and take, that level again next year, maybe a little bit higher, but for all practical purposes, that same level. Then step by step after 2027, we will see a decline again, and thereby a free cash flow upside in the years after that. As we've said before, then in the midterm, we do see inventories coming sort of back towards the level where we've been historically. Maybe probably not fully down there, but it will decline again.
That was very clear. Thanks a lot.
As there are no further questions, I will hand it back to the speakers for any closing remarks.
Yeah. Thank you. Thank you all for your time. I feel that we have given you a lot to take away, but I am hoping that where we are taking Pandora is very clear, and the way that we are planning capturing the demand has come across very clearly as well. So, of course, we are pleased with our quarter three performance. We have more work to do, so we are not planting the flag yet, as we are still climbing. And with that, I just wish you a very good day.