Good day, and welcome to the quarter one Pandora report 2016 conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Morten Eismark. Please go ahead, sir.
Thank you, and welcome to Pandora's conference call following the release of our Q1, 2016 results announced earlier today. The presentation for this call, as well as a full version of the first quarter 2016 release, is available on pandoragroup.com/investor. My name is Morten Eismark from Pandora Investor Relations, and with me here today is CEO Anders Colding Friis and CFO Peter Vekslund. In accordance with the agenda on slide two, Anders will go through a few Q1 highlights before Peter will talk you through the Q1 numbers in more detail. Finally, Anders will conclude the presentation, and we'll be happy to take your questions. Before handing over to Anders, I kindly ask you to pay close attention to the disclaimer on page three. Anders, please.
Good morning, everybody. Please turn to slide number four. Following a strong fourth quarter, we continued the momentum in the first quarter of 2016, and increased reported revenue with 34% to more than DKK 4.7 billion, a growth driven by solid development in all our three regions. All product categories experienced strong growth, supported by a continued relevant product offering, including the two product launches in first quarter, the Valentine's Day and the spring collection. We continued to focus on our brand store network and opened 50 new concept stores in the first quarter, and revenue from the concept stores, including eStore, grew 61% compared to the first quarter of 2015, and represented 60% of group revenue. Furthermore, sales out continued to be positive for the group and for the three regions.
EBITDA for the quarter increased to DKK 1.8 billion, corresponding to a 35% growth compared to the first quarter of last year. The EBITDA margin was 37.1%, a slight increase compared to 36.8%, first quarter, 2015. The improvement was primarily driven by a higher gross margin, offset by the anticipated cost in relation to project activity and the ongoing expansion in China and Japan. Free cash flow was DKK 1.4 billion, an increase of 37% compared to first quarter of last year. Finally, at the end of the first quarter, we had bought back shares for DKK 700 million out of a total share buyback program of up to DKK 4 billion to be completed by the end of 2016. Now, please turn to slide number five.
As a consequence of the stronger than expected first quarter numbers, primarily driven by like-for-like in our developed markets, we upgrade our full year revenue guidance to more than DKK 20 billion compared to the previous guided more than DKK 19 billion. In relation to our new guidance, we now expect our existing store network and the expansion of our network to contribute equally to our growth, while previously assumed that the network expansion would contribute with two-thirds. Headwind from currency is still expected to be around 3%. We also upgrade our EBITDA margin for 2016 from more than 37% to more than 38%. The increase is primarily driven by the higher revenue expectations, as well as an expected smaller impact from product production complexity.
Finally, we upgrade the number of new concept stores to more than 275. Our expectations regarding CapEx and tax rate are unchanged. Please turn to slide number six. Before turning to our regional revenue development, I would like to share a few words on our product development. Our newer products continue to perform well, and roughly half of our sell-in continues to be created by products launched within the last 12 months. In terms of sales out, the demand for the newer products is equally strong. During the quarter, we launched the Valentine's Day collection and the spring collection, and both were well received in all markets. The two collections added a total of 139 new products, including 27 new products to the Disney collection.
Revenue from the Disney collection, which is available in Americas and Asia Pacific and counts a total of 136 products, continues to contribute meaningful to revenue, but saw limited growth for the quarter compared to last year. Limited growth was due to a very strong first quarter of 2015, which was helped by the above normal introduction of 60 new Disney products, as well as the initial sell-in ahead of the launch of the Disney collection in shop-in-shops and larger multi-branded stores in April 2015 in the U.S. Also, the Pandora Rose collection continues to perform well, driven by continued high demand in the U.S., as well as the launch of Rose in the U.K. in June last year.
Currently, the Pandora Rose collection is only available in the U.S. and the U.K. stores, but based on the success so far, we are planning for a global launch in connection with the autumn launch in September later this year. We believe that the collection going forward will be an important part of our product assortment, also outside of the U.K. and the U.S. Finally, as part of our efforts to refine our way of merchandising our products, we've decided to move the Pandora Essence collection from its separate display to be a part of the same displays that carries the Moments collection. With the change, we hope that even more women will discover the attractiveness of the Essence collection. Please turn to slide number seven. All three regions generated double-digit revenue growth for the quarter.
Americas reported DKK 1.8 billion in revenue, up 13% from the first quarter of last year, and represented 37% of group revenue. Growth was driven by a continued network expansion in all major markets in Americas, and the launch of the Pandora eStore in the U.S. in April of 2015. Like-for-like in Americas was 2%, with a positive single digit like-for-like growth in the U.S., Canada, and Brazil. U.S. revenues increased 13% to DKK 1.4 billion. The growth was driven by flat to positive like-for-like in all regions, as well as the continued development of the store network, including the launch of the eStore. It's still early days for the U.S. eStore, but the contribution is already meaningful.
Brazil, which represents less than 5% of the Americas revenue for the quarter, was up around 10% in reported revenue, reported revenue, or 50% in local currency. The growth was driven by a mix of single-digit positive like-for-like growth, as well as the opening of net 29 new concept stores during the last 12 months. The revenue in Canada increased 5% compared to the first quarter of 2015, and represented around 10% of the reported revenue in Americas. The growth was primarily driven by the performance in the existing stores network, as well as the addition of net nine new concept stores. Revenue in EMEA, covering Europe, Middle East, and Africa, was DKK 2.1 billion, equal to 44% of reported revenue in the first quarter. EMEA increased 47% in reported revenue, or 49% in local currency.
EMEA concept store like-for-like was 11%, but excluding the third-party distributors, which include Russia, the EMEA like-for-like sales out development would have been around 20%. Revenue in the U.K. increased 30% and generated 30% of EMEA revenue. Growth in the U.K. was primarily driven by a strong performance in the existing store network, as well as the addition of net 38 concept stores. Like-for-like was double digits, driven by continued strong in-store execution. Also, Italy and France contributed significantly to the growth in EMEA, and revenue grew faster than the region, with around 70% each compared to the first quarter of 2015. The growth was driven by high double-digit like-for-like growth and the opening of 13 and 18 concept stores, respectively. Italy generated 20% of EMEA revenue, while revenue from France correspond to around 10% of EMEA revenue.
Revenue in Germany increased close to 50%, generating around 10% of EMEA revenue, driven primarily by the net opening of 68 new owned and operated concept stores since the first quarter of last year. The transition phase continues in Germany, and we are encouraged to see double-digit like-for-like and an improving brand perception in the market. Finally, revenue in Asia Pacific increased with 58% or 62% in local currency to a total of DKK 880 million. Asia Pacific contributed with 19% of total reported revenue, up 3 percentage points compared to the first quarter last year. The quarter was positively impacted by the conversion effect from the acquisition of Singapore and Macau on January 1 of this year and China since July 1 last year. Excluding the one-off effect from the conversion, the growth was 36%.
Australia revenue increased almost 50% compared to first quarter of last year, driven primarily by high double-digit like-for-like growth. Australia continued its impressive organic growth in spite of the hard comps. Revenue in Australia represented around 30% of the revenue from Asia Pacific. Like-for-like in Hong Kong was again negative, primarily due to the high number of new stores opened in the last 12 months, as well as the general declining traffic due to the economic environment in the area. Nevertheless, total sales out in Hong Kong was up with around 10% in local currency and generated around 15% of revenue for the region. Revenue in China increased significantly compared to last year and represented around 20% of revenue in Asia Pacific for the quarter, compared to around 5% in the first quarter last year.
The increase was primarily driven by high double-digit, like-for-like growth, as well as the conversion of distributor revenue to retail revenue, which had an impact of around DKK 75 million for the quarter. Additionally, we opened five new Pandora-owned concept stores in China during the quarter, to a total of 29 new concept stores in the last 12 months. We now have 58 concept stores in China. With this, I'll give the word to Peter, who will give you some more details on the numbers.
Yeah, thank you, Anders. Please turn to slide eight....continues to focus on the branded part of the network, and for the quarter, branded stores contributed with 73% of revenue, up five percentage points compared to Q1 2015. Pandora-owned stores doubled the revenue and represented 30% of the revenue, compared to 20% a year ago. The revenue from Pandora-owned stores was impacted by the takeover of distributors in China, Singapore, and Macau, as well as the transition in Germany. Revenue from shop-in-shops declined by 6% for the group, compared to Q1 2015. The decline was primarily due to tough comps in Americas, as Q1 2015 was positively impacted by initial selling ahead of the launch of the Disney collection in all branded stores in North America. Additionally, the U.K. and Australia are closing down shop-in-shops as part of upgrading the network to open more concept stores.
The multi-branded stores continues to perform well due to the successful focus on larger accounts, particularly in the U.S. and in Italy, while closing down or upgrading to smaller accounts across the regions. The multi-branded store revenue increased 16% to a total of DKK 883 million, and contributed with 19% of group revenue. The third party distributor revenue increased by 10% compared to Q1 last year, equal to 9% of group revenue. The channel was positively impacted by Russia, Spain, and East Asia, partially offset by our acquisition of distributors during the last twelve months. Excluding China, Singapore, and Macau, growth in revenue from third party distributors was 45%. Please turn to slide nine. In Q1, we added net 50 new concept stores to a total of 405 new concept stores in the last twelve months.
This includes the addition of 37 Pandora-owned concept stores in the quarter and 219 through the last twelve months. Of the 37 stores, 15 were acquired from our former distributor in Singapore and Macau. In line with our primary focus on expanding the branded point of sales, we closed almost 300 multi-branded points of sale in the quarter, and more than 1,100 in the last twelve months, of which 300 was in the U.S. Finally, as mentioned in December, Jared will be upgrading 200 multi-brand stores to shop-in-shops in the U.S. during 2016, and the refurbishment and openings will begin in Q2 this year. Please turn to slide 10. All product categories increased with double digits in Q1, driven by continued newness in the stores and several promotions across categories and markets.
Our established categories continued to do well, and revenue from charms was close to DKK 3 billion, with a growth rate of 23% compared to Q1 last year. Bracelets were just short of DKK 1 billion and had the highest growth rate of all the categories, with around 70% growth relative to Q1 of last year. The growth was fueled by successful promotions in all regions and the launch of a number of new bracelets. Together, the revenue from the two categories corresponded to 81% of revenue, while their growth contributed with 78% of the total growth for the quarter. Rings continued to do well, and revenue was above DKK 0.5 billion for the third consecutive quarter, with a growth rate of 31% compared to the first quarter last year.
Revenue from rings was 11% of total revenue, on par with last year. Revenue from other jewelry, which contains earrings and necklaces and pendants, increased with 65%. As mentioned at the Capital Markets Day in January, we have increased the focus on earrings from early 2016, and as a result, revenue from earrings grew by 70% compared to Q1, 2015. Earrings now contribute with close to 4% of total revenue. So far, we are satisfied with the development. Also, necklaces did well and increased revenue with 50%. Please turn to slide 11. Gross profit was DKK 3,536 million, corresponding to a gross margin of 74.6%, compared to 71.1% last year.
The increase was mainly driven by a tailwind from favorable raw material prices, having a positive impact of roughly 1.5 percentage point, and an increase in revenue from owned and operated stores with a positive impact of 2 percentage point. In Q1 2016, operating expenses, including depreciation and amortization for the quarter, were DKK 1,891 million, representing 39.9% of revenue, compared to 36.2% in the same quarter last year. Sales and distribution expenses increased 67% to DKK 998 million, equal to 21.1% of revenue, compared to 16.9% one year ago. The increase in share of revenue was mainly driven by additional owned and operated stores, which had an impact of around 4 percentage point.
Additionally, the amortization and depreciation related to sales and distribution expenses increased by DKK 38 million. The increase was primarily related to the opening and fitting of the stores in Germany last year. Marketing expenses increased 6% to DKK 346 million, which corresponded to 7.3% of revenue for the quarter, compared to 9.2% in Q1, 2015. The absolute increase in marketing was primarily PR and media, while the decreasing share of revenue was a result of higher sales. Administrative expenses for the quarter increased 53% to DKK 547 million, equal to 11.5% of revenue, or an increase of 1.4 percentage points compared to Q1, 2015. The increase was mainly driven by increasing headcounts, including the established offices in China, Japan, and Singapore.
Additionally, as a one-off for the quarter, administrative expenses as a percentage of revenue were impacted by around 1 percentage point related to Project Agility, and we now expect to have booked the majority of the expenses related to that project. Net finances provided a small gain of DKK 9 million, in contrast to a loss of DKK 281 million in Q1 2015, which was primarily related to foreign exchange. Income expenses totaled DKK 348 million, and the effective tax rate for the quarter was 21%. Net profit increased to DKK 1.3 billion, compared to DKK 383 million in Q1 last year, primarily due to an increase in EBIT, as well as an additional tax expense of DKK 364 million last year related to the settlement with the Danish tax authorities. Please turn to slide 12.
The group EBITDA for the quarter was DKK 1,760 million, up 35% compared to the same quarter last year, equal to a margin of 37.1%. Americas increased the EBITDA margin by 4.2 percentage point to 38.3%. The increase in margin was primarily driven by a higher gross margin due to the favorable realized commodity prices, while the comparative quarter was negatively impacted by approximately two percentage points from the acquisition of the 22 Hannoush stores in the U.S. EBITDA margin in EMEA was down 0.2 percentage point, primarily due to the impact of Project Agility, which was partially offset by the favorable gross margin development. In absolute numbers, EMEA was the highest EBITDA contributor, with DKK 769 million.
As expected, the expansion in Asia impacted the EBITDA margin for Asia Pacific, which decreased from 43.6% to 35.3% in Q1, 2016. The decrease was primarily due to the increase in cost related to the expansion in China and Japan, including the takeover of the distributor in Singapore and Macau, where we are establishing our own organization. Combined, it had a negative impact of around 7 percentage points for the quarter. This also includes a one-off effect of around 2.5 percentage points on the gross margin for the region, due to the acquisition of the distributors in Singapore and Macau, as existing inventory is acquired at wholesale prices. Please turn to slide 13.
The operating working capital for the quarter was 14.4% of the preceding twelve-month revenue, a decrease of 1.6 percentage points compared to the same time last year, and on par with the operating working capital at the end of Q4, 2015. The improvement compared to the first quarter last year was due to both lower inventories and trade receivables as a percentage of sales. Q1 CapEx was DKK 274 million, compared to DKK 167 million in the same quarter last year. The increase was primarily due to the opening of owned and operated stores in the quarter, increasing investments in the production in Thailand, as well as IT infrastructure projects. Free cash flow for the quarter was DKK 1,356 million, compared to DKK 990 million last year. The increase was driven by higher profits.
We ended Q1 with a total interest-bearing debt of DKK 3.252 billion and a net cash position of DKK 703 million. Our net interest-bearing debt to EBITDA was 0.4, which is in line with our overall capital structure policy. With this, I'll hand over to Anders, who will summarize the quarter.
Thank you, Peter. Please turn to slide number 14. So in summary for the first quarter, revenue increased by 34%. We continued the rollout of stores with an addition of 50 new concept stores during the quarter. The gross margin was 74.6%, EBITDA margin 37.1%. We had a free cash flow of DKK 1.4 billion. We paid out dividends of DKK 1.5 billion, and we had a new guidance—we have a new guidance for the full year of 2016, with a revenue of more than DKK 20 billion and EBITDA margin of more than 38% and more than 275 concept store openings. So all in all, a first quarter for Pandora, where around 18,000 people around the world have done a remarkable job. We're now open for any questions to the quarter. Operator, please.
Thank you. If you wish to ask a question at this time, please press star one on your telephone keypad. We will pause for just a moment to allow everyone for question. We are going to take our first question from Chiara Battistini from JP Morgan. Please go ahead. Your line is open.
Good morning. Thank you for taking my questions. A couple on the U.S., please. First of all, on the Americas like-for-like, that went from 7% last quarter to 2% in Q1. I was wondering if you could comment on the reasons for the slowdown, especially as you noted in the press release that U.S., Brazil, and Canada were all on positive like-for-like. So I was wondering if there is any region, any country within that region that is on negative like-for-like and dragging the overall region? And also, if maybe you're seeing some cannibalization from online that is ramping up quite fast in the U.S. The second question now, also on the U.S., on the Signet partnership that has been extended, you've noted that the rollout will start from quarter two.
Could you please remind us, the contribution from Signet on, on the group sales currently, and what the impact should be from the, from this rollout and extended partnership? And finally, I think a couple of quarters ago, you mentioned to us that you were looking, or last quarter, that you were looking to, do selected price increases in the U.S. So I was wondering if, one, you've done that already, and, two, what the reaction from the consumers was to that, please? Thank you.
Thank you very much for your questions. I will start by giving a little bit of insight on the U.S. like-for-like numbers was up 2%- sorry, not the U.S., but the Americas. Like-for-like was up 2% in Americas, and the total growth was, as you have seen, 13%. If we look at some of the things which is changing there, we can see that Caribbean is an area where we see less tourists, and that has an impact on the region. Whereas we have already stated, Brazil, U.S., Canada positive development in like-for-like numbers.
We can also see that in the northeastern part of the U.S., we continue the good momentum and still have good positive like-for-like numbers in that area. Online, as we see it, is not a direct competitor to retail stores. As we've said, it has a meaningful contribution, but we think and believe that the channels go hand in hand and actually support each other. On the development on Signet, we are very happy with the agreement we made with Jared, and the fact that we are doing around 200 new shop-in-shops in the American market, in the U.S. market, actually, over the year.
We don't have any view on the figures on that, but we think it will be a good development of our branded store network in the US market. And then on price increases, we have done nothing in the quarter on prices. We have last year done a price increase of between 5%-15% in a number of DVs or design variation around 200 products. And we can say that it has had very limited impact on the volumes.
Right. Thank you. And then if I may, a couple of follow-ups. First, on the, on the Americas, I understand about the Caribbean, so would you, would you think, excluding the Caribbean impact, that we are looking at something like mid-single digit like-for-like for the region? And on the prices, then are you looking also to do the same, as you did in the last quarter, in other regions, please?
I don't think we can go further into the details of the like-for-like. We have 2% in total for the Americas, and we are in positive territory in the U.S., Canada, and Brazil. Prices, we do not have, at this point, any plans on moving prices, but we did the test in the U.S., and that was a good and encouraging experience.
Perfect. Thank you very much.
You're welcome.
Thank you. Thank you. We are going to take our next question from Anne-Laure Bismuth from HSBC. Please go ahead.
Yes, good morning, Anne-Laure Bismuth from HSBC. So I just wanted to know what were the main drivers behind the strong performance in Italy and France, which were up approximately 70% in Q1 2016? And my second question is about the performance in Russia. Would it be possible to have an idea of the performance in Russia in Q1? And my third question is about the increase of the focus on earrings year to date. Is it broad-based or in more mature markets? More generally speaking, you can focus first on the expansion on these product categories in more mature market, and then new markets, or is it broad-based? Thank you.
Thank you very much for your questions. I'm not sure I got it. I think the first question was around Italy and the drivers behind that, if I got that correctly.
Yes, Italy and France, yes.
France, yeah. Well, you can say both Italy and France are good markets, but still in newer markets, without calling them new markets. We can see that the expansion of the branded network has good traction with the consumers, and that is really the reason behind the strong development. We have, from day one, in both markets, had a focus on developing a branded environment. You know, as we have learned more and in Pandora, we have put more focus on that from the beginning. Also, at the same time, we are showcasing our full product assortment, which is also an important part....
But maybe I can go to your last questions on how we focus on the different parts of the assortment? And clearly, we have a slightly stronger focus on in some of the more developed markets when it comes to earrings. But we actually showcase it in all the stores around the world. And it is very important also in newer markets that we show that we have a full product offering, so we have that everywhere. But if you look at the development, let's take rings as an example, we can see that markets like U.S., Australia, and even the U.S., U.K., and Australia, we can see a good traction for rings, as those are slightly more developed markets, b ut we do showcase the products everywhere, and we also have a good development on the different product categories across the world. I think Peter will give a little bit of flavor on Russia.
Yeah, on Russia, first of all, Russia is less than 5% of our revenue in Europe, and below 2% of the group. In the quarter, we did see an increase in our revenue. That was primarily due to a rather weak Q1 of last year. The like-for-like in Russia is still double-digit negative, so business have been better. It's a difficult market, and we. Our distributor also closed three concept stores in the quarter in Russia. So overall, a somewhat negative development, but compared to what we see how others are doing in Russia, we still have what we believe is a good business in Russia.
Thank you very much. Can I add one more question? Do you still plan to spend 10% as percentage of sales in terms of marketing? Thank you very much.
Well, we can say that these are rough indications that we are giving, and if you want to look at a number right now, we're probably more around 9%.
Thank you.
Thank you. We are going to take our next question from Michael Rasmussen from ABG. Please go ahead, your line is open.
Thank you, and well done on the numbers, once again, guys. Firstly, I would like to talk a little bit about the comment you make in relation to the lower complexity in products, how that has surprised you, and this was part of the reason for the margin upgrade. Can you please explain what exactly has happened? Is it a different demand by consumers, or are you better at producing these more advanced products at a lower price? And should we expect this to continue over the coming years?
And then if you could just put a few more words on the online stores, a little bit more details on the U.S. development and also the Australian development, and any kind of numbers would be great. And finally, if you would add a few more comments on how customers have seen the recent store openings in China, and a little bit more details on the environment in China, please. Thank you.
Well, I can do the last two ones, and then Peter, he will talk about the complexity. If I start with your last questions, on China, I think we've seen a good reception in China, and that's also the reason why we continue opening new stores, as we have done in the quarter. We can't give you any further numbers of it, but we see a good development, both in terms of the total business in China, but also for our like-for-like numbers. The same actually goes a little bit for the online stores. We had previously said that we have a good development in the U.K., and we've given a number which is more than 10% of our revenue. It is our most progressed market. We've started well both in the U.S. and in Australia, but we do not give numbers for the online development. So, Peter?
Yeah, on the product complexity, we started out the year by guiding that the upside on commodity prices of 1%-2% was offset by increasing product complexity. As the year have progressed, we can see that the impact of product complexity is less than we started out anticipating, and that's why we say it's not ending in the 1%-2% range, probably somewhat less than that. And in Q1, the impact was insignificant.
But Peter, what is the reason for this, do you think?
The reason is, first of all, that the people and the production in Thailand is doing a bit better than anticipated when we laid out the plan. Please acknowledge that it's a rather complicated puzzle, managing production with 15,000 employees and the supply chain we do have. We're actually guiding pretty precise with 1% on the margin.
Okay. Thank you very much.
We are going to take our next question from Kristian Godiksen from SEB. Please go ahead, your line is open.
Thank you. A couple of questions from my side. I was wondering if you could comment on the large discrepancy you, we see in the sales in like-for-like, which in the quarter was 17.5%, and the sales out like-for-like, which was only 9%. Can you comment on the separate impacts from what was the impact on the, on, from the e-store and the diff- and the impact from- from Russia also contributing more in one of the figures compared to the other figure? And how sustainable is this discrepancy in the coming quarters? That was my first question. Second question was coming back to the Jared upgrade of all the shop-in-shops.
Do you expect that all more than 200 stores will be opened in or upgraded during this year? And, should—how should we think think about the impact throughout the year, just as you guided regarding the German stores? And, thirdly, if you could comment on the Northeast region of the U.S., where I guess both Hannoush and the Northeast region is now in positive or is continuing to be in positive like-for-like territory. Can you comment on the traction you see there regarding refreshing the network, and yeah.
Yeah, I'll do the two last ones, and then Peter will do the first one. If we start with the Jared upgrade, I can just confirm that, yes, we expect to do the 200 stores in this year. What we have to keep in mind is that it is not new stores, it's upgrading of stores, so it's not totally new in that respect. We do not give any numbers on the exact expectations on this. If we look at the Northeast region, I think it continues to be encouraging to see the development there. We are, as I mentioned, in positive territory like-for-like, and continue to be there. We have not, in the quarter, upgraded any stores.
I think that what we've previously said is that we'll do that when the rent agreements are up for renewal and won't do it before that. So, there's been no development in the quarter on that, but we have seen a continued positive development in the Northeast, which we are very happy with.
Anders, just before Peter takes over, could I just ask, can you comment on then, when the store leases are up for renewal, is it something we'll see during the course of this year, or how many years will we see before the network is totally refreshed?
Let me put it like this. I think that if we look at the stores as they are functioning at this time, it is—they are doing pretty well. So it's not like it's going to be a total boost in sales when we upgrade the stores. We'll do it as they come up for renewal, and it'll be over the next couple of years.
Okay, thank you.
Yeah, and the question around the like-for-like and our revenue, and you can actually compare to a couple of different numbers. The like-for-like for the group for Q1 was 9%, and total revenue growth 34%, concept stores was 61%. When comparing those numbers, please bear in mind that the like-for-like, that is including all concept stores, also third-party distributors, concept stores, which means Russia is included in the like-for-like number. And that does have quite an impact on the overall like-for-like number. If you take the like-for-like for Europe, that would have been 20% for the quarter if you excluded the distributors. Other than that, the main differences is related to network and the network expansion, as well as the eStore, which is not included in the like-for-like number.
Yeah, but thank you, Peter. Just, can you comment a bit on... because my logical sense or maybe lack of that would tell me that normally you would see a more positive like-for-like figure out of concept stores compared to, say, shop-in-shops and multi-branded stores. So, if you take Russia apart, and then the residual discrepancy, is that primarily what is that primarily driven from? Is that the eStore, or are the, say, all the stores not being concept stores, are they actually growing faster than concept stores at the moment?
The biggest difference, or making the biggest difference, that is Russia and the eStore. That's, that's the key, key drivers of the difference.
Okay, but can you confirm that in the quarter, that stores ex or stores not being concept stores grew faster than concept stores?
Oh, I think that's something we need to look into, either after the meeting or when, when we meet.
Okay. Okay, many thanks.
Thank you. As a reminder, if you wish to ask a question, please press star one. We are going to take our next question from Piral Dadhania from RBC Capital Markets. Please go ahead. Your line is open.
Thank you. Good morning, and congratulations on a good set of numbers. I have three, please. Firstly, could you please confirm that your 2016 guidance in terms of space and like-for-like contribution still remains two-thirds and one-third, just given that in the first quarter, more of the organic growth was derived from space. Secondly, on your Asia Pacific operating margin, are you able to break down how much of the 830 basis points of EBITDA margin decline relates to the one-off regarding Singapore and Macau, and then how much is just underlying margin dilution related to China and Japan store expansion?
And then finally, just on ASP, I know you don't disclose this anymore, but are we right to assume that you have seen a positive development in your ASP, given the strong growth observed in rings and earrings? Thank you.
I'll do the last and the first one. If we start with the ASP, it's correct. We do not give any figures on that, because primarily it is meaningless. What we can see is that we kept our prices in store unchanged in the quarter, so there's been no changes to that. If you look at the distribution of our sales across the categories, you will see that rings had more or less the same percentage as it had the same quarter last year, which was 31% of our revenue. So that has not had a big impact on that, and earrings have more or less the same price parameters as charms, a little bit higher, but not a lot higher.
So, virtually unchanged if you look at the different building blocks here. What we can say is, on our expectation, our guidance for the year, is that we now expect half of the development of the revenue coming from the organic growth, and half from opening of new stores.
And the question on the margin for Asia Pacific, overall, of the total decline in the margin of 8.3%, then 7% is related to the expansion in China, Japan, and Singapore. And out of those 7%, 2, 2.5 percentage point is related to the inventory acquisition or the inventory buyback. So that is a one-off.
Okay. Right. Understood. Thank you very much. And then could I just follow up with one question just in terms of gross margin for 2017? Of course, we've seen silver price appreciation of around 20%-25% year to date. Based on your current guidance of 10 percentage point impact is 100 basis points to your gross margin, should we assume then for 2017 that we should expect something like a 240 basis point headwind from raw materials next year?
On the gross margins, first of all, we are not guiding on the gross margin, not even for the current year. What we do is we disclose our naked gross margin for each quarter, and that is the gross margin excluding commodity hedging. And for Q1, that was 76%, and you can use that as a proxy for the gross margin one year ahead. And that is as close as we can get. And then the rule of thumb that a 10% change or 10% increase in commodity prices will have an impact of 1% on the margin, that still apply.
Thank you very much.
We are going to take our next question from Lars Topholm from Carnegie. Please go ahead. Your line is open.
Thank you. Congrats with the numbers. Just a couple of questions on my side. One is on earrings. I know it's only 4% of sales in everyday, but can you tell something about to what extent demand for earrings is cannibalizing on other products in your view? Can you tell something about the profile of the customer buying an earring? Is she younger or older, or how do you see that? And then a second question related to commodity price inflation. So based on the experience you now have from the US with the modest price increases you have made, will you, in your opinion, be able to mitigate at least a modest commodity price increase through pricing? And then a final question, if I may, on the product complexity.
I think, Peter, you said first, you thought this would hurt margins by 100-200 basis point. Now it's 100 bps, but you also said that in Q1, the effect had been insignificant. Would that mean that if it continues to be insignificant, you would potentially see further margin upside, or how should I interpret that? Thank you very much.
Well, if we look, to start with your first question, the earrings, 4%, well, if you look at the rings, what we could see was that we actually had a somewhat younger consumer looking for the rings. We don't see the same on the earrings, so it's more broad spectrum of consumers in earrings at this time, and we will of course see how that develops. We don't see cannibalization. We actually see addition, and that is also one of the reasons why we continue developing our product offering.
We see the categories supporting each other, and you can say that by the end of the day, what we would like to see in any consumer's mind is that when you're looking to buy a piece of jewelry, you don't have to do anything but to visit one of our stores. And we see the different parts of the assortment supporting each other. Price increases, we have no plans, and that is the way it looks. As I said, insignificant development in volumes based on the price increase we did in the U.S., but we do not have any plans for price increases at this time. We do believe that our numbers are strong with the present price level we have. And I don't know whether you-
Yeah, on the gross margin and product complexity, again, starting out the year saying that the upside on commodity prices, 1-2 percentage points, would be offset by product complexity or production complexity. We did see less than anticipated impact on that, and as you said, insignificant in Q1.
...How that specifically will play out in, in the remaining quarters of the year will not be that specific, but of course, confirming that it's all, included in the guidance for the year with the gross margin of, of above 38%.
Okay, well, one final question I forgot before, if I may. Rose gold in percentage of revenue in U.K. and U.S., can you give any indication of that?
Well, I think it is in one of the areas we call meaningful contribution.
What's your limit for saying a contribution is meaningful?
It is that it is meaningful. It's a part of the business, so we don't give numbers.
Okay. Thank you very much.
Thank you.
We are going to take our next question from Frans Høyer from Jyske Bank. Please go ahead. Your line is open.
Thanks very much. You mentioned that one of the sales drivers in the quarter had been the increased newness of products in the stores. Is that something that you just kind of verbally or, or even internally think is happening, or are you able to measure that?
Well, the simple answer is yes, we can measure it, but it was not an increased newness. It was actually the same kind of newness as we've seen before, which is important. We need to, and we think it's important for us, to have a balance between new products and existing products. And the number, which is around 50% of sales, which is products launched within the last year, has been a number that has been tracking for a while. So actually we see that as a good number, a combination of selling the existing products and also adding new products.
Okay.
If we gave the impression that it was increased, that was not correct.
All right. But it sounds like it's still mentioned as the driver of top line in the quarter.
Well, it is important for us to continue measuring this and making sure that we have a good balance between new and existing products.
Okay. Could you also give us a little bit more texture on what you're doing around the Essence collection at the moment? I'm having a... I'm not sure whether I should see this as a defensive or an offensive move as far as the Essence collection is concerned.
I would call it a natural move, actually. It is not part of the quarter's numbers, because we are just doing it right now. And what we see is that it is actually a supplement to our total offering of bracelets and charms, and therefore, we have found that it was the right thing to add it as part of our total product offering. But I would really call it a known usage. It is. We have been very happy with Essence, and we can see it has a good and meaningful contribution in the business. So we now see it as part of our total bracelet and charm offering.
But it doesn't sound like it's complementary to the Moments collection anymore.
Well, it is. It is a slightly different offering, and it does also attract a slightly different consumer. Where the Moments collection does have a little bit of a, you can say, bigger size charms and also bigger size bracelet. The Essence is a little bit more refined, and if we look at some of the consumer segments that we target, which is the more rational consumer, it does have good traction with that particular consumer. So we see it as two different concepts which are supplementing each other, and that's also the reason why we want to put them together, because then the consumer can see the two product offerings side by side. So we believe it's a good move.
Okay, thanks very much.
You're welcome.
We are going to take our last question from Klaus Kehl from Nykredit Markets. Please go ahead. Your line is open.
Yeah, hello, Klaus Kehl from Nykredit Markets. Two questions, if I may. First of all, you must have had at least 10% like-for-like growth in Germany. So, could you comment on whether this is a positive surprise? And also, could you comment on the development in Germany in general? That would be my first question. Second question, perhaps a bit more technical, but as far as I can calculate, then your new guidance calls for a total growth of 21%. And then, I could add 3% impact from currencies, meaning that you will have an underlying growth of 24%. And you say half of this will come from like-for-like growth, so that must be around 12%. Are you, yeah, do you follow my calculations? If that's correct, then you must have more or less doubled the like-for-like guidance for 2016 after Q1. Is that correct? That would be my questions.
If we look at Germany in general, yes, we are encouraged with the development in Germany. We haven't given any Like-for-like numbers, other than we say that they are positive, and we are very happy with that for the first quarter. We have also said that we had a growth of 50% in Germany for the first quarter. So, I think all in all, we are tracking to what we had expected. We also have to say that Germany is a rebuild case, so we had to rebuild the consumer confidence in the brand, and that is something which will take some time. And encouraging development is that we can also see the consumers' perception of the Pandora brand is strengthening in Germany. So all in all, we are happy with the first quarter, but there is still work to do in Germany.
... Okay, just a quick, quick follow-up on that one. As far as I understand you, page 10, when you say you have a like-for-like growth of 11% in, in Europe, and you say it was driven by double-digit growth in U.K., Italy, Germany, and France. So doesn't that mean that you have double digit like-for-like in, in Germany?
It does, yes.
Okay, excellent.
Yeah, and the question on the overall like-for-like growth and the calculation, and I'll do my best to follow the math. But we do this in very rough figures, guiding that half the growth will be from like-for-like, and the other half from network. That number you calculate to around 11-12%, and that is across all store types. Whereas the like-for-like number we disclose, that is the 9% for the quarter, that is only concept stores for more than 12 months. So those two are not directly comparable.
Okay, but what was the original guidance for 2016 on like-for-like? Wasn't that around 6%, or is it only that?
Two-thirds to network and one-third like-for-like. So the upgrade is primarily due to to existing stores that are doing better than than expected, whereas the network component is is the same, but but being in less lesser of the growth due to more like-for-like growth. So it's upgrade is due to a fantastic performance in existing stores. That's the bottom line.
Okay. Okay. Thank you very much.
Welcome.
Thank you. We do not have any question, more question.
Then, thank you very much for your questions, and thanks for the congratulations with the results. We are very happy with the first quarter, and thank you for listening in today. Goodbye.
Thank you. That should conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.