Thank you for standing by, and welcome to the Pandora Q1 2015 Report conference call. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question and answer session, at which time, if you wish to ask a question, you will need to press star one on your telephone. I must advise you that this conference is being recorded today, Tuesday, the 12th of May, 2015. I would now like to hand the conference over to your speaker today, Morten Eismark, Head of Investor Relations. Please go ahead.
Thank you, and welcome to Pandora's conference call, following the release of our Q1 2015 results, announced earlier today. The presentation for this call, as well as a full version of the first quarter, 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 2, Anders will go through a few Q1 highlights, followed by Peter, who 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 3. Anders, please.
Good morning, everyone. Please turn to slide four. As the new CEO of Pandora, I'm proud of the numbers we are releasing this morning. The company has continued the strong momentum, and in the first quarter, revenue increased to DKK 3.5 billion, which is an increase of 36.8% or 22.3% in local currency. Growth for the quarter was primarily driven by an increase in the average selling price, as volume growth was 5.6%. Revenue growth for the quarter was driven by all geographies, supported by strong growth across all product categories, with rings in particular continuing the positive trend, growing 84% for the quarter.
The new collections, Valentine's and Spring, launched during the quarter, were received well by our consumers, and in North America, we expanded our Disney Collection with 60 new products, which were received equally well. We continued to expand our branded network with focus on the concept stores and with the addition of 310 concept stores over the past 12 months. Revenue from concept stores now contribute 55% of revenue, compared to 51% in first quarter last year. The revenue from concept stores increased 47.4% compared to last year. sales- out, which I will return to in a couple of slides, continued to be positive, and we have now been able to generate positive like-for-like sales out in all four reported markets, nine consecutive quarters.
EBITDA for the quarter was DKK 1.3 billion, an increase of 39.3% compared to first quarter last year, and EBITDA margin was 36.8% compared to 36.1% in first quarter of 2014. The margin improvement was driven by a tailwind from the gross margin of around two percentage points, but partially offset by increasing OpEx spend, primarily related to marketing and sales and distribution costs. Free cash flow for the quarter was DKK 990 million, compared to DKK 1,049 million last year, where last year it included a one-off VAT repayment from Germany of approximately DKK 250 million.
For the full year, primarily as a consequence of the favorable exchange rate fluctuation, we've increased our revenue guidance to more than DKK 15 billion from previously guided more than DKK 14 billion. Furthermore, as a consequence of the agreement we made with the Danish tax authorities last week, we've raised the expected efficient tax rate for 2015 to 30% instead of 20%. Peter, he will later give you some more flavor on the impact on our accounts later in the presentation. Finally, we continued to return cash to our shareholders, and during the quarter, we bought back shares for almost DKK 600 million and additionally paid out dividend of DKK 1.1 billion. Please turn to slide number 5. All geographic regions generated double-digit growth for the quarter, also excluding the positive tailwind from currency.
Americas, which represented 44% of revenue, was up 34.4% in the first quarter or 12.8% in local currency. Revenue in the US increased 13.2% in local currency to a record high DKK 1.2 billion. Growth was driven in particular by the rings category, as well as the continued high demand for the Disney Collection. However, sales growth for the quarter was negatively impacted by unfavorable timing of shipments compared to same quarter last year. Finally, revenue in the US was positively impacted by around DKK 20 million from converting wholesale revenue to retail revenue related to the takeover of 22 stores in the Northeast USA in the third quarter of last year. Revenue from other Americas increased 11.6% in local currency.
Canada, which is the largest country in that region, continues to see a positive development in like-for-like sales- out growth rates. But due to phasing of revenue between quarters, revenue from Canada decreased 8% compared to first quarter last year. Please remember that revenue in fourth quarter of 2014 was up 64% in Canada. Revenue from Brazil more than offset the negative growth in Canada, as the positive development continued in the quarter. Like-for-like growth in Brazil increased with double digits, and 28 new concept stores have been opened for the last twelve months. Revenue from Europe, which is representing 40% of the revenue, was up 33.2% for the quarter, or 28.5% in local currency, driven primarily by the UK, Germany, Italy, and France.
UK continues to perform very well, and although it is high, a highly penetrated market, revenue grew 41.5% in local currency for the quarter. Revenue from Germany increased 24.8%, and as has been stated before, we continue to be in a transition phase where revenue will be volatile. As we announced in the beginning of the year, as part of the resetting of the business in Germany, we entered an agreement to assume a number of leaseholds in the country. The process is now finalized, and we've secured 77 store leases, all in very good locations. As of today, we've opened Pandora stores in roughly 20 of the locations, and during the rest of 2015, we will open owned and operated stores in the remaining 57 locations.
Momentum in France and Italy continues, and revenue from the two countries increased by around 50% for the quarter, driven by an improved network and healthy like-for-like growth. For the quarter, Italy was 30% and France, 15% of the revenue from other Europe. Revenue in Russia was down 75% for the quarter, and the concept stores in Russia continue to perform well given the difficult financial climate in the country, with like-for-like sales out roughly flat compared to the first quarter of last year. However, as we in general have very large shipments to our master franchisee in Russia, timing of shipments can have a huge impact on quarterly revenue in Russia. This had a significant negative impact on revenue for the quarter, while first quarter last year was exceptionally strong. Revenue from Russia represented around 5% of revenue from other Europe for the quarter.
Last but not least, revenue from other Europe was positively impacted by converting third-party revenue to retail revenue in the Middle East, following the acquisition of the local distributor. This contributed around DKK 20 million for the quarter. Finally, revenue from Asia Pacific, representing 16% of the group revenue, increased 55.6% for the quarter, including currency tailwind of around 20%. Most markets in the region contributed to the growth, with Australia and Hong Kong being the key drivers. Revenue in Australia increased 28.2% in local currency, again, driven by targeting, marketing, targeting, marketing, and strong in-store execution. Rings, which have been mentioned a couple of times in the past, continues to perform well, and revenue from rings increased 58% in Australia for the quarter.
Other Asia Pacific increased almost 40% in local currency, driven by Hong Kong, as well as a handful of the smaller markets in the region. Hong Kong in itself saw revenue growth of more than 100%. Momentum in the region is maintained, and as announced, we plan to increase focus in 2015 in the two largest markets in the region, China and Japan. The expanded collaboration with Bluebell in Japan was initiated in January, however, still with limited effects on the number, and later this year, in July, we'll set focus on the Chinese market and together with Oracle, accelerate the store rollout as well as the marketing investment in the country. Now, please turn to slide number 6. The positive like-for-like rate continues into the first quarter across all four major markets.
Furthermore, looking at the four charts on the slide, you can see that the increase in all four markets is on top of the strong first quarter last year and even 2013. The growth was again driven by relevant product portfolio, increased awareness through our marketing efforts, as well as a continuous improvement of in-store execution across all markets. Like-for-like sales growth in the US was 8.9% and driven in particular by rings as well as the Disney Collection. The process of refreshing the network in the Northeast continues, and at the end of the first quarter, a handful of the stores acquired from Hannoush has been refitted to the new Evolution Concept. The Northeast region is improving, but still, like-for-like for the quarter was slightly negative... All other major US regions grew with low double-digit like-for-like rates.
Like-for-like sales growth in Australia and the UK was again stronger than expected, and both increased with more than 20% for the quarter. Growth for the quarter was driven by very positive reception of our new collection, as well as continued good momentum in the rings category. Like-for-like in Germany continues to be driven by our owned and operated stores, which for the quarter increased 5%, whereas the franchise stores continue to deliver negative growth rates. As mentioned earlier, we have embarked on opening 77 new concept stores in Germany, which means that we are almost doubling the network. This will most likely have a negative impact on the like-for-like rates, as cannibalization with a roll out of this magnitude is to be expected. Consequently, you should expect the like-for-likes rates for the coming quarters in Germany to move into negative territory.
Please turn to slide 7, where you can see the products, which is really what it's all about. Our newer products continue to perform well, and roughly half of our sales- in continues to be created by products launched within the last 12 months. In terms of sales out, the demand for newer products is equally strong. During the quarter, we launched the Valentine's Collection and the Spring Collection, which were both well-received in all markets. In North America, we launched 60 new Disney products, of which 10 are exclusive to the Disney Parks. From April, we started selling the Disney products to all our branded sales channels in North America, and not only the concept stores.
The Essence Collection, which we launched, launched late 2013, continues to show an encouraging performance, and revenue increased with more than 100% compared to first quarter of 2014. However, it is from low levels. The U.K., Germany, Italy, and Asia Pacific are among the markets where Essence has been most successful. Please turn to slide 8. As you saw from the release this morning, we have raised our revenue guidance to more than DKK 15 billion, where we previously expected more than DKK 14 billion. This is primarily a result of the favorable exchange rate fluctuation we have seen since we reported in February. Assuming unchanged exchange rates, we now expect tailwind from currencies of around 10% compared to the 3%-5%, which we set on the call in February.
Also, CapEx guidance is increased to approximately DKK 900 million as a consequence of the currency moves. We previously guided for DKK 800 million Danish kroner. The EBITDA margin expectation is unchanged at 37%. As mentioned earlier last week, we made a settlement with the Danish tax authorities, which means that going forward, we'd recognize a higher proportion of the group's profit in Denmark. Furthermore, we pay an amount to Danish tax authorities related to the years from 2009 to 2014 of DKK 995 million Danish kroner, covering additional taxes and interest for all six years. As a consequence, the effective tax rate for 2015 is expected to be around 30%, which includes the additional tax payment related to 2009 to 2014.
Excluding the payment, the effective tax rate for 2015 is expected to be around 22%. We now expect to open 325 new Concept stores during the year, versus previously expected more than 300. With this, I'll now hand over to Peter, who will give you some more detail on the financials.
Yes, thanks a lot, Anders. Please turn to slide 9. Strong revenue growth across all regions led to total revenue growth of 36.8% to a total of DKK 3,547 million. In local currency, revenue increased by 22.3%. Volume increased only 5.6%, as some markets was impacted by unfavorable timing of shipments compared to the same quarter last year. This was mainly related to the U.S., Canada, and Russia. It is a number that is difficult to quantify, but as the vast majority of our revenue is wholesale, we will from time to time, be impacted by phasing of revenue between the quarters. What is important and also evident from our strong sales out numbers, which by the way, are primarily driven by volume, is that our business continues to be strong.
The average sales price increased from DKK 169, from DKK 131 in Q1 2014. This corresponds to an increase of 29%. Roughly half of the increase in the ASP was driven by currency. The other half was driven by two factors contributing equally. First, an increased share of revenue coming from more expensive products, including rings and the Disney Collection. And secondly, a shift in channel mix, with more revenue now coming from our owned and operated stores. On a product-by-product basis, prices have been kept virtually unchanged. Revenue from owned and operated stores generated revenue of DKK 708 million, and is now 20% of group revenue, compared to 13% in Q1 last year.
The increase is driven by like-for-like growth, as well as the addition of 163 new owned and operated stores in the last 12 months, including 47 concept stores and 16 shop-in-shops, which has been converted from franchise stores. The net effect of converting wholesale revenue from the franchise stores that is now owned and operated by Pandora is approximately DKK 60 million. Revenue from concept stores increased 47.4% to almost DKK 2 billion, and now constitute 55% of revenue for the group. The development is in line with our strategy of focusing on branded sales channels and concept stores in particular. Please turn to slide 10. And now turning to the development of our distribution network.
The total number of points of sale decreased by 272 compared to Q4 2014, to a total of 9,634 points of sale globally. The decrease was a result of our continued focus on branded stores, which has resulted in the closing of 283 unbranded stores in Q1. In the last twelve months, almost 1,000 unbranded stores has been closed. During the quarter, we added 37 new concept stores. This includes opening of net 21 new franchise stores and net 16 new O&O stores, as well as the transfer of 25 franchise stores to O&O stores. The 25 converted stores are mainly related to the Middle East and Germany.
For a breakdown of the geographic split of the concept store openings, please refer to the new appendix in our Q1 reporting, listing the movements in larger countries. Now, please turn to slide 11. Both of our core categories are continuing to perform well. Revenue from charms increased by 33.5% compared to the same period last year, while revenue from silver and gold charm bracelets was up 35.3%. These categories together represent 79%, which is a decrease from 80.9% a year ago, which is primarily due to the very strong performance in rings. Rings increased by 84.1% for the quarter and represent 11.4% of total revenue, compared to 8.5% in Q1 last year.
The revenue from rings continues to be driven by improved offering, as well as increased marketing activities focusing on rings. Particularly Australia and the UK have seen a strong contribution from rings, but actually, most markets are increasing their share of revenue generated from rings. Other jewelry increased by 22.8%. The growth was primarily driven by revenue from earrings and necklaces, which increased 60% and 70% respectively. Other bracelets continued to perform relatively well, but was negatively impacted in the quarter by a decrease in revenue from leather bracelets. Please turn to slide 12. Gross profit was DKK 2,522 million, compared to DKK 1,791 million in the same period last year, all resulting in a gross margin of 71.1% in Q1 2015, compared to 69.1% last year.
The 2 percentage point increase in gross margin can be broken down into four chunks. Around 3 percentage point tailwind from commodities, 1 percentage point from channel mix, primarily more O&O revenue, 1 percentage point headwind from currency, and 1 percentage point from the acquisition of the 22 concept stores from Hannoush in the US. Please remember that the inventory in Hannoush stores was acquired at wholesale prices, which has a short-term negative impact on margins, as we only capture the retail margin on the acquired inventory. Excluding our hedging and the time lag effect from our inventory, the underlying gross margin in Q1 2015 would have been approximately 73%, based on average gold and silver market prices for the quarter.
Under the same assumptions, a 10% deviation in quarterly average gold and silver prices would impact our gross margin of by 1 percentage point. Please turn to slide 13. Operating expenses for the quarter were DKK 1,284 million, versus DKK 904 million in Q1 last year, now representing 36.2% of revenue in Q1, versus 34.9% in Q1 last year. Comparing with last year, OpEx for the quarter was impacted with around DKK 100 million Danish kroner from currency moves, mainly related to the U.S. dollar, the British pound, the Australian dollar, and the Thai baht. Sales and distribution expenses were DKK 599 million, an increase of 44.3% compared with Q1, 2014, and corresponding to 16.9% of revenue, compared to 16% last year.
The increase was mainly driven by higher activity, as well as an increased number of Pandora-owned stores. Marketing expenses were DKK 327 million, compared to DKK 210 million in Q1 2014, corresponding to 9.2% of revenue, compared to 8.1% last year. The increase was due to an increasing marketing spend, primarily within digital media. Administrative expenses for the quarter was DKK 358 million, representing 10.1% of revenue, compared with 10.8% in Q1 last year. The nominal increase in administrative cost was primarily related to higher IT costs and increasing employee expenses. Please turn to slide 14.
EBITDA for Q1 2015 increased by 39.3% to DKK 1,305 million, resulting in an EBITDA margin of 36.8% compared with 36.1% in Q1 last year. The EBITDA margin for Americas for the quarter was 42.3% and down two percentage points compared to the same quarter last year, despite a positive gross margin impact. The decrease was primarily due to an increase in marketing spend, as well as the negative impact of approximately two percentage points from Hannoush, as mentioned earlier. This is the last quarter where we will see the Hannoush impact. The EBITDA margin for Europe increased from 39.8% in Q1 2014 to 43.5% for the current quarter. The increase was primarily driven by the improved gross margin.
The EBITDA margin for the Asia Pacific region was unchanged at 50.3%, as the improvement in the gross margin was offset by an increase in administrative expenses and marketing. Going into Q2, the quarterly EBITDA margin could weaken a bit as we prepare for the relaunch of the Chinese market, as well to continue the store expansion in Germany. However, we maintain our full year guidance of around 37%. Please turn to slide 15. For the quarter, net financial income amounted to a loss of 281 million DKK, compared to 8 million in Q1 last year. Of the 281 million, 276 were non-cash, and mostly related to large currency moves over the last twelve months. 230 million DKK mainly relates to unrealized losses on intercompany loan in U.S. dollars.
The remaining DKK 39 million was primarily related to losses on foreign exchange and commodity contracts. As Anders mentioned earlier, income taxes for the quarter were impacted by the agreement made with the Danish tax authorities. According to the settlement, which relates to the years 2009-2014, we'll pay DKK 995 million, covering tax payments and interest for the six years. As we have already made accruals for DKK 610 million related to this specific case, only DKK 364 million will impact our income tax expenses, as well as a financial loss of DKK 21 million related to interests. Consequently, our tax rate for the quarter is 60%, and excluding the additional tax, the tax rate would have been 22%.
Regarding the payment and the cash flow effect of the DKK 995 million, most of it will be paid in Q2 and the remaining part in Q4. Finally, a reported net profit decreased to DKK 383 million, obviously heavily impacted by the financial loss and the additional tax expense. Please turn to slide 16. Operating working capital at the end of Q1 2015 corresponded to 16% of the preceding twelve-month revenue, compared with 19.3% at the end of Q1 last year, and 16.7% at the end of Q4 2014. Inventory was DKK 1,925 million at the end of Q1 2015, corresponding to 14.9% of the preceding twelve-month revenue, compared to 14.1% in Q4 last year, and 16.4% in Q1 2014.
As highlighted in Q4, inventories were at a too low level following Christmas, and we have now seen an expected increase. Inventory levels are still relatively low, and you should expect to see an increase in inventories a bit further in the coming quarters. The relative decrease compared to Q1 2014 reflects an impact of around 15% from decrease in commodity prices. Trade receivables was DKK 1,093 million at the end of Q1 2015, corresponding to 8.5% of the preceding 12-month revenue, compared with 9.3% in Q4 2014 and Q1 2014. The decrease is primarily due to strong cash collection. Tax receivables increased by DKK 207 million compared to Q4 2014.
As a formality, we have paid around DKK 200 million to the Thai tax authorities related to a tax case to avoid paying interest on the amount. They are booked as receivables, as we believe we have a strong case and expect the amount to be repaid. In Q1 2015, Pandora CapEx was DKK 167 million, primarily related to US investments in refitting the stores acquired from Hannoush. Preparation for the US e-store launch in this April, as well as new headquarters. Also, CapEx was impacted by the addition of 17 owned and operated stores in Germany. Finally, we had a net cash positive position at the end of the quarter by DKK 330 million, corresponding to minus point one percent, minus point one of our net interest-bearing debt to EBITDA compared to minus point two at the end of Q1 2014.
With this, I'd like to hand back to Anders to conclude the presentation.
Thank you, Peter. So in summary, for the first quarter, we saw revenue increase 37%. We continued the rollout of stores with the addition of 37 new concept stores during the quarter. Gross margin was 71.1%, EBITDA margin 36.8%. The free cash flow was DKK 990 million. Revenue guidance, we upgraded to more than DKK 15 billion, and share buyback of up to DKK 3.9 billion in 2015 is on track. So this concludes our presentation, and Peter and I would like to open up for any questions that you might have.
Thank you. As a reminder, if you would like to ask a question, please press star and one on your telephone and wait for your name to be announced. If you wish to cancel that request, please press the hash key. Your first question comes from the line of Lars Topholm of Carnegie. Please ask your question.
Yes, a couple of questions here. First of all, this phasing between quarters in Canada and Russia, I think I can roughly calculate the effect to around DKK 140 million your Q1 revenue had been higher if there had been no phasing issue. But can you confirm that number, and can you comment a bit on the effect from the US? Likewise, Anders, you mentioned the 5.6% volume growth was Sales In, and that Sales Out was mainly volume driven. What was the Sales Out volume growth compared to Q4? And then a final question, if I may, and that's relating to the tax settlement last week, which came as a surprise to me. I know there were discussions, but not in the magnitude of DKK 1 billion.
So I just wonder, what is the company's policy of disclosing such issues? And do you have any other issues of significant potential impact that are not clearly explained in the accounts which might affect us going forward? Thank you.
Maybe I should take the two first, and then Peter can talk about the tax settlement. If we look at the phasing of the quarters, I think that what we can say is that we have a development which is reflecting the fact that the business is a combination of a wholesale and a retail business. So, some quarters, we have a stronger sales in for the part of the sales we have wholesale, and what we have, that's rightly picked up, we have also commented on the fact that in Canada and in Russia, we have seen a phasing difference. So we had more sales in the last quarter of 2014, and that then, of course, affects our figures in the beginning of 2015.
I don't think we can go more into detail on this. If we look at the 5.6% volume growth, it's a little bit a question which goes in the same direction. We can see the volume growth, which is a combination of sales, wholesale sales to our distributors and our franchisees, and then sales out from our own stores. I'll just point you to the fact that if we look at our sales out, we have very nice development in our like-for-like growth and that is really what is the thing which supports the development of the company. Then I'll leave to Peter to talk about the tax settlement.
Yes, as to the tax settlement, we have in our annual report disclosed that we do have tax risks. As an international company operating in many countries, you will always have ongoing tax investigations and discussions with the various tax authorities. Also, we have had discussions with the Danish tax authorities, and then last week, that ended with a settlement. But I can inform you that we have no other cases at a similar magnitude for the time being.
If I can just continue on the US phasing part, which you mentioned in the report. So the way to think of it, can I look at the increase in the number of concept stores year-on-year of 14%, then add the 9% like-for-like sales growth, and then the 25% currency effect, then I get a 44% revenue growth without different phasing. Now you report 38%. So can I assume that US revenue growth would have been, or US revenue would have been 6% higher without this phasing issue? Is that a relevant way to try to quantify this?
Peter, take it.
Yeah, Lars, I'm not sure I follow all your calculations as we speak. What we focus on in the US is that we have a pretty strong quarter on the like-for-like sales out, and we cannot comment on all the details in your calculations.
No, but you have to understand, we have to understand your numbers and see to what extent this phasing has a big impact or a small impact.
Absolutely.
And if the number of stores is 14% up, like-for-like growth is 9% up, and currency is 25% up, adding that together gives 44% growth, and you report 38% growth. So my question is simply if the gap, i.e., 6%, is what you say we have lost from phasing with more sales in Q4 and less sales in Q1?
Yeah, this is not exact, this is not exact science to do these calculations. Remember that in the US, we have quite some wholesale revenue to our franchise partners in the US. We just recently started acquiring O&O stores in the US.
So, your reported growth should have been even higher without this phasing, is that what you indicate?
I'm not sure we get the, if we get closer to, to these numbers.
Okay, that's fair enough. Thank you very much.
Your next question comes from the line of Chiara Battistini from J.P. Morgan. Please go ahead.
Good morning. Hi, thank you for taking my questions. Just a couple from me, please. First, on the full year guidance that has been upgraded for phase, I was just wondering whether, or at least to clarify, whether this has been just raised for the, for Forex assumptions being much better, like 10% versus 3, 3-5? So excluding the number of increased openings, and also excluding any impact on the launch of the US e-com that has been announced a couple of months ago, a month ago. And then on the, on Russia, if you could give us more color on what we should expect in terms of selling in the coming quarters, please, i.e., if we're going to see a pickup of selling in the coming quarters, or we should continue to see a depressed, selling numbers? Thank you.
Really good questions, to be honest. The first one was regarding the... Maybe, maybe you take it, Peter, you got it.
Let me first of all, you asked about our guidance, and we increased our guidance from 14 to 15, and that is primarily related to foreign exchange. Previously guided 3%-5%, and now we expect around 10% for the full year. On e-com in the U.S., you're right, we launched our e-store in April. It's still early days. The website is up and running, but we are not ready to quantify the impact on that. On Russia, it's still a risky market. We are happy about the sales out, which is approximately flat in our concept stores in Russia.
The shipments, when we fill up 170 Concept Stores we own one distributor, will fluctuate between the quarters.
Thank you. Just maybe, maybe just a couple of clarification. Well, first on Russia, will fluctuate within the quarters with such magnitude as we've seen in quarter one, or a more moderate magnitude than we have seen? And then on the full year guidance, just to clarify, so that doesn't include, the upgrade of the guidance doesn't include any impact from the recently launched U.S. e-commerce?
Our guidance for the full year, of course, includes all the components that we are aware of as of today, including the U.S. e-store.
Okay.
Just on, on Russia, just to follow up, we had negative growth in Q1 of 75%. That we do not expect to continue for the full year.
I think that maybe adding on that, I think that what we should look at, and we also said that in the presentation, what is important is that if we look at the sales out, which is the like-for-like sales in Russia, it is only slightly negative, so it's pretty close to flat. I think that's the very important thing to focus on.
Great, perfect. Thank you very much.
Your next question comes from the line of Patrik Setterberg of Nordea. Please go ahead.
Yes, hello, gentlemen. So I have two questions. The first question is relating to your guidance upgrade on the number of Concept stores for 2015. You choose to upgrade by at least 25 stores. Could you tell us where do you plan to open these additional stores?
Yes, we can say that, that will be spread throughout the network we already have. So, it's not any particular place, it's just spread out over our different regions.
Okay. And then my second question is relating to the quarterly development in the number of shop-in-shops you have. You're decreasing the number of sales points by 7 stores in the quarter. Should we expect that you will continue to reduce the number of shop-in-shops selling points, or is this just a single quarter where we're decreasing slightly?
I don't think you should put anything into this. I think that what we do is that when we look at the placement of new concept stores, which is our preferred kind of stores, then there might be shop-in-shops in the vicinity of those concept stores, and we will obviously close those. I think what you have to look at also going forward is that it depends very much on the markets and where we have the expansion. In some markets, you have a lot of department stores, in other markets you have a lot of malls. If you have department stores, you would see more shop-in-shops. If we have countries where we have more malls, you'd see more concept stores.
It really depends on what market we are talking about.
Okay, thank you for the clear answers. Thank you.
Your next question comes from the line of Michael Rasmussen of ABG. Please go ahead.
Yes, hi. Thank you. Three questions, please. First of all, Anders, I know it's early days for you at Pandora, but we are obviously all very, very eager to get to know you. So what is your thinking so far at Pandora? And maybe if you can share a few thoughts about some of the focus areas you've succeeded in, in your old job with STG?
...My second question, being on the U.S. e-commerce, can you, if you can just talk a little bit about the traffic and the volumes you've seen in the startup period versus when you launched in the U.K. some years ago? And finally, in terms of rings, now 11% of revenues, if you could just repeat what the share of revenues is in Australia, and is this really the level we should see on a group basis going forward? Thank you.
I think I'll at least start with the first question, which is, my thinking so far. I think that what is really important is when you join a company like Pandora, it is a privilege to see the development of the business. And therefore, if we look at the strategic direction for the company, it is really very much continue the good work. There's always things where we can look at tweaks and do things better. And as we represent in Pandora, the full chain from designing the jewelry, manufacturing them, and through to the stores where we sell them, there's of course things which can be done so far, done throughout the full chain.
I personally think that there, there's a lot of opportunities, and if you want a small reflection compared to my old job, I think that what I'm looking at here is that everywhere we look in Pandora, we look at quite a number of opportunities. And compared to where I were before in Scandinavian Tobacco Group, I think that's a privilege that I enjoy very much. If I should talk about the US and the e-commerce, we are very early days, so it is impossible for us to comment on this at this time. But we've started, and we are there, and we will follow that, of course, in the future and see how that it develops.
On the question of the rings, 11% of our volume, I think that's a very nice figure, and also more than 80% growth we had in the first quarter compared to last year. It shows that there are a good development in the rings, and we also believe that there's more leverage in that category, and that's why we continuously focus. You had a specific question on Australia, and I can tell you that in Australia, rings were good, a little bit more than 20% of our revenues, the same in the UK, and in the US, it's close to 10%. So it's really around the world and in all the regions, we are seeing some very, very nice development in the rings.
Thank you very much.
Welcome.
Your next question comes from the line of Kristian Godiksen of SEB. Please go.
Yeah, hello, this is Kristian from SEB. So, three questions, if I may. So first of all, I would also very much like to know the impact on the growth from the phasing. So I calculate that like-for-like growth, adjusting from the mix effect from your O&O stores, then adjusting for this, then your like-for-like growth is only 1.7%. And this makes me nervous, to be honest. So I would very much like to have some flavor on the magnitude of this impact. And secondly, I would like to hear about your pace on overtaking and opening new stores in Germany going forward. So, you have opened 8 new O&O stores from the new leaseholds out of the 77, so which pace should we expect in the coming quarters?
And then thirdly, if you could comment on the impact on the EBITDA margin in your guidance from FX? Thank you.
Maybe I'll just take the opening of the stores in Germany, and then I think Peter, he would be very, very happy to take the other two questions. If we look at the pace, we are already well into the process. I think that I actually visit our people in Hamburg a few weeks ago to see how the progress was, and I think that the approach that they've taken has been, is very encouraging. What we look at is that we are going to phase the openings over the full year, so the last stores will be opened by November. And what you can see is that we're going to have that as a spread throughout the year.
I think that's, that's the way that you can look at that. Then Peter?
Yes, in terms of the EBITDA margin and the impact from currency, I can take you through the components. The EBITDA margin has an upside of 2 percentage point from the gross margin, and then there's a negative of half a percentage point from currency and another half percentage point related to additional OpEx spend. Included in the 2% upside on the gross margin is 1 percentage point negative on currencies. So in total, you could say that the EBITDA margin is negatively impacted by 1.5 percentage point.
On the phasing, again, I'm not sure I can follow all the detailed calculations, just saying that being negative by 75% in Russia in Q1 and -8% in Canada in the quarter indicate that there is some phasing, which we do not expect to be negative in the coming quarters.
But you can't really compare that to the like-for-like sales, and I think that's very important because that's really Sales Out from all Concept Stores, some of them Owned and Operated, and others, Franchise Stores.
Yeah, thank you. But just a quick follow-up. What I've done is just that, you implicitly say that your like-for-like in local currency was 8.9%, because you said 40% of your local currency was driven from like-for-like, so that's the 8.9%. And then you also say that, around 25% of the increase in ASP was due to the mix effect of higher share of O&O stores. So that's 7.3%. And then you say, what I would like to know is what is your underlying growth, if you had not had that positive effect from opening O&O stores?
And that's the, you can say, that's the delta, and that's only 1.7%, and, and that, that's the, you can say, that's the growth figure that makes me nervous.
Again, Kristian, I'm not sure I follow all the calculations, but please be aware that the ASP channel mix impact both the like-for-like and the network growth.
Okay, thank you very much, gentlemen.
Your next question comes from the line of Frans Hoyer of Jyske Bank. Please go ahead.
Good morning. I'm quite impressed with the sales development in the UK. Could you try and analyze the sales growth? Was it 41% in local currency? I'm keen on hearing about the performance in rings in the UK and the online performance, and from that, I guess I can deduct what's happening in the rest of the business in the UK.
Well, I think that I, we talked a little bit about the rings already in the UK. Around 20% of our sales out are rings, and as I said before, that's a very encouraging number. I think if we look at the online business in the UK, it's around 10% of our revenue, and is very good, very strong. If we look at the customers in the online business, it's predominantly men like you and me, where we do not enjoy the browsing part of the shopping experience as much. We enjoy going online.
Have these ratios changed since last year? Or is it pretty stable that rings... Surely, rings must have increased to 20% from a low, and likewise for online sales.
I think that if we look at Q4, it was around 15%, so it has increased from 15% to 20%.
Okay.
I don't know whether we have anything on the online, but I think that's been pretty stable, but as far as I know.
Could you also comment on what your view of the Essence collection is? Is it actually a concept that can kind of be a leg to stand on in the charms and bracelets business alongside the Moments Collection? Or is it something else in your judgment from what you see now?
I think the, the Essence collection plays a very good and important role in, in our portfolio. We can see that we, in, in that context, actually cater to a slightly different kind of consumers, which, which actually means that with the Essence collection, we grasp more. You get a little bit of an idea of, of what kind of consumers, with the countries where it sells a lot, which is, as we mentioned before, Germany, France, Italy, also the Far East. So, so I think it plays a very important role and, and is a distinct concept, which is also recognized by the consumers as distinct.
Maybe just to add some numbers, the revenue increased by 100% on same quarter last year, and in some markets, it's around 5%. So it's a concept, and we have a meaningful business out of that.
And finally, a question on that tax receivable of DKK 259 million in the balance sheet at the end of the quarter. Did that have any effect on the P&L in the quarter?
No, it's a-
Okay.
Prepayment, so it's only cash out and then receivable.
Good. Thank you very much.
Once again, if you would like to ask a question, it's star and one on your telephone and the hash key to cancel that request. Your next question comes from the line of Anne-Laure Bismuth from HSBC. Please go ahead.
Yes, good morning. I have several question regarding the online. So it's 10% of the sales in the U.K. Do you confirm the target of 10% of the total group sales, mentioned by Allan Leighton for previously? Regarding the U.S., what was the impact of the Disney Collection in Q1? And I would like to know what is the percentage of rings sales in other European countries? And a last one, sorry. How many store did you buy back in the U.K. on the first April? Thank you very much.
I can maybe... Oh, maybe, yeah, I can start a little bit. I think that, we've given you the figure on, on online stores in the UK. We will have an aspiration to move towards that level, but we don't have, to be honest, internally, a clear goal of exactly a number there. I think that we should take it as far as we can. I think what is important to recognize when we talk about online is that we're also talking about a omni-channel approach, which means that we want our retail stores to work well together with online. And as you know, you'd research online, and you might buy in store and vice versa.
But I think that the online business and the fact that we are getting online in more countries, which is going to support our business. If we look at the US and the Disney products and the Disney Collection, it's been doing very well, and we are very happy with it. We also find that it's a nice supplement to our portfolio, but we do not give any figures on the exact sales on that. And maybe you, Peter, will take
Yes, you had a question about the four stores that we acquired on April first in the UK, and that are four pretty good performing stores, among some of the best in the UK. And basically, the franchise partner of those four stores wanted to exit and retire, and therefore, we stepped in and acquired those stores. And the details is outlined in our Q1 report at the very back end.
Thank you, and on the percentage of sales of rings in, in Italy, France, in other European countries, please?
In terms of ring shares, we disclose the U.S., Australia, and the U.K., and then the group figure, which is 11.4 in the quarter. We're not providing details on other countries or markets.
Thank you.
Your next question comes from the line of Jesper Christensen of Alm. Brand Markets. Please go ahead.
Yes, hello. A couple of questions from my side on the volume development. Is it possible that you could elaborate a bit on your volume development for the four markets, where you're also giving a like-for-like growth figures?
The short answer is no.
That was short and precise. Just a bit of speculation from my side then. We see a sales growth development of 4.6%, but you are increasing your number of branded sales point with around 10%, and you're also increasing, I guess, sales of Disney products and rings and so on. So sales volume of 4.6% could indicate that you are actually, in volume terms, selling less and less charms, especially out of North America. Could you have any comments on that?
Just the 4.6%, is that the-
Sorry, it was 5.6.
5.6.
Yeah, it was 5.6. I was just me saying it wrong.
Okay. So on the, just on, on the volume, which we, it increases 5.6%. That is the sales in volume in, in Q1. And as we stated, previously, this is, half currency and then half, split between somewhat more expensive products like the Disney and the rings, where customers, they buy, instead of, 2 simple silver charms of $20, they buy maybe 2, slight, one slightly more expensive, of $40 or $50. Or instead of 2 charms, they buy one ring. So that's what's, what's impacting the, the ASP, and then, of course, the increase in our O&O share.
Again, what we focus on is that the sales out, which we have pretty detailed information on in our concept stores globally, both owned and operated, and franchise stores, that the sales out growth, which is not impacted by, by currency, is very positive in the, in the 4 key markets that we, that we disclose. Also, there's a table on the, on the product mix in our, in the presentation for this call on page 11, and there you can see that the, that the charms category is growing 33.5% in the quarter.
Thank you.
There are no further questions at this time. Please continue.
Thank you very much for joining us today. A pleasure, and thank you for your questions. Have a great day.
That does conclude our conference for today. Thank you all for participating, and you may now disconnect.