Thank you, and, welcome to Pandora's conference call following the release of our Q3 2014 results, distributed through the wire this morning at 8:00 A.M. The presentation for this call, as well as the full version of Pandora's Q3 release, is available on pandoragroup.com/investor. My name is Morten Eismark from Pandora Investor Relations, and with me here today is CEO, Allan Leighton, and CFO, Henrik Holmark. In accordance with the agenda on slide 2, Allan will go through a few Q3 highlights, followed by Henrik, who will talk you through the Q3 numbers in more detail. Finally, Allan will conclude the presentation. We'll be happy to take your questions. Before handing over to Allan, I kindly ask you to pay close attention to the disclaimer on page 3. Allan, please.
Thank you, Morten. If you turn to slide four. Good morning, everyone. As you can see from the numbers we released earlier this morning, the strong development we saw in the first half of the year has continued into the third quarter. Revenue for the quarter was DKK 2,845 million , an increase of 26%, with a bit of tailwind from currencies of about 1.6%. As in the previous quarters, growth was driven by all the geographical regions, supported by strong sales, in particular, from our two core categories, charms and rings. Rings, as you know, focus on, the sales almost doubled compared to the same quarter last year.
And as evident from the year-to-date numbers, is expected to surpass DKK 1 billion in revenue for the full year, which is very encouraging. We launched two new Pandora collections in the quarter, Pre-Autumn and Autumn, and they've both been well received. The store network continues to evolve, and during the quarter, we opened 93 Concept stores contributed nearly 56% of our revenue for the quarter and grew at 43% compared to the same quarter last year. Our focus is Concept stores first and branded. Quality, not quantity of stores. And as you can see, we have closed around 1,000 White and Silver stores in the past twelve months. sell-out, which I'll return to, continue to be positive, with positive like-for-like sell-out in all four reported markets.
EBITDA for the quarter surpassed DKK 1 billion for the first time, with an increase of 34% compared to Q3 last year. The EBITDA margin was 35.9%, which includes a tailwind from the gross margin of around 4.1 percentage points, driven by lower commodity prices. The increase in profits lead to free cash flow of DKK 567 million for the quarter. To reflect the strong performance in the quarter, we've upgraded our revenue guidance for the year to more than DKK 11.5 billion, and also upgraded our expectations to our EBITDA margin to more than 35% from previously, approximately 35%.
Our share buyback program is on track, and we've bought back what corresponds to around 3.6% of the share capital during the first nine months of the year, or shares worth DKK 1.7 billion, out of a total DKK 2.4 billion program. If you turn to slide 5. For the quarter, we saw double-digit revenue growth in all geographic regions. Revenues from the Americas increased 17.8% in local currency, with the US up 13.9%. We started renewing, the process of renewing the network in the Northeast US. As we announced in August, we've acquired 27 stores from the US jeweler, Hannoush. The stores were handed over to the end of the quarter, and therefore, had no impact on the numbers for Q3.
As part of that transaction, five stores located outside the Northeast region have been handed over to an existing franchisee. The rest of the U.S. is performing well, with the West Coast, in particular, driving growth. Revenue from Other Americas was up 28.4%. Revenue in Canada, which represents more than two-thirds of the region, was up 15% for the quarter. The inclusion of revenue from Brazil, which, if you remember, was in Other Europe in Q1, added around DKK 40 million to the region in the quarter. Revenue from Europe was up 27.4% for the quarter in local currency, U.K. and France being the primary drivers. The U.K. increased 26.4% in local currency, driven by strong like-for-like sell-out growth , and continued solid contribution from the store, as well as network expansion.
Compared to Q3 2013, the UK has opened 37 Concept stores to a total of 144. Revenue in Germany increased 2%, and as I highlighted a couple of times earlier, we continue to be in transition phase, and revenue will be a bit volatile. And during the quarter, we did some additional cleanup work of our network, and actually reduced the number of unbranded stores by about 160, which clearly had an impact on revenue. Other Europe increased 34.3% in local currency, Italy and France being the major drivers. In Russia, we continue to grow and take market share, and our Russian distributor continues to develop the store network.
We opened 14 Concept stores in Russia in the quarter, and the revenue growth, as well as like-for-like sales growth in Russia, remains positive, although at lower levels than in the recent past. Revenue from Asia Pacific increased 40.5% in local currency. Australia was up 15.6% in local currency, and that's driven primarily by organic growth and rings. And rings in Australia, you know, the vanguard of it really continued very well. Actually, revenue from rings in Australia increased by around 30%, in the quarter, and represents 25% of our revenue in Australia. Revenue from the Other Asia Pacific , which is also very big for us, increased 69.3% in local currency. Hong Kong, Singapore, Taiwan, and China being the primary drivers. So it's still early days.
China's continued to be really positive, with the stores performing well in China. If you turn to slide 6, it's about sales out. Sales out positive in all the major markets. The positive like-for-like rates continued in the third quarter across all the four major markets, and continued to be driven by newness in our stores and improving and continuous focus on in-store execution in all the markets. Sales out growth in the U.S. was 3.7%, an improving trend. And as mentioned, variance continues across the regions in the U.S., with the Northeast still in negative territory and all the other major regions doing mid-single digit growth or more in terms of like-for-like. As previously mentioned, measures are being taken to return the Northeast to positive territory.
sell-out growth in Australia at 22.9% and the UK at 20.6% are again above our expectation and are among other things, driven by increasing revenue from rings. Germany, as in the first half of the year, is really driven by our owned and operated stores, which in the quarter increased 12% in like-for-like sell-out growth, where the franchise stores were slightly negative. We're continuing our focus in Germany on O&O, and we opened 8 new owned and operated stores during the third quarter. Now we have a total of 51. If you turn to slide 7, this is really about the newly launched products. They continue to do well. Half of our sell-in is created by products launched in the last 12 months. As I mentioned, the Pre-Autumn and Autumn collection was launched, and both have been well received.
The Pre-Autumn collection, which was late, launched in late July, had 25 new products, compared to only 5 for the 2013 Pre-Autumn collection, and consequently, we got some incremental revenue there. Essence, launched a year ago, is showing encouraging performance. The UK, Italy, and Asia Pacific are the markets where Essence is really performing strongly. Disney was launched in the US and Canada last week, so early days, but selling in during the fourth quarter, and so obviously had no impact on Q3. If you go to slide 8, you know, following another strong quarter, we've decided to increase our revenue guidance to more than DKK 11.5 billion.
This is basically a result of incorporating better than expected Q3, a stronger set of like-for-like numbers, and the fact now that we're going to open more than Concept stores, up from the previous 275. We've also decided to grow our EBITDA margin slightly to more than 35% to reflect the better expected profitability in the third quarter. Our CapEx is downgraded a bit to around DKK 500 million , and this is really due to the timing of our planned production facilities in Thailand, which will slip over into Q1. Tax rate are unchanged at around that 20% mark. So with that, I'll hand you over to Henrik, who will talk a bit more detail about the financials.
Thank you, Allan. If you turn to slide 9, you'll see that, strong revenue growth across all regions led to a total revenue for the quarter or growth for the quarter of 26.2%, or total revenue of DKK 2,845 million. In local currency, revenue grew by 24.6%. Volumes increased by 15.7%, and the average sales price increased to 145 DKK from 133 DKK a year ago. The ASP increase was primarily driven by an increase in share of revenue coming from rings, as well as a shift in channel mix. More revenue is now coming from O&O stores, which impact that channel mix effect. On a product-by-product basis, we have made no price changes from prior periods.
Like-for-like organic growth in sell-in generated roughly two-thirds of the growth for the quarter, whereas network expansion represented the remaining third of the growth. In Q3, 86% of our revenue came from branded distribution, which is up from 82% same quarter last year, in line with our strategy of focusing on branded sales channels Concept stores in particular. Please turn to slide 10. Looking at the development in our distribution network, total number of points of sale reduced by 205 compared to Q2 2014, to a total of 9,841 points of sale globally. During the quarter, we added 93 Concept stores and a net total of 183 branded points of sale.
The majority of Concept stores openings in the quarter were in Europe and Americas, with Russia, U.K., and U.S. being the largest contributors. During the quarter, we increased the number of Concept stores with 43, of which 22 is related to the Hannoush acquisition that Allan previously referred to. Bear in mind that the Hannoush stores are not adding to the total store count. They merely change status from franchise stores to O&O stores. Of the 21 new owned and operated stores outside the Hannoush acquisition, five of those were opened in Brazil and eight were opened in Germany, as Allan previously mentioned.
We are now below 10,000 stores, which is a consequence of the strict strategic focus on branded stores, and as I Concept stores in particular. The number of unbranded points of sale have been reduced by more than 900 stores in the past 12 months, primarily, due to reductions in Germany, Italy, the Netherlands, and the Nordic market, as well as in some of our distributor markets. Please turn to slide 11. Looking at the product mix, where you'll see that both of our core categories are continuing to perform well. Revenue from charms increased by 22% compared to the same period last year, while revenue from silver and gold charms bracelets was up 27.6%.
These categories together represent 76.5%, which is a reduction from 78.5% a year ago, but which is due to the strong growth of our rings category. Rings increased by 98% for the quarter and represented a record high of 12.1% of total revenue in Q3 2014. And important to note, this is also reflected in our sell-out performance, where around 12% of our sales out Concept stores is coming from rings. The revenue from rings continues to be driven by an improved offering, as well as increased marketing activities, focusing specifically on rings. Particularly Australia, as Alan mentioned, and UK, have seen strong contribution from rings, but actually, most markets are increasing their share of revenue generated from rings.
The other jewelry category increased 4.5%. Necklaces, in particular, did well in the quarter, with revenue from the category increasing more than 50%. However, revenue from earrings was markedly lower than the same quarter last year, due to some very strong product launches in last year's Q3. The watch category, which has been discontinued in 2014, contributed negatively for the quarter, with close to five percentage points on the other jewelry category, due to returns received from retailers. Please turn to slide 12. Gross profit was DKK 1,999 million, compared to DKK 1,493 million in the same period last year, resulting in a gross margin of 70.3% in Q3 2014, compared to 66.2% last year.
The increase in gross margin for the quarter, compared to Q3 2013, was driven by lower hedge prices on commodities. The slight decrease in gross margin, compared to Q2, was primarily due to an increase in retail cost, impacted by lower spot prices on gold and silver. Excluding our hedging and the time lag effect on our inventory, the underlying gross margin in Q3 2014 would have been approximately 72%, 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 by 1-2 percentage points. Please turn to slide 13, which looks at the OpEx development.
Operating expenses for the quarter were DKK 1,036 million versus DKK 785 million in Q3 2013, representing 36.4% of revenue in Q3 2014 versus 34.8% in Q3 2013. Sales and distribution expenses were DKK 440 million, an increase of 24.3% compared to Q3 2013. This corresponds to 15.5% of revenue, which is in line with last year, where this was 15.6% of revenue. The nominal increase in sales and distribution expenses was mainly driven by higher revenue and increased number of Pandora owned and operated stores, as well as costs related to the expansion of our e-commerce platform.
Marketing expenses were DKK 259 million, compared to DKK 211 million in Q3 2013, corresponding to 9.1% of revenue, compared to 9.4% of revenue in Q3 2013. Due to Christmas and the launch of the Disney collection in the U.S., marketing expenses are expected to increase significantly for the fourth quarter. Administrative expenses for the quarter was DKK 337 million, representing 11.9% of revenue, compared to 9.8% in Q3 2013. The increase in administrative costs was primarily due to costs related to relocation of offices, higher IT costs, and generally increased headcounts. Furthermore, administrative expenses for the quarter includes the full accrual of the potential severance payment through to the end of 2016, related to the agreement with our CEO, Allan Leighton. Please turn to slide 14.
EBITDA for Q3 2014 increased by 33.8% to DKK 1,020 million, resulting in an EBITDA margin of 35.9% compared to 33.8% in Q3 2013. The EBITDA margin for the Americas for the quarter was 41.3%, which is down 2.9 percentage points compared to the same quarter last year, despite a positive gross margin impact on the regional margin, which, however, was partially offset by some higher customs that we had to pay in Canada. The EBITDA margin decline was primarily due to costs related to refreshing the Northeast network in the US, as well as a general increase in marketing spend.
Furthermore, as in the two previous quarters, the inclusion of Brazil in Other Americas , as opposed to previously Other Europe , has a negative impact of around 1.5 percentage points for the third quarter EBITDA margin in Americas. The EBITDA margin for Europe increased from 39.6% in Q3 2013, to 47.8% for Q3 2014. The increase was primarily driven by the improved gross margin, as well as leverage on the cost base from increase in revenue, particularly in the UK and the new markets in the region. The EBITDA margin for Asia Pacific region improved by 5 percentage points to 45.2%. Improvement was primarily driven by increasing revenue in the region, as well as the improved general improvement in gross margin. Please go to slide 15.
For the quarter, net financial income amounted to a loss of DKK 57 million, of which DKK 44 million was an exchange rate loss, non-cash, exchange rate loss, primarily due to fluctuations in exchange rates, translations of intercompany balances. The opposite was the case in Q3 2013, where the same element generated a gain of DKK 54 million. Income tax expenses were DKK 181 million in Q3 2014, implying an effective tax rate of 20%, which is in accordance with our guidance. Reported net profit increased by 18.5% to DKK 725 million in Q3 2014, compared to a net profit of DKK 612 million in Q3 2013. Please turn to slide 16 to look at working capital development.
Operating working capital at the end of Q3 2014 corresponded to 24.9% of preceding twelve months revenue, compared to 25.6% at the end of Q3 2013, and 18% at the end of Q2 2014. Inventory was DKK 2,126 million at the end of Q3 2014, corresponding to 19.7% of preceding twelve months revenue, compared to 16.5% in Q2 2014, and 19.2% in Q3 2013. Of the increase, roughly DKK 100 million relates to raw material inventory, including some late buying in the last days of the quarter of gold and silver. The remaining increase is mainly due to higher revenue, as well as higher revenue in own...
Sorry, higher, higher inventory in owned and operated stores, due to an increase in the number of Pandora-owned and operated stores, which also includes the Hannoush store inventory, which was transferred to Pandora at the end of the quarter, together with the actual stores. Trade receivables were DKK 1,327 million at the end of Q3 2014, corresponding to 12.3% of preceding twelve months revenue, compared to 7.8% in Q2 2014, and 12.2% at the end of Q3 2013. The increase compared to Q2 2013 is primarily due to the timing of revenue within the quarter, as well as extended credit terms in some markets, which is customary at this time of year.
Trade payables at the end of the quarter were DKK 758 million, compared to DKK 481 million at the end of Q3 2013, and DKK 633 million at the end of Q2 2014. The increase from Q2 2014 is mainly due to the increase in raw material inventory. Other receivables decreased to DKK 119 million, compared to Q2 2014. This was primarily related to a repayment from the German tax authorities of DKK 175 million, related to VAT previously paid in Germany. This is the last extraordinary payment from the German authorities related to 2012 and 2013 VAT. Finally, I'm tempted to say. In Q3 2014, Pandora's CapEx was DKK 135 million, primarily related to opening of owned and operated stores and office moves.
Investment in intangible assets was DKK 57 million, mainly related to key money in connection with the opening of Pandora-owned stores. Net interest-bearing debt at the end of Q3 2014 was DKK 9 million, corresponding to a ratio between net interest-bearing debt and last 12-month EBITDA of 0. With this, I'll hand back to Allan to-
Thank you, Henrik. If you go to slide 17, strong quarter, consistency of performance now, revenue up 26.2%. The diversification on product categories and geographies now well on track. Revenue Concept stores, really important to focus on this, up 43%, now 56% of our revenue. Gross margin up to 70.3%, EBITDA of over DKK 1 billion and just under 36%. Free cash still strong, DKK 567 million. Revenue guidance upgraded to more than DKK 11.5 billion. Basically, the share buyback are on track. That really concludes our presentation, and we'll open it up as normal for questions.
Thank you, participants. As a reminder, if you wish to ask a question, you'll need to press star one on your telephone keypad and wait for your name to be announced. If you wish to cancel that request, please press the hash key. Once again, that's star one for a question. Your first question today comes from the line of Michael Rasmussen from ABG Sundal Collier. Your line is open.
Thank you very much. Three questions, sir, please. I'd like to start with hedging, and if you could start and just explain us the dynamics between the re-melting costs and how the gross margin declined by 100 basis points on an unhedged basis from Q2 into Q3. So if you could first explain so we understand this more in detail, and secondly, isn't this gonna continue or even accelerate into Q4 or into 2015? And also on your 2015 hedging, I don't really understand how most of the hedging levels that you give for the next four quarters are around $20 for silver. I believe silver hasn't been at $20 since the end of July. Second question being on your e-stores in Europe.
I see that you've now added Italy as well. Well done. You're in seven markets now in Europe. I was hoping for a bit more flavor on performance in some of these markets outside of the U.K., and how big of a share of group revenue should we see online sales go to, please? And final question, if you could give us a bit more of an update on the U.S. Northeast Coast. It seems like you're still struggling a little bit in this region. With what you've seen in the Hannoush store so far, are you sure you're gonna be able to fix this problem in a short time? Thank you much.
Okay, Mike, I'll do the reverse ones first. US, as you know, we took Hannoush, I mean, well, first of all, a more encouraging trend I thought in the US like-for-like was a good step up. Too, in the Northeast, we took Hannoush at the end of the quarter. We've now got it, we're operating it, and we've just done some very basic things about execution, clearing inventory, clearly, you know, purchases are making sure that we're consistent to where we be. And, you know, we wouldn't have done it if we didn't think that it would have an impact. And, we very much expect that to be the case.
And so, you know, we've always been, and still are, very optimistic about the US performance. And as I say, I in my mind, over the next couple of years, that is a market that, as in the UK and Australia, should go again. And my position not changed on that. The second thing is in terms of e-stores , Italy's only just gone and Poland's only just gone, so it's a bit early to put flavor on. If you want me to stay outside the UK, I think we're, France is looking very encouraging, in terms of the metrics that we've got there. Germany, a bit behind that.
Austria, not of any significance either way. I would think about that, and in the Netherlands, still a bit too early. In the UK, it continues to be a very strong performer. And we continue to be very encouraged by that. The male purchase piece of this is increasing, which is key for us because we get a higher share of male. And actually, in some of the gifting times, it is as high as 60% or 70% of the purchases in key gifting times. So that is a very encouraging stat for us. Our service levels continue to be phenomenal.
You know, I've said to you all the time that my view is over time that there's no reason that the online business or the business as a whole shouldn't be in the realms of 10%. It'll just take time to build it, but clearly that is the potential for that business. Henrik, do you wanna just comment on the hedging points?
Sure. Well, first, addressing the hedging levels, I mean, these are the hedging levels. I mean, we build our hedging according to the methodology that's described in the announcement, 180, 60, 40% for the four quarters ahead. And this is then based on that, the hedging prices that we arrive at. Obviously, I mean, we will benefit from the current lower hedge prices as we move along, if they stay where they are. But these basically are our hedge prices as they look right now.
Hedging versus remelt, your other question, what basically, the challenge between the prices for the remelt and our hedge prices on our purchasing is that the benefit that we get from the reduced raw material prices on our purchasing is delayed 12 months, whereas when we remelt gold and silver products, then we get the hit straight away because we sell it at spot prices in the market. So, well, unfortunately, there's that lack of symmetry, you could say, which then has this impact in Q3.
So, Henrik, but that should be even bigger in theory in Q4 then?
Well, not necessarily, because it really depends on which products are remelted and also depends on the time of production of these products. So we had a sharp decline in gold and silver prices around Q2, start of Q2 last year. So I mean, the further we come along, the closer relationship, everything else being equal, we will have between the production prices and remelt prices. But obviously, again, depending on how gold and silver prices develop going forward.
Okay, great. Thank you. And I guess there isn't much silver in your watches that you're remelting anyways.
Well, there is one. I provide it for and we provide it for you.
But Michael, the way to think about this is it is absolutely to do with timing, and therefore it doesn't necessarily trend, put it that way.
Mm-hmm. Okay. Thank you very much.
Okay, we're ready for the next question, operator.
Yes, sir. Your next question comes from the line of Lars Topholm from Carnegie. Your line is open.
Yes, thanks for taking my questions. I do have a couple. The higher custom costs in Canada, is that a one-off or is that something continuing, and what's the amount? And likewise, the cost for the relocation of offices, how much is that? And is it a one-off? Then a question on your store expansion pace, the number of stores you're opening now on a 12-month basis, around 300, is that a run rate you expect to be able to maintain going forward? Not forever, of course, but you know, looking at the next couple of years. And then a final question here, you mentioned that your revenue in Q3 was skewed towards the end of the quarter.
Is that any different from a normal seasonal pattern, or just as you'd expect it to be? Thank you.
We will just check whether we think the revenue skewed to the end of Q3. But let me take the stores point last. You know, we are around Concept stores. you know, it's difficult to say whether that should be a run rate. You know, as you know, you know, the whole focus is on quality of site. And I think the thing that you should really take from this, which I think is significant for us going forward, is this focus Concept stores. and on one hand, you know, that's the piece of the business we are growing, whereas the other end of our distribution, white and silver, is being reduced significantly.
And if you look at the concept store growth in the quarter, you know, it's 43%. It's now 56% of the business. And that is not just to do with basically adding stores, it's the quality of those stores which is making a difference. So in my mind, the thing to focus on is concept store revenue is what will grow. That will be driven by quality of location. And you know, if it's 200 or 150 or 300, in my mind, it's not relevant. The thing that's most relevant is what is the quality of each of those individual stores? And so I think that's the way to think about it.
You know, we wouldn't give up, but I wouldn't work into the 300 is a run rate, but I would absolutely read into Concept stores is the growth engine of this business, and that is what the business is very focused on. They outperform, I think that's the major point, because, of course, you've got control and total branding. Do you, Henrik, want to just take these other two points?
Sure. The higher customs cost in Canada, we're not providing the numbers, but it's, we may have these fluctuations between the U.S. and Canada. We are looking into an opportunity to work more favorably with the transactions between U.S. and Canada. There are some mechanisms in the U.S. that makes this possible, but we cannot give any timing on that. But it's a minor impact compared to all the other impacts on the gross margin in the Americas. Relocation of offices, if you look at admin overall, slightly more than half of the increase in admin is related to Allan's exit. The other bit, it's mainly IT costs and the additional headcounts that really impact it.
So the relocation of offices is a minor part. Yes, relocations is, say, by definition, one-offs, but it, but they come from time to time, but it's a small amount. In terms of the skew of revenue towards the end of Q3, well, generally, if you look at last quarter, same quarter last year, we also had around 12.3. I think this year, it's 12.3, last year was 12.2% of our receivables at the end of the quarter, compared to 12 months revenue. So it's a comparable level, and that, and but it, it's generally higher than the other quarters because the revenue is more skewed towards the end.
Also, as I mentioned, when presenting the numbers, we have some extended credit terms, which is basically customary for this time of year, where we start some Christmas shipment deliveries already towards the end of Q3. So it's not something extraordinary for this year.
So in other words, when revenue is skewed towards the end of the quarter, I shouldn't read too much into that regarding, you know, momentum building up through the quarter or anything?
Oh, no. Your receivables are always impacted by when your invoicing takes place. So that's... But you shouldn't read anything into that in terms of momentum. It's business as usual compared to prior years.
Yeah. And then, Henrik, if I may, just one housekeeping question, it's only because I'm stupid, but how can an intragroup loan trigger a currency swing in net financials?
You're not stupid. This is something I think only for accountants to try and understand. It's a little bit technical, and it's because of a lack of symmetry between the way this is treated internally in the group because of some IFRS rules. So there's a receivable between two group companies. In one group company, the currency adjustments go to the equity in the balance sheet, and in the other group company, it goes to the P&L due to the way the accounting rules are. And when you then consolidate, you only have one leg represented in the P&L. And this year, it has a negative impact. Last year, it has, had a positive impact. The important thing is that it's a, you say, it's a non-cash element.
... but it obviously impacts the year-over-year performance when it comes to the net profit line. It's almost DKK 100 million impact in between the two years as a gap.
Fantastic. Thank you very much for taking my question.
Thank you. Bye bye.
Thanks.
Next question comes from the line of Antoine Belge from HSBC. Your line is open.
Yes, good morning. It's Antoine Belge at HSBC. Three questions, please. First of all, in the US, can you update us a little bit on your work, especially on the East Coast? And how do you see—when do you think the like-for-like and total sell-out could really improve? And second question relates to marketing. I think you mentioned a strong effort in Q4. What type of marketing, which regions, and where do you think the marketing to sales ratio will end up for the entire year? And thirdly, you are now investing a bit more into O&O stores.
So what was the percentage of sales through truly owned store in the first nine months? And how do you see this evolving going forward? And also, what will be the impact on your CapEx? And if you could maybe give us a bit of information about the metrics, like CapEx per square meters, and also, you know, what type of margin you expect compared to the store, especially for the concept store, the one that you don't truly own. Thank you.
Okay, there's a few questions there, and sort of let me go. So the U.S., I mean, the way to think about the U.S. is the quirk in the Northeast was primarily driven by let's get hold of Hannoush, which is a big impact in all that. And I articulated it earlier, what we're doing with that, and that will definitely have an impact. Just generally in the U.S., we've a bit more marketing spend, a bit more, a lot more focus on stores and execution. And also, you know, just looking constantly to see how we can refresh the network.
So all of the things that we do everywhere else, we're just doing with a slightly more intensity, and clearly, Hannoush gives us a bit more opportunity to make an impact slightly faster. We don't talk about like-for-like by region, apart from saying that the Northeast has been down, but we would expect that to improve, and we'd expect, as we do all our markets, for the Northeast at some stage to go into being like-for-like positive. You know, I feel very good about the work that's been done there. And as you can see anyway, generally in the US, there was an improving like-for-like trend in the quarter.
And, you know, is in that range that we always talk about for the US, a 3%-5% like-for-like, being a very good number. And clearly, a number that's close to 4% in the US this quarter, by US standards, would be at the top of the pack. So that's the US. Marketing, generally, there is a lot of activity in Q4. Clearly, we have the Christmas campaigns, we'll have Disney in the US, we will be doing a lot of marketing around rings, and we've got Essence. So we've got more products to get behind, and also, we will be on national TV in the majority of the big markets.
And you know, clearly there is real momentum in this business, and clearly, Christmas is a great time to enhance that momentum. And so, that's the, that's the, the thought behind Q4. We, again, we never guidance to what the number is. We always talk, you know, I, I go on and on, you know, on and on and on, but I would like to be able to spend 10% every quarter in all the markets, because our, our P&L construct and our model allows us to do that, but, but I may wanna make sure that the majority of that money is spent on consumer-facing things. So that's our thought about Q4. We'll be big in marketing, a lot of programs, a lot of products to support, and rightly so. You know, I think we've...
The TVCs, the TV commercial I've seen, and on the research we've had on those TV commercials would suggest they're the best we've ever done. So, you know, let's get behind them. In terms of owned and operated, again, the way we think about owned and operated is we tend to use it in countries where we're starting out in town, so we can build the business, show a P&L, and then build on the franchise on the back of that. But in certain markets, where we are either rebuilding or constructing the network, then you know, owned and operated plays a bigger role. I think we've opened about 100 owned and operated stores this year, and I think we've got about 200.
A lot of those are clearly, Hannoush comes into those numbers, but there's a lot in Turkey and Brazil, which we've taken over from distributors. But in the core markets, in prime sites, then we will put down owned and operated stores, where the franchisee cannot really afford the rent. And our ability to go in these prime locations is now very high, and there are a number in the countries. So owned and operated for me is a really important tool, again, of how we're driving our concept store business. I would... Our owned and operated stores are outperforming our concept Concept stores in terms of growth. Now, what comes with that is a slightly more CapEx up front, not significantly so.
In the early, I'd say in the first 6-9 months of opening those stores, your EBITDA margin is slightly lower than it would be in a franchise store. But of course, your cash margin is significantly higher. So we play it in the mix, and we play these things strategically. And in a market like Germany, where we're completely rebuilding the network, then owner-operator is playing a big role. So we're really pleased with these stores. It doesn't signal a change in strategy. They will be a bigger part of our business. They are very profitable and in the right location are providing a very strategic tool for us in our network build.
I think you asked about the share of revenue from owner-operator stores. As we mentioned previously, it's around 15%.
Okay. Just maybe, I mean, you mentioned the impact, you know, a bit more CapEx, and then the impact on the EBITDA. What about in terms of, inventories and just, you know, working capital?
You have a little bit more inventory in there, but it's... None of this is of great significance as the way-
Okay.
I think about it.
All right. Thank you very much.
Thank you very much.
Next question comes from the line of Stephanie D'Ath from Bank of America. Your line is open.
Yes. Hi, everyone. I have three questions for you. The first one is on volume growth. It declined to 16%, while we used to have over 25% volume growth. Could you maybe specify which categories or geographies weren't growing as fast in terms of volumes? My second question relates to coming back to the margin contraction in Americas, so, encouraging results in terms of like-for-like reacceleration, and obviously the impact from the Northeast region continuing. But how do you see Americas's margin evolve, and do you think this will still be under pressure in the coming quarters as a result of the integration, sorry, of Hannoush? And then my third question is on the exchange rate loss. How should we think about that going forward in the coming quarters? Thank you.
So I'll get Henrik to the exchange rate. On the Americas, you know, I think we've stayed consistent. I have stayed consistent anyway. I think with anything, we've probably been making too much money in the US. Our EBITDA margins have been too high, and therefore, that there is an adjustment in that in terms of support, in terms of OpEx and marketing that you can see. In the Americas as a whole, there are a number of things moving around at the moment. As you've seen, you know, the Brazil impact has an impact on, in this quarter, a negative impact on their EBITDA margins.
The Hannoush in Q4, Hannoush actually will have a negative impact on the US margin, because we basically thought that we've already taken our margin, and therefore, the only margin we're gonna get on the stock that's already in there is the wholesale margin. And so that will, you know, we've already taken one chunk of the margin, so that will deflate our EBITDA in Q4 off the back of Hannoush. But of course, over time, it works its way through. So a number of one-offs in the US. But my view is, you know, we need to invest a little bit more in terms of EBITDA margin. As I say, I see the US as a growth market, and a big growth market, and therefore, we should get behind it.
But there'll be a bit of oscillation over the next 3, 6, next 3 quarters, I'd say, as some of these things swing in and out. But frankly, we're only interested in the US in, in the mid- and long term. It's still a very profitable business for us, even at the levels that we're at today. And, you know, we feel very comfortable that it will be returned to, you know, good EBITDA margins, and when we move our way through this next phase. But I want to invest in it because it supported the rest of the company for a period of time. In the, in, in terms of volume, it's... and volume is becoming not that relevant to us now because clearly, there's a big mix issue here.
A big change in the volume is the mix of rings, which clearly sell at a much higher average price than the core businesses. The way I look at volume is that... And of course, you've got very high, you know, you've got very high comparables. When I looked at the numbers, I looked at these numbers, I think I'm right in saying that when you look at the real volume, we sold about 4 million more units than we did. And so when you look at the real, real volume, that's going through the real volume increase as opposed to percent, it's very significant. So we're not, we're not worried about this at all. It's absolutely what we would expect.
On the exchange rate loss, that is, I mean, difficult to predict because it really depends on development in the US dollar rate. But generally, you could say, an increasing US dollar rate against the Danish kroner would have negative impact on the group accounts, whereas a reduction in the US rate against Danish kroner would have a positive impact. So that's, but it, it's difficult to give other guide to help them there.
Okay. Thank you.
Okay. Thank you.
Your next question comes from the line of Patrik Zetterberg from Nordea. Your line is open.
Yes, good morning, gentlemen. I would like to ask a question about the German operation. You're mentioning in your presentation that the market is in a transition phase as you make some changes in your distribution setup.
... I'm just wondering how long time period this transition phase will last? And secondly, what would be a fair growth level for this market during this transition? Should we look at the 2% growth you reported in Q3 in Q3 report as a fair reference?
Well, again, I mean, let's start from, I don't know how you put it. So Germany is a complete rebuild. It is like starting again. And I'd say we've been on that now for 12-14 months. I think we've made good progress. We've got... You can see in our owned and operated stores, the key number to look at in Germany is the sales out, not the sales in, and because that's what we're very focused on. And if you look at our owned and operated store, like-for-like in Germany, I think they're close to 8%, which is a pretty big number. So I think we feel pretty good about that. And we will continue to build our network with owned and operated, closing down other stores and closing down the tail.
In my view, there is at least another 12-15 months worth of work to do because we're building a complete network. We're in, you know, we'll do it as fast as we can, but I don't want to repeat the history of the past, which is that the German team is only focused on the absolute quality of location. It's not a numbers game. So I think we'll see the volatility. I'm actually really pleased with the progress we've made. I'd say we're 40% of the way where we need to get to. We're not gonna open stores rapidly. We'll go at the pace which we need to do and get the quality of location.
But I would be fixated on the, which I am, on the sales out of our owned and operated stores in Germany, is the real test of how that business is doing.
Okay. Thank you very much.
Question comes from the line of Chiara Battistini. Your line is open.
Hello, good morning, everyone. Just a couple of questions for me, please. One, on Disney, if you could comment on the launch and the early reception from the retailers now that you have launched officially at the beginning of November. And then just a follow-up on gross margin and on the silver move, really, as silver has taken a further leg down in the last month. So I was wondering whether, first, you are planning to invest any of that move back into pricing. And then, two, if you're seeing any pressure from retailers for the time being, to have higher margins, well, to leave them higher margins? Thank you very much.
Okay, Chiara, I'll do it in the reverse order. I mean, we don't... We really do not think about our pricing in any way to do with what happens to commodities. We've been there before. You know, I think we're very consistent. Our pricing is, we think we're in a great spot in terms of affordable luxury. We haven't changed it for a long period of time, and as far as I'm concerned, we're never gonna change it. And so what happens to commodity has to be managed elsewhere, but one of the ways it never gonna be managed is putting the prices up. So that's the first thing. The second thing, we're not really seeing any pressure from retailers for more gross margin.
As you can imagine, if you're a Pandora concept store franchisee, and your business is growing at +20%, then you're feeling pretty good about things. And that's good because we want them to feel really good about things. So we're under no pressure from more gross margin from our retailers, and we're under no pressure to put our prices up in any way, shape, or form, and won't be. As far as Disney, I think it was, was it Disney you said? I couldn't quite hear at the beginning. Was it Disney?
Yes, yes, it was Disney. The Disney launch, and the recep-
Yeah.
the reception from the early response, I guess, from the retailers.
Yeah, I mean, so Disney launch is taking place. It's very early days. I would say the reception from our franchisees was probably the best reception we've ever had on any product launch we've done. You know, US and Disney, it is a big deal. And so, you know, early days, but the reception from our franchisees was exceptional.
That's great. Thank you very much.
The next question comes from the line of Faisal Ahmad from Handelsbanken. Your line is open.
Yes, Faisal Ahmad from Handelsbanken Capital Markets. A few questions from my side. Firstly, on the Russian market, I mean, and the ruble has continued to slide a lot. What are you exactly doing with your wholesale prices? Earlier during the year, you chose to eat some of that hit yourself. What's your plans going forward? And maybe if you also can comment a bit about trading and consumer trends on that market. That's the first question. The second question relates to your concept store openings and plans for this year. I mean, you have upgraded your targets for full year once again. I mean, which markets are surprising you? Yeah, that's my questions. Thank you.
Okay, well, let's start with Concept stores. the additional openings that we flagged in our guidance here are across the world, you know, the usual suspects. It's across the world. It's all of the key markets have got three, four Concept stores. and that's what we're largely seeing, you know, the spread of Concept stores is pretty much the spread of our business geographically. And it's very, you know, it's very encouraging. And I think I'm encouraged by two things. One is, you know, clearly franchisees lining up to take these stores. But secondly, which is by far the most important thing to me, the quality of these locations is very high.
As I say a thousand times, I'm much more interested in that than the numbers. As far as Russia is concerned, we've not changed our position. You know, we're taking a long-term view of Russia. We're not taking a short-term view of it. We've supported our distributor there in terms of margin to enable us to hold our prices down. That has not changed. The fact that we are in that position is that we are, you know, we're taking market share, and we've got a positive like-for-like sell-in, which is quite unusual in the Russian market today. I sense that, you know, the market in Russia is still, you know, I...
How I describe it? I think people are very reserved in what they're doing. You know, I think the consumer spending is down without any doubt, and people's confidence levels, which is, you know, probably the most important thing, are also down. But you know, as I say, we tend to focus on our own position, and we're doing exactly what we said we would do and getting the results we expected to get from that. That will just continue, and you know, as we take this long-term view of Russia.
Okay, just a follow-up question on the concept store openings. The guidance which you have provided us for Q4, as far as I can calculate, it's around 19%-20% growth in local FX for Q4. What's the contribution, growth contribution Concept stores, or space openings in Q4 in that number?
Yeah, I mean, we're not providing that kind of guidance on a quarterly level, but generally, you could say retail is a strong, Q4 is a strong retail quarter, so you can expect a higher share of O&O in Q4 just because of that.
Okay. Okay. Perfect. Thank you. That's all from my side.
Thank you.
There are no further questions, but participants, as a final reminder, if you wish to ask a question, you'll need to press star and one on your telephone keypad.
Good.
There are still no questions coming through the line. Speaker, please continue.
Yeah, so, thank you very much for that. I think I sort of point you in four directions off the back of these numbers. You know, first of all, you know, continuation of that strong performance, but I'd really focus you on the performance Concept stores and what that means for the business and our focus on that as the driver, a key driver of our growth. I think the second thing I'd focus on is rings. You know, this is now becoming a substantial business and has been a big part of our move, as I describe it, to the right, i.e., that we keep our core charms and bracelets business strong, and both those businesses grew +20% in the quarter.
But at the same time, we've been able to move to the right and create ourselves a rings business of some scale. The third thing I'd point to, as we've known often to, is the performance in Asia. And, you know, that business has traded phenomenally for the past 12 months. And as we think about our moves into China and Japan, you know, we feel greatly encouraged by the performance in those markets already from a small scale, but also what we're doing in the rest of Asia. And then, finally, I think, you know, the core market performance in the US, beginning to pick up again.
The UK and Australia, you know, we're just we rattle off 20% like-for-like, as if, you know, they're just something that happened. They don't. We just have absolutely quality of network, which is what we're trying to get to everywhere, and a largely concept store driven business. And I think that those are the threads that you need to weave into how you think about, you know, where the business is progressing to. Anyway, we'll see some of you tomorrow and over the next few days, but thank you very much for being on the call.