Good morning, everyone, and welcome to the extended conference call for Pandora's Q1 results and the announcement of our new strategy. I'm John Beckman from the Investor Relations team. I am here with our CEO, Alexander Lachek and our CFO, Anders Boyer and the rest of the IR team, Christophe Manglian and Mikkel Johansen. Slide 2, please. Please pay notice to the disclaimer on Slide 2.
Alexander, Please go
ahead. Thank you, John, and welcome, everyone, for joining us in this extended call today. Today's call will be split in 2 parts. Beck. The turnaround has been successfully completed, the top line has been stabilized and we have a much stronger organization.
We're now ready to share the highlights of our new strategy, which will lead Pandora into a chapter of sustainable and profitable growth. Beckman, but more on that later. Let's first start with the Q1 numbers. As already announced in the March trading update, we've had a strong start to 2021 Beckman with the continued strong momentum. Our strong online growth continued and was up over 200% versus 2019.
Beck. The U. S. Growth was very strong, up more than 50% versus 2019. Overall sellout growth Beck.
The quarter was only down 5% versus 2019 despite that 30% of the stores were closed in the quarter. We are pleased with the start of the year.
Beck. On
top of announcing the new strategy today, we have 3 other important announcements to make. 1st of all, based on the strong performance so far and our expectations for the rest of the year, we upgrade our guidance for the year Beckman to now expect organic growth above 12% and EBIT margin above 22%. Beckman. Secondly, we also reinitiate cash distributions to the shareholders by doing a combination of extraordinary dividend and share buybacks. Beck.
And finally, today our new sustainability report is also released, where we disclose strong results achieved so far and our ambitious goals for the future. Slide 7 please. Beckman. Our underlying performance is best viewed versus 2019 when there was no impact from COVID-nineteen. Beckman.
Using Q1 2019 as the comparison, in Q1 2021, we saw solid performance across most key markets Beck. U. K, which is our 2nd largest market, was only down 16% versus 2019, Beck. Despite all the stores being closed in the quarter, our stores in the UK are now fully opened again. The performance in our largest market, U.
S, Beck. Really stands out, with sellout growth 52% higher than the same quarter in 2019. Australia, which was almost fully open, also delivered positive growth versus 2019. As expected, Beckman, and increase our investments to strengthen and reposition our brand and reduce promotions during the second half of the year. Beck.
As said already, we think our underlying performance is best viewed versus 2019. Beck. The sellout growth of minus 5% versus 2019 is impacted by opposing factors. We talked about these in Q4 as well, and they are still all very relevant. 1st, lost revenue from closed stores, which is partly offset by revenue picked up online instead.
Beck. Secondly, as we have talked about before, a shift in general consumer demand away from travelings and services, for instance, And towards, among others, gifting and jewelry. In the U. S, this has been fueled further by the stimulus packages. Beckman.
Net net and trying to cut through all of this noise, our assessment is that the underlying Q1 performance confirms Beck. Next slide, please. It's clear that we're maintaining our industry leading brand position. However, with lockdowns and closed stores, we have adjusted the spend pattern more towards digital, especially in markets where physical retail has been closed. Beck.
So a little bit less of top funnel spending, which impacts the unaided brand awareness. More than onethree of all Google searches for branded jewelry Beck. Globally was for Pandora in the quarter, while the 2 closest competitors had around 10% share of searches. On global unaided brand awareness, we were number 1 in 5 out of 7 key markets in the quarter and ranked 2nd highest in the U. S.
Beck. Next slide, please. Let's have a look at our digital results in Q1. Online growth Becker. Continued and revenue more than doubled versus 2020 and was up over 200% versus 2019.
Beckman. Our online conversion rate was up over 80% year on year and the conversion improved for most of the steps during the consumer Beck. The click and collect concept in the U. S. Continued the strong traction Beck.
Digital plays a key role in our new strategy that we will cover later in this Beckett. Beckman. Today, we launched our new sustainability report with increased disclosure. Sustainability is close to our heart and we're working towards becoming a Low carbon, circular and inclusive business. In 2020, we lowered our CO2 footprint and switched Beck.
We are supporting a circular economy and have established a roadmap towards achieving our target of using only recycled silver and gold by 2025. Beck. Our recent refinancing also links part of our borrowing costs to our sustainability goals to be carbon neutral and use recycled metals only by 20 20 Beckman. It integrates sustainability into our capital structure and creates a transparent further incentive for us to reach our goals. I will now hand over to Anders to take us through the financial performance.
Anders, please go ahead.
Thank you, Alexander. Let's go to Slide Bekke. 13 and where we can have a short look at the financial performance in the Q1. As Alexander already said that the Q1 performance was Strong, given that 30% of the stores were closed. The EBIT margin was up 5 points, 5 percentage points compared to Last year and mainly driven by the robust operating leverage that we see in our business.
In the Q4 announcement from back in February this year, we said that the cash conversion in the quarter would be affected by Both a large reduction in payable as well as a deliberate increase in our inventories. And as you can see on the Cash conversion here that is quite visible in that KPI in the quarter. But despite this Negative cash conversion, the net working capital continues to be low and was still negative by the end of the Q1. And then I would also just mention that the significant increase in earnings per share that you can see in the last row of the table here. And just noting that Earnings per share is obviously also supported by the fact that we have no restructuring costs now that Programme Now is Beck, behind us.
And go to the next Slide 14, please. On the revenue development here on Slide 14, we have provided both a bridge Versus 'nineteen and versus 'twenty. And I know it's quite a lot of data, but we hope it's useful for you. I think the bridges are mostly self explanatory, so I won't go through them, but that is one unusual building block in the bridge versus 20 Beck. 20 in the lower part of the slide.
And that's the negative 6% negative impact from calendar shift, as we've called it. And It's somewhat technical, but it relates to the fact that different calendars are used for sellout growth and organic growth. And the organic growth is calculated on the calendar month, obviously, I would say, but the sellout is based on weeks And the so called 4.45 retail calendar and sellout In Q1, therefore, covers weeks 1 to 13, which is January 4 to April for of 'twenty one. And that means that the sellout KPI includes 4 trading days in April, where we are comping very limited revenue in 2020. And therefore, sellout ends up being higher than organic growth.
And that's it's pure timing of course and we will see the reverse effect here in the second quarter. So next slide please. The only thing I want to say about the EBIT margin is that we are pleased with the performance and that we are pleased to see the Positive operating leverage in the quarter when revenue goes up and the rest should be quite self explanatory. So in order to move us Forward to the Q and A, I suggest that we go to Slide 17 and the guidance. Based on the strong start to the year, combined with our updated expectations for the rest of the year, we have upgraded our guidance for both organic growth and the EBIT margin as Alexander said.
So there's 2 comments I would like to give to the guidance. First and Obviously, the guidance is associated with significantly higher uncertainty than normal due to the pandemic. And secondly, the guidance still provides a floor for what we expect and we deliberately leave the guidance open ended and based on certain specific COVID-nineteen assumptions. And I'll comment a bit more on this on The next slide, 18. On slide 18, I have 3 comments to the organic Beck.
Growth guidance that we are showing here. First of all, we have still included a 6 percentage points impact of the pandemic On the full year revenue, the own and that's the same as in the original guidance. The only difference is that we now expect it to be spread across all four quarters of the year and not just the first two quarters as in the original guidance. Secondly, I will call out that this 6% revenue impact from the pandemic only includes the net impact of Closed stores and online picked up from those closed stores. It doesn't include the tailwind from the stimulus packages in the U.
S, which also needs to be taken into account if you want to reflect on the implicit underlying performance in the guidance. And finally, the guidance corresponds to a sellout growth versus 2019 of around, Let's say minus 2%. And given that we have delivered minus 5% sellout growth in the Q1 versus 'nineteen, Then the implicit rest of year sellout growth guidance or the guidance flow is therefore around minus 1 versus 'nineteen. We just wanted to give you that data point as well. So around minus 1 for the rest of the year on sellout growth.
And when we look at the current trading for the Q2, so that's April, we're doing better than that 'nineteen and it continues to be driven by the U. S. Where performance in April is actually even stronger than in the Q1. And as you heard just before, sellout growth in the U. S.
In the Q1 was plus 52%, but April is above that level. And you'll see the details when we send out a trading update for April in just a few days. On that note, I would like to stress that we hope and expect to stop sending out monthly trading updates soon. When the number of closed Stores due to the pandemic gets below, let's say, 15%, then we plan to revert to normal quarterly reporting. So on the next slide, the EBIT margin guidance, we have upgraded the EBIT margin guidance by 1 point, 1 percentage point.
And on the one hand, that's supported by the operating leverage and we've also it's also supported by a bit higher Cost reductions that what we had guided previously. On the other hand, we will be investing in supporting the strengthening of our brand in China. And initially, this will be a drag on the bottom line both in absolute terms Beck, and not least in terms of the margin as well. Then going to Slide 20. During the last year, we've taken a quite a prudent approach to our cash distribution due to the pandemic.
But now based on another quarter Of good performance, our low leverage and our strong liquidity, we are reinitiating cash distribution. And as an extraordinary measure due to the pandemic, the cash distribution will follow what we have been calling pay as you go Prod. So initially paying out DKK1 1,000,000,000 during the Q2 of the year and assuming that the pandemic Situation improves, then we will expect to continue the quarterly distribution in the 3rd Q4 of the year. And with that, I'll hand it back to Alexander.
Thank you, Anders. So our performance in Q1 shows strong underlying performance in most Key markets, as Anders mentioned, U. S. And online are the key drivers of our growth. And based on this strong performance And our expectations for the rest of the year, we, as Anders just went through, will upgrade the financial guidance as well as reinitiate distributions to our shareholders.
So good day all around, I would say. And with those remarks, we are ready for the Q and A session regarding our results. And as a reminder, please limit your Questions to one at a time since we only have 30 minutes. When we're done with this, we will get into the Pfenex Beck. And we'll also be joined by our Chief Marketing Officer, Carla Liouni.
But before that, let's get into the Q and A. Operator, please go ahead.
Beck. Our first question comes from Elena Mariani from Morgan Stanley. Please go ahead. Your line is now open.
Hi, good morning, everybody. So I will speak to one question, of course. So maybe just on the guidance. So My question is more about how conservative that is. I know you've put a floor and so anything could happen.
But can I try to better understand What the assumption of your floor base is because you've, of course, delivered a better performance in Q1? Your April Trends are very encouraging. So why are you so conservative in giving this floor? What is it Beck. Is it assuming that there are further lockdowns?
But the question is more about if things progress in the way we believe and so the reopenings will be Progressively happening through the rest of the year, what could be a sort of range that we should expect? I hope you understood my question. Thank you.
Beckman. Yes. Thank you, Alina. It's Anders here. We obviously provide the guidance because we think Beck.
It's a good reflection on how we think about how the year could play out. But had we been in a More normal year, if that will ever exist, then we will probably have been put a more concrete range in and not leaving open ended, but we are leaving it open ended because we see a wider range Than normal during this year. So but we are expecting that we will continue to see some kind of impact from the pandemic during the rest Of the year, so we have in the guidance, we implicitly assume that 5% to 10% of the stores will be closed during The second half, so much less than what we have seen in Q1, but still the lockdown impacting our performance Here and there. So that's one important assumption. And then I think another thing to call out will be that we Obviously, also expect that the impact from the stimulus package that we've seen in the U.
S. Will Fade out as the year goes by and that we will be in a more normal stage and there in the second half of the year and thereby have much less Beckman. So a tailwind on a group level from the U. S. Growth.
Sorry, just to clarify on this point, because in your slide, you're talking about the U. S. Stimulus package, both when you're moving from Your guidance from above 8% to above 12% and also as a compensating factor versus the store closures. So it's not very clear to me what exactly you are Factoring in for the U. S.
Because you include that effect in both the two bars. I'm talking about Slide 18.
Beckman. It's actually the explanation that we're having on slide, I'm just Going through that one on the implicit guidance on Slide 8. What We're trying to say that if you're thinking about the underlying performance in Q1, so what would the minus 5 Beck. 5% sellout growth versus 'nineteen had been had we not been for the pandemic and the stimulus packs. That's What we're trying to call out on that slide and in that context, obviously, there is sort of extraordinary Support from the stimulus pact in the U.
S. How much? I think that we can only guess about, But we just wanted to make that call that out on that slide. So we are expecting that In the back part of 2021 that the growth in the U. S.
Will be a much lower number than what we've seen in Q1. And in that on that note, you should remember that we were just about 20% growth in Q3 and Q4 in the U. S. Last year. So we will be comping a much tougher base in the U.
S. When we get into the second half of 21.
Okay, understood. Thank you very much.
Thank you. Our next question comes from Mike Rasmussen from Deutsche Bank. Please go ahead.
Yes. Thank you very much and well done guys. It's great to see Pandora back in great shape. So well done on that. I'll ask into China.
I don't know if the timing is right or if I should wait Beck. But since you mentioned it in the presentation, I'll put down that question right now. So on the issues That you have in China right now, is there anywhere where you can utilize on some of the previous learnings in terms of Some of the problematic markets that you've had at Pandora in the past, is there any way where you can say, okay, this is the same that happens in terms of Consumer's behavior, the brand positioning or anything, so will that speed up perhaps the restructuring of the The Chinese market, please.
Hi. I mean, we'll actually cover that in the next section at a little bit more in-depth. But Beck. As I've been saying in the past, the way the brand was launched into China is different from the way it was launched anywhere else. Beck.
So the job is essentially, if I dumb it down, is to think of it as a relaunching the brand in China. Then there are many things that are similar, the store network, the density, the kind of behaviors we see on and offline. A lot of these things are kind of similar, but the Starting point in China is just different for the brand. It doesn't have that clarity in consumers' minds what's unique and different and interesting about Pandora that we see elsewhere. Beckman.
So that's the brief answer I'll give you today.
That makes sense. And It certainly doesn't seem like a quick match sorry, quick fix, but I'm sure you
guys are on top of it. Thank you.
Our next question comes from Lars Toffman from Carnegie. Please start.
Beck. Yes, I would also start by congratulating you for a very strong quarter. I also have a couple of questions regarding the Beck. One question, of course, regarding the U. S.
So I wonder if you can shed some color on A, the impact from stopping with Jared, I just wonder if there's any inventory you have taken back and if you I have assessed that against revenue. And if you have, how it affects your margins? And then In the presentation, you likewise mentioned that based on credit card data, you grew faster than the overall U. S. Market.
So I wonder What growth you referred to more specifically in the credit card data? Thank you.
Beckman. Hi, Lars. I can start out on the sub question number 1 on the U. S. About the Jared.
We actually Beck. The revenue impact is very limited, even though it's quite a number of point of sales that have been officially closed down. Now the revenue impact is minuscule because it was already at a low point in 2020. But we did do something on the inventory back in Beck. I can't actually even recall whether that was late 2019 or early 2020, but as
Not this year.
Not this year, definitely not this year, But it might even have been all the way back in 2019 as part of knowing that we were closing down that channel, making sure that we manage the inventories, but that's no impact in the Q1 'twenty one numbers.
Okay. That's very clear. And then on the credit card data and what growth ratio?
Yes. The credit card data, this is a Bank of America that releases data On that and we picked up and this is basically the only data point that we have on in print on the market growth and this is the So the entire jewelry market was in the high 30s, if I remember right, in growth. So still we have our growth that we have seen is well above that in the U. S.
Beck. So hi, Curtis. So I should compare to what number in your report, Anders, just to make sure I Beck. You're completely right. I should compare it to the 64% local currency growth over last year or the 81% sellout growth.
Beck. Because I guess the Bank of America data that must be sellout growth data. That would be my logic because the nature of the underlying data, so I so I that's
So you're basically growing more than twice as fast Beck.
Yes. On the assumption that the Bank of America Beckman. So I think that's why we've been a bit Careful of making 2 big conclusions on that. We can just see that we're significantly ahead of that data point, but I don't think the necessarily there are apples to apples comparisons. I would be a bit careful with drawing that conclusion.
Beck.
Fair enough. Thanks for taking my question.
Our next question comes from Siti Agrawal from Citi. Please go ahead.
Hi, good morning. Coming back to the U. S, could you just describe what is really brand specific That is driving that stellar growth in the U. S. Apart from the things that you've outlined.
You mentioned something during the last call that You had launched email marketing in that market. So have we seen any further improvement in terms of all those Becker. CRM data capture that you are now leveraging in
the U. S. Thank you.
Yes. I mean, yes, we have seen a very strong improvement on the Beck. The impact of email marketing, but you need to put that in context versus the totality of the business, this is still not the major driver. Beck. Actually, if you the performance in the U.
S. Started after the summer last year. So if you look from August and onwards, we've had Continued improvement in the momentum in the U. S. So it's not like something just happened on January 1.
So it's been ongoing. And this has come behind, as we've been speaking about in the past, Good basics. So we are investing more in media. I think we're making smarter media choices. We're doing better job on merchandising, on product availability.
So it's core basics that are at play.
Thank you.
Our next question comes from Antoine Belch from Exane BNP Paribas. Please go ahead.
Yes. Hi, good morning. It's Antoine at Exane BNP Paribas. My question relates to online and more importantly, how online evolves when you are reopening stores. So I know it's It's early, but you may be taking the UK market as a sort of a showcase.
Yes, how I mean, do you see what kind of moderation do you see when physical store are reopening? Thank you.
So that question has many facets because it really depends in which geography we are and let's say The adoption of e commerce as a channel, not Pandora specific. So what we saw, for instance, in Australia, Where generally speaking, e commerce as a percent of trade is a little bit lower than maybe what we experienced in, let's call it, Northern Europe. When the stores reopened, we actually saw a big, big kind of traffic movement back into the stores. So the high levels of share of business that we saw in e commerce came down quite a lot, similar to what we've seen in the Mediterranean countries. So in Italy, for instance, we had the same type of behavior.
Then you take a country like U. K. Now I only have the last 2 weeks of stores being reopened, so it's very early in the curve. But there we've seen a strong influx of traffic to the stores Whilst the e commerce actually has continued to be very strong, so there is not one generic answer to that Question, it really depends in which geography we are. So yes.
Becker. Maybe just to put some more color on it because I think the Beck. Part of your underlying question might be what do we expect when we get back to, let's call it, more of a steady state or a normal if that any such Beck. So versus 2019, I think we can safely say that the share of business transacted online is going to stay at a higher level. There is no doubt, but I don't think it's going to stay at the current high level.
Today, we have roughly onethree Of our global revenue done through online, I think that is going to come down. But to what level, I don't know. And 2019, if my memory serves me right, was more like 13%. So it's maybe it's going to end up settling somewhere in the middle, but we shall see.
Okay. You preempted my follow-up. So thank you very much.
Thank you. Our next question comes from Magnus Jensen from SEB. Please go ahead.
Thank you guys for taking my questions. Yes, One goes to the second half of the year. So Signet is out saying that they're planning for guidance for negative growth in the second half of the year. Of course, they're mainly exposed from U. S, so we cannot make a complete comparison to you guys.
But could you give some thoughts on what you think about the second half, especially for the U. S? We also sort of expect negative growth in the
second half. That's my question. Thank you.
Yes, I think, Magnus, it's Anders here. I think maybe that's a stupid way to start the answer, but it would definitely be Growth rates that are below what we are seeing currently both for two reasons, one being the Assumed less impact, much less impact from stimulus packs that we are seeing in Q1 and also here in April. But secondly, that we are facing, If we look at the year over year at 20% sellout growth in Q3 and Q4, so roughly last year. So the comp Beck. Base will be much tougher when we get into the second half of the year.
So we are assuming that the sources of Growth, if you like, compared to what we've seen here in the Q1 will be quite different when we get into The latter part of the year with the from having a Q1 very much driven by the U. S. And tracked down by China and not the least, but also Europe due to the pandemic. Then assuming much Beck. Less pandemic impact in the latter part of the year.
We will see Europe going back and probably being part of driving growth, but a much less Hopefully also less drag from China and less tailwind from the U. S. So quite an Some unusual big shift in the sources of growth during the year due to the pandemic, not least when you look at it year over year.
Okay. Thank you.
Our next question comes from Fredrik Avison from ABG. Please go ahead.
Thank you very much. One question for me, Alexander. You mentioned the conversion rate up 80%, and I believe it was 30% in Q4, if I remember correctly. And Maybe two questions related to that. Firstly, what have you done to drive that conversion rate?
Is it marketing, imaging, payments, etcetera? And secondly, if you would be open to give us a ballpark number of your current conversion rate and whether you see upside to the current levels? Beckman. Thank you.
I mean, we haven't done anything materially different in this quarter versus the previous Becker. To be perfectly honest with you, it's we're continuing maybe what we've done is Since there's been more stores closed now, we have shifted a bit the, let's say, the media mix and we've spent a little bit less On the top funnel spend and spend it more towards the digital, but it's not materially different From what we've done in the past, so there's really no big magic. I think in some places, we've introduced Klarna and Afterpay, which obviously drives a little bit, but again, doesn't explain Let's say, the macro movements on conversion rates. The thing with e commerce, the way we're running it now, It's a continuum of improvements in terms of features and site speeds. And so this is not like it used to be When I grew up at least, where you kind of made one change and then you sat and watched it, every 2 to 3 weeks, we have a new release Of some kind that keeps improving the experience online.
So that's it. So you can't attribute it to any major change. Maybe, Beck. As I said, unless we talk about Klarna and Afterpay, but then again, that's not been rolled out globally. That's been in some geographies.
I think U. K. Has done Some good stuff there and parts of the U. S. Has also gone into this type of mechanism, but that's probably the only major Beck.
Change that I've foreseen is a continuous improvement effort. That's kind of how these teams are organized. They work on 2 to 3 week Sprints and then they release new things.
Beckman. Thanks, Alexander. And on the level of the conversion rate, any ballpark figure?
I think we'll keep those numbers relatively close to our Beck. You can say that an ambition would be to get going to somewhere north of 3% and we still have Some way to go there from a sustainable standpoint. There will be peaks when we go above that, and I'm talking about a global number. Beck. I have geographies which are lower than that.
I have geographies which are quite a bit higher, but the average is there. So that's Part of the things that we're going to talk about in the second session today, conversion rate is one of the keys on how we're going to drive more growth.
Beckman. On the Slide 10 in the Investor Day, we actually show that the conversion rate in the quarter was Beck. 3%, but it tends to be positively impacted when stores are closed, but 3% in the quarter. So hello.
I missed that. Thanks. This is excellent. Thank you.
Our next question comes from Franz Hojer from Handelsbanken. Please go ahead.
Yes, good morning. Thank you very much. A question about Beckman. The online revenues, could you give us an idea of the breakdown just the top few Most important markets, how important are they as a percentage of your total online sales? And Also what was the roughly percentage increase in those markets in online year on year, please?
Okay. I mean, it's a quite detailed question. So To no surprise, the U. S. And U.
K. Are the big ones, as you can imagine. And in U. K, the growth was this is versus 'nineteen for the quarter was over 400%. And the U.
S. Versus 2019 was over 200%. The average was 200%. So then Most markets are kind of in you can do the math yourself. But the big the 2 big ones to watch for us always is U.
S. And U. K. Beck. That is
How big is the U. S. As a percentage of Q1 online sales, roughly speaking, and the U. K?
Roughly, what, 25%, give or take, yes.
Both of the margin or was that the U. S?
U. S. Is roughly a quarter.
And the UK?
Beckman. You're stretching my math here is
A third of the revenue.
A third
of the online revenue in Q1.
Beckett. And 25% for the U. S.
Yes, give or take. Yes.
Okay. Thank you very much.
Thank you. Our next question comes from Klas Peer from Needkredit. Please go ahead.
Beck. Yes. Hello. I was just thinking about something else. Sorry, the question was that We've seen some major movements in the inventories among the franchisees.
It was quite a negative movement in March. Then we've seen quite a positive movement here in April. So what is driving these changes? And is there any specific markets that are, yes, affecting this?
Yes, maybe Claus I can it's Anders here. I can start On that one. So the shipments and so the timing of those is purely driven by sort of commercial and logistical Circumstances. So the shift that we're seeing between March April is purely what makes Since from an operational and commercial point of view, so we are so much more focused on the Sell out growth, but I agree that it has been when you look at March April, it has been quite big shifts between those two months. Well, I would say that it's one of the so the it's always been there.
It's not new. The new thing is that we're disclosing monthly numbers. Suddenly it becomes visible for the outsiders as well that there are these swings between months, which then becomes less visible on the on a quarterly level.
Okay. But has it anything to do with your Production capabilities in Thailand or anything?
No, absolutely not. We have, I think, actually Quite fine. On inventories, we do think that inventories were too low when we entered Q1. So you can also see the inventories are What is that, DKK 350,000,000, DKK 400,000,000 during the quarter? So we would like to operate with a bit higher inventory levels, but that was not definitely not the reason for the timing Between whether we should ship in March April, that was purely due to both on sort of the receiving end on The partners when they thought that makes commercial sense for them to get the shipments.
Merchandising, logistical point of view, we are in a fairly good shape.
Beck. Our next question comes from Deborah Hankeling from Bloomberg. Please go ahead.
Hello. I'm trying to work through my EBIT margin expectation. And here in that, And a reminder that second half of twenty twenty one in the U. S. Will be a slower Slower 1 going forward for the reasons that have been given.
And then I look at the hedging policy in the way that you work and think about A little bit more exposure, maybe 20% to 30% more exposure on your hedging at this stage for the second half. So I'm trying to understand the process And where we think EBIT margin will be weighted through the quarters. Thank you. I
I had a little bit difficulty in hearing the question, Deborah here, but let me see if I answered it right. But I think as usual, the Q4 is By far, the biggest quarter on the top line and on the bottom line, both in absolute terms, but also in terms of margin. So typically, we see a significant EBIT margin pickup in the Q4. This year, it might be you can argue it will be A little bit less than what we will see in a standard year for two reasons. 1, being That the we will have more silver price headwind in the quarters to come In Q3 and Q4, based on the silver price increase that we have seen, so that as hedges Lapses, there will be a bigger track on silver prices in the second half of the year.
And then we will be investing start investing in the Beck, part of the year on in the repositioning of the brand in China as well. But of course, we have guided above 22% EBIT margin and we were only at 20% in Q1. So that there will be Beck. And that pickup is something that margin pickup from Q1 to the full year guidance or the floor of the full year guidance is a Q4 thing. Beck.
Okay. Thank you. But that's
completely normal seasonality.
Yes. I was just wondering whether As you said, whether the U. S. Would cancel some of that, the other thing is just to try to understand whether We saw the excess costs from the end of the program now, whether there'll be any onboarding costs for the new strategy?
Beckman. There will be cost associated with the new strategy, but it's if you talking about U. S. Specifically. It's not margin diluting.
It adds to the bottom line from day 1.
Beck. Sorry, the question there, sorry, was related to the group. So, we wouldn't expect any margin dilution across
Beck. Apart from China, that's it. Otherwise, It adds to the bottom line from day 1.
And we have time for one more question.
Our next question comes from Charah Bostini from JPMorgan. Please go ahead.
Yes, hi. Thank you for taking my question. Maybe just a follow-up actually on the margin for the year. Your station Distribution costs in Q1 came in much lower than I was expecting them. I was just wondering in terms of sales and distribution costs as a percentage of Beckman.
Thanks for the year. What is your embed in your full year guidance, please? Thank you.
Yes. The We're not sort of guiding on specific on the individual OpEx lines, but I think 2 comments, Kiara, On that, that might be helpful. One is that we had DKK82 1,000,000 in government support that we received in the Markets that were closed down in Q1 and all of that and I think it's all of that, but at least close to 100% of that DKK82 1,000,000 Goes into as a negative OpEx in sales and distribution in Q1 because it's compensation for store colleagues that we have on board. So That's one of the reasons you probably see that sales and distribution cost looks lower in Q1. The other comment I would give is that we have upped the increased the expectations for the cost reduction program A bit 0.5 percentage points of revenue, DKK100 1,000,000 in lower cost this year and a big chunk of that is sales and distribution Beck.
We do see further upsides are not least on the level of store leases, store cost, rental cost that will help keeping sales and distribution costs down as well.
Sorry, I'm just following up on these two points then. In terms of the government support, was this maybe the U. K? So this is going away in Q2? Beck.
Or should we factor in some also for the coming quarters for the year?
It's you're absolutely right that mainly the U. K. Both given the magnitude of stores being closed there for all of Q1 basically All of Q1 and the nature of the program in place in the U. K, but also a bit in Germany and Italy, but U. K.
In absolute terms being the biggest piece. And then Beck. We do assume that we will get a bid as well of support that is included in the guidance in Q2 and April specifically, but then we assume that at some point in time, it will disappear. So even though we have assumed Some store closures and lockdowns in the second half of the year. We're not assuming that government support programs will continue forever, which I think is a prudent approach to it.
And on rent reduction, to what extent that what you've seen is We can consider a structural versus something that is also going to normalize in the coming quarters.
It's If I heard the sound is a little bit bad, but if I heard the question right, this is structural reduction. It's not temporary reductions due to The pandemic, the 0.5 percentage points, so margin support from lower cost is permanent lower cost reductions that we look
Perfect. Thank you very much.
And that concludes the first Q and A session on our Q1 results. We now move to the next part of the presentation which is covering our new strategy, Phoenix. There will be another Q and A session after that as well, but I will now hand it back to Alexander. Please go ahead.
Now that we have finished the quarter 1 announcement, We would like to lift our sights and discuss what lies ahead of Pandora in the years to come. I have 2 pieces of good news. On one hand, Beck. We declared the end of Programme Now. On the other hand, we are excited to introduce our new strategy, which we call Pfenex.
Given the relatively limited time we have today, the intent is to give you a high level overview of the key components in our go forward strategy. I fully realize it might be challenging to assess these from a numeric standpoint as we will not disclose any figures yet. But there should be meaningful value to discuss the direction of our company and the key choices we have made. We have included a deeper dive into one of the growth pillars, such that we can demonstrate a more concrete output of this new plan. Our ambition is to hold a Capital Markets Day in September, where we will be able to share more details across the full suite.
We're excited to share with you the 3rd chapter of Pandora's journey. In the first chapter, the founder successfully introduced the Moments platform. In the second chapter, Pandora quickly established a strong and profitable Global Retail Network. We will continue to improve on these as they are critical to our success. In the upcoming 3rd chapter, we will seek to unfold the true potential of Pandora by putting the brand and our customers at the center of everything we do.
The strategy we're launching today is focused on further developing our existing core business, where we see significant opportunities to generate growth. The strategy is on one hand built on leveraging some of the unique advantages We possess Leica manufacturing capability, global distribution network and well known brand. On the other hand, we have drawn Beckett. These ingredients together with our view Of what we will take to win on the global stage in the future have shaped the new strategy. As we have Beckett.
Before and to manage expectations, we will not provide any numbers or financial targets today. Our turnaround efforts have clearly improved the foundation of Pandora, but the COVID-nineteen situation continues to blur the picture. So Beck. So it's still a bit early to disclose numbers. As I just said, we will cover this and much more in the upcoming Capital Markets Day.
Although we won't be sharing any financial targets, we can safely say that we'll expect to deliver a balanced and bottom line growth. We do operate in a healthy market segment that in the last 10 years has been ahead of GDP growth. Our initial ambition is to be in line with the market growth. The key value driver is growth within our core business. We don't need to pursue completely new business areas to create growth as we see plenty of opportunities closer to home.
It's also important to stress that we do not need to succeed with all growth opportunities in Pfenex in order to deliver on our growth ambitions. In the mid- to long term, we are we see interesting opportunities for Pandora within M and A, new product segments and select geographic expansion. It is a deliberate choice to deselect those for now in order to stay laser focused on our plan. Before we begin the actual presentation, I would like to remind ourselves why Pandora plays such a unique role in people's lives. We said that the 3rd chapter is all about the brand and our customers.
So let's see what they have to say.
And if I'm feeling down or uninspired, all I have to do is look at my wrist and I'm constantly reminded of all the beautiful travels, my family, Special milestones in my life.
It's an extension of what you believe in, what you love, what you hold in your heart.
I truly believe That all of the things that we choose to wear are based on experiences that have shaped us in our life.
As I go through and pick out Which charm bracelet I'm going to wear that day, it's probably going to be related to either what I'm thinking about or what I'm missing or just my general just emotions For the day,
I have been stopped countless times in many different places by different women asking if they can look At mycharm.
This is a visual representation and a walk for my life.
I'm always glad to show them everything that I have on my bracelets and I always find myself telling them my personal stories.
It's my story and my Beck.
I'm John Beck. I think it is Becker.
What these customers are saying is really the essence of what Pandora is all about. We have built the brand on the idea Beckman. Throughout history, humankind has shared feelings of happiness, love, Beck. This need for self expression lies at the heart of connecting with our partners, friends, family and many others, and it is the essence of our brand. That is why Panor is a story about touching the lives of 100 of 1,000,000.
Every day, people express who they are and what matters to them with their Pandora jewelry. Whether it's a display of friendship or romance of any kind or love of art, Beck. Our jewelry is a way to express these loves. That is our purpose. We give a voice to people's loves.
Pandora pursues this purpose by creating affordable, hand finished jewelry for the many rather than the few. Jewelry that can be personalized to reflect the many facets we all have and express who we are. Our purpose is also about celebrating and empowering people in becoming who they wish to be. And it's about caring Beck. For our shared planet by crafting our jewelry with respect for resources, environment and people, leading our industry towards a more sustainable future.
Before talking about the future, we want to pay tribute to the turnaround journey we have been through in the past 2 years. When initiating Programme Now, we said that we would stabilize the top line while retaining strong profit margins. Due to COVID-nineteen, It is difficult to compare year on year development exactly. But when looking at the underlying factors, the net effect is that we believe the last Three quarters are showing positive growth. We achieved this by focusing on first, driving heat back into the Pandora brand Secondly, improving access to the brand and finally, to structurally reset our cost base.
Let's quickly take a closer look on some of these achievements as they are partly foundational of the new strategy. From a growth point of view, we can highlight 3 areas We now has delivered and placed us in a much stronger position. We have revitalized the brand by developing communication based on much Stronger understanding of our customers. We have invested significantly more in driving awareness behind the multipronged media model, Beckman. The payoff in increased customer engagement and like for like sales has been very clear.
We have step changed our digital capabilities. Our investment in the e commerce business has paid off as we record stronger traffic and conversion rates than ever before, COVID-nineteen notwithstanding. We have embarked on new omni channel solutions to broaden the access and services to our customers. We have also made strong progress in digital marketing. Our product portfolio has been restructured and slimmed down, leading to much higher productivity.
We have applied a more data based and analytical approach to our merchandising efforts, which amongst other things materially improved product availability. Furthermore, a renewed focus in our assortment on affordability and collectability has been critical to improve sales performance. Finally, And certainly by no means least important is the organizational restructure we implemented last year. We have created a customer centric organization Beckman that operates faster and connects our markets closer to Copenhagen. This allows us not only to be agile, but also to draw on our global scale.
Beckman. We can move business insights across our global network lightning fast. This is most definitely a new competitive advantage. Beckman. With a strong foundation and a clear direction, we are now excited to let you in on the plans of our future journey.
With Pfenex, we are changing our mindset from turnaround to growth, From fixing a lot of problems to more positive and forward looking plan. The purpose and the idea behind Pandora is still the same, but we now have a new ambition, Beckman. With the purpose in mind, we have set an ambitious plan for our company. We want Pandora to become the largest and most desirable brand in the affordable jewelry market. This will be accomplished by continuing to deliver high quality jewelry to our customers around the globe and by staying true to our fundamentals, Beck.
Why do we call it Phoenix? The Phoenix bird resembles rebirth, Beck. As at the end of its life cycle, it will burst into fire and be reborn from the ashes. A new magnificent bird emerges, More powerful and more desirable for every time. Associated with the sun, the Phoenix is seen as a symbol of immortality and transformation, Beckman.
All elements that span across Pandora's journey as we move from turnaround and into growth. We consider the new strategy to be an evolution rather than a revolution. Now let's have a closer look. At the heart of Phoenix, we keep the reason why we exist, which is our purpose. As I said, Pfenex is fundamentally about driving balanced profitable growth.
We have a very good understanding of our drivers and have picked Four growth pillars to focus on. They are fueling our brand desirability and reach, creating consumer centric designs, Beck. Personalizing the customer experience and growing our core markets. Today, we will give you a snapshot view of 3 pillars and a somewhat deeper dive into the design pillar, where we will show you some of the early outputs that will hit the market already this year. It goes without saying that you need a solid foundation to stand on.
We have put in place a good foundation in all critical areas during the last 2 years. This means we have a strong starting point. We have done a thorough assessment across 5 areas as can be seen in the foundational layer. We have defined desired end states and developed multiyear roadmaps on how to get there. We are also launching a new set of core values that have been co developed with our employees and designed to support our growth strategy.
I wanted to briefly highlight 3 major aspects of our foundation before diving into the growth pillars. Our most important asset It's the 26,000 employees and partners that are located in all corners of the world. The second point I want to touch upon is our sustainability agenda. And thirdly, I want to highlight the transformation from a traditional analog business to a modern company with an aggressive digital agenda. First, let's look at some aspects of our people agenda.
We have simplified the organization by removing the regional layer and built Beck. We have refreshed 5 of the General Managers to drive growth and stronger leadership. We have rebuilt the executive team, which now boasts world class talent in each position. Our global operating model has been flattened and simplified based on 2 global product categories. This is an organization which is rooted in being close to our core markets and local customers.
Beckman. This new operating model makes Pandora more responsive to customer preferences. Our ambition is to become much faster from idea to execution. We have invested in critical capabilities in marketing, merchandising, digital and supply chain in order to create more capacity for growth. This has led to over 1,000 white collar hires in the last 12 months across the entire global organization.
We now have capacity and capability to support growth in our core markets. We have reset our performance culture to Dial App focus on ambition, Beck. We're driving high performing teams development in our top 20 teams across the company. We have realigned how we manage performance, So we can carry the strategy from launch to execution. We have identified a global scorecard of 27 KPIs, which we will use to track performance.
There is a clear link between our performance and pay, a model which we continuously keep refining. We have defined performance leadership at Pandora for the first time and have started to assess all senior leaders to identify strengths as well as gaps for attention. This will roll through the next 2 years. Sustainability is and has always been an integral part of our business. We lead our industry by being a low carbon, Beck.
We have previously announced some very ambitious ESG targets. We will be carbon neutral in our own operations and only use 100% recycled silver and gold by 2025. Furthermore, we have joined the science based target initiative. Specific targets will be announced later this year when the studies are concluded. Lastly, we're developing a strategy for inclusion and diversity to advance equality.
For more information about our programs, you can find a comprehensive overview in the sustainability report that we released this morning. Given our size and reach, our ambition is to be both a thought leader as well as a catalyst of change towards a more sustainable future. The 3rd foundational element I want to highlight today is digitalization. As I mentioned earlier, we have progressed with pace in the last 2 years. Our ambition is to become the leading direct to consumer brand in the jewelry industry.
We believe that successful brands of tomorrow will need to In the digital strategy, we have identified 3 key areas, which will enable us to deliver on that ambition. Those are organization, technology and data analytics. We have built a new digital powerhouse in Copenhagen. There are more than 400 colleagues dedicated to deliver digital and technology solutions that are driving growth. The digital hub is a place for our data, digital and tech experts to innovate and work together to transform Beckman, our customer experience online as well as in store.
We will continue to strengthen our digital organizations as we are setting the bar high to become the leading global direct to consumer jewelry brand. We have recently announced that we are merging our IT, Becht, digital and data organizations into 1 new global digital and technology function. This new setup We'll ensure full alignment in delivering on our growth plans, as well as empowering our amazing employees through improving their daily work with technological touch points. Beckman. The second key area we are further strengthening and standardizing is our technology foundation.
We are working on cleaning up fragmented legacy systems That to a degree have been slowing us down. For example, rollout of omnichannel features like click and collect have been slow due to incompatible systems. Good work has been done on taking cost out of our technology platforms through the IT transformation work. The next phase is about reducing complexity, increasing speed and enhancing return on investments. The final key focus area in our digital strategy is data and analytics.
The number one priority is to focus on the changes that drive growth. A key priority is to significantly ramp up our efforts to capture more data. We will create more value Beckman, for customers to share their data with us in stores and in our marketing channels. In 2020, we had over 650,000,000 customer Beck. This generated close to 40,000,000 transactions.
Historically, Pandora didn't capture any meaningful customer data. There was also no structured effort to mine even the transactional data that we have. We plan to increase the amount of data we capture dramatically over the coming years. This will be done in a systematic way through, for instance, online sales, everyday contacts in the physical stores, introduction of a new loyalty program, Beck. New services and incentivizing customers to share richer data with us.
Capturing the data, however, is not enough. The key to create value is being able to analyze, uncover insights and important leverage those by personalizing the customer shopping journey. We've made a start with our global marketing customer view platform and customer segmentation dynamically driving our digital media spend, Meaning more relevant ads tailored to customer interest in real time. Going forward, You'll see much more personalized experiences, each of us seeing a slightly different version of pandora.net, different e mails based on our interest and history And with clientele and technology conversations in stores as well. This is a program designed to support our growth.
It's an area in which we continue to lean forward in terms of investment since we believe it will be a competitive advantage. This concludes a brief view into 3 of the foundational elements. During the Capital Markets Day, we'll have more time to cover this and the other ones in much greater detail. Now let's turn the focus to the 4 growth pillars. First, we will look at how we intend to further drive the desire for our brand.
Pandora is a global brand with a very high level of awareness and a distinct positioning. We are playing in a discretionary category, where it's Fundamental to continuously invest in the brand experience. In order to develop the brand, we must drive desirability and do this for many people. We will focus on 3 distinct aspects in our brand building efforts. The first objective is to constantly be relevant for Our audiences.
We apply an outside in approach, where we generate deep insights about their needs and wants. We turn those insights into commercial initiatives. A key priority is therefore to invest even more in learning about our customers. This is done both via traditional market research as well as increasingly mining our own customer data. We use these insights to create engaging, Beck.
Authentic and culturally relevant brand experiences, for example, in advertising, visual merchandising and product design. We have also introduced a more quant based approach to estimate the value of our commercial initiatives to ensure that we pick the winners as well as provide them with sufficient support levels. Simply put, we're combining arts and science to deliver relevant brand experiences. Pandora is a brand for everyone. But as we will present later today, we have changed our collection structure, which will ensure that we are better equipped to target different needs.
One of the key target groups we'll focus on is winning with Gen Z and Millennials. These two generations are the key growth drivers in the affordable luxury market. Forecasts suggest that they will represent more than 50% of personal luxury goods consumption by 2025. We already enjoy a fairly strong position amongst women aged 18 to 34, as they represent 44% of Pandora Owners today. We believe there is more we can do to make our brand even more relevant for them.
We will retain the core values of Pandora Beckman, such as self expression, affordability and collectability. This will ensure that the brand positions remains very clear. Under this umbrella, we will however allow to stretch the brand to ensure it's relevant and in sync with the audiences and usage Beckman. Later in the presentation, Carla Leuning, our Chief Marketing Officer, We'll show you how we are applying this to 2 new initiatives we're bringing to market this year. When I grew up, the job of a marketeer was much easier.
The number of media channels were few, typically TV and print. The retail landscape was more focused. Today, we live in a world with a path to purchase is far less linear and has multiple touch points ranging from social media, influences, Traditional advertising through to in store communication. The number of platforms where we consume media just keeps on increasing. On one hand, we have changed consumer behavior and on the other, a significantly more fragmented media landscape.
Going forward, consumers will meet the Pandora brand in a much more personalized way across more channels. We are paying Far more attention to ensuring we know who we speak to, what they might be interested in and how to actually respond to our efforts. It is important to point out that we include traditional media channels, digital channels as well as our stores and store staff Beck. When we drive out holistic messaging, it all needs to sync up for maximum impact. In this fragmented landscape, we have raised Beck.
The media investment significantly in the last 2 years to a far more competitive level. Going forward, we will turn our attention to getting the most out of this investment. We are building a sharper analytical capability to evaluate the impact of our media investments. We are, for instance, pioneering digital media in terms of We are building the next generation model that will give us the ability to better understand the more true impact of various digital channel choices. This can be modeled live and provide an immediate impact on the media tactics that optimize return on investment.
For good order, I should also mention that this modeling doesn't rely on cookies or tracking of individuals. This is in line with GDPR and privacy legislation, and therefore, we believe it's future proofed. As you can see, we're merging arts with science to deliver a desirable brand experience at scale. Let's now move to the 2nd growth pillar, which in a way is linked to what I just spoke about. It's about how we intend to personalize the shopping experience.
Beckman. Pandora is built on the idea of personalization. Our Moments platform offers our customers a unique opportunity to create Beck. And make it to tell their own personal story. A significant part of this experience is the personalized service we offer, in particular in our stores.
This is typically where the co creation takes place. By being a direct to consumer brand, We have a unique position to interact directly with our customers. Today, more than 75% of all transactions are done direct. We want to take this to the next level by using our digital capabilities to create the most personalized shopping journey. The customer journey has evolved quickly in the last few years, especially among our young customers, who now move fluidly across different channels.
They might discover Pandora through a store in a shopping mall, explore the brand on Instagram, buy online and then pick it up in store. This creates a need for us to offer a true omnichannel journey and for our different channels to reinforce each other. At the same time, the demand Beck. We've massively strengthened the core digital experience at Pandora. You might call this the vanilla experience, where we all see the same version of Pandora.
Heading forwards, we'll wrap the Pandora experience around each customer. Beck. In time, this will look like each customer seeing different creative that in a way follows them from what they see on Instagram onto pandora.net Beck. Based on what we know they like. Your local store manager reaching out to you with new releases, special events Beck.
Offers because they know you're a Pandora fan. By the way, this is already happening in our China stores right now with the power of WeChat. Beckman. And then personalizing the actual selling ritual using augmented reality with things like virtual try on and giving personal recommendations on our 3 d Bracelet Builder platform. We're making the ways you can receive your Pandora products more personal to you too.
We continue to roll out Click and Collect as a same day option in major markets. We introduced curbside collection in the U. S. Beck. And on the future road map, we'll be testing interest in same day home delivery.
Lastly, we're introducing a new loyalty program that will enable us Increased customer lifetime value. The program will drive increased purchase frequency, retain and reward loyal customers, and I'll offer access to pre release products and much, much more. The program will also be connected with our store staff so that they can provide even more relevant The key to all of this personalization agenda is deepening relationships with people who love Pandora, providing an increasingly rich Pandora brand experience, making the best use of advanced analytics and data technology to enable it. Therefore, this is an area which will receive disproportionate attention and resources going forward. The 3rd growth pillar relates to our geographical presence.
This also includes our network strategy, which we have discussed earlier this year. In essence, our distribution is sufficient and we don't foresee any major changes other than what we have previously announced, Namely, a larger footprint in China and Latin America. We have a somewhat revised view on U. S, which I will touch on briefly today. Today, we sell Pandora to consumers in about 100 countries through almost 7,000 points of sales.
Going forward, we still see long term growth opportunities in geographical expansion. However, in the near to medium term, We will focus on core markets where we still expect to drive higher brand penetration. Our core markets have one important commonality In that we have a very healthy financial structure. Despite many other things being similar, we can still see that the brand development in terms of awareness and penetration differs. This suggests that there is still a strong potential in our core markets to drive brand penetration.
In the last two years, we have proven that we can drive healthy growth even in the most mature markets like Australia, Italy and UK. We will continue to have a strong focus here and expect to continue driving solid profitable growth. U. S. And China represents more than 50% of the global jewelry market and will continue to increase in importance with a significant part of the absolute market growth driven by those 2.
As such, we plan to invest over proportionally in U. S. And China. We recently developed and started deploying a growth plan in the U. S.
We already see strong commercial traction, While part of this has been inflated by the unusual market dynamics, we still believe that our relative outperformance Can be partly attributed to this plan that we have labeled Ignite. Examples of levers in the plan are Driving awareness via further investment in media, expanding our consumer base, including win and win Gen Z, Beck. Driving a healthy network expansion. Our concept store penetration in the U. S.
Is lower than other core markets, and we see meaningful opportunities for expanding our network further here. China remains a top priority and a significant growth opportunity for Pandora. We are currently developing a plan for setting us up for accelerated growth in China to reap the opportunity in market size and growth that it represents. Our plan is focusing on turning around our performance in China. We have identified 6 key areas to focus on and drive growth, which have been the outcome of a rigorous analysis across consumer, brand, marketing, product, retail and digital insight studies From the best market research companies globally.
In brief, they are brand and communications. This is the primary priority as our Unaided brand awareness in China is only 16%, which is very low compared to our other key markets. And consumers therefore are less familiar with Beckman. Pandora's key brand attributes such as collectability, personalization and affordability. To fix this, we will increase our media investment and communicate our brand message clearly across each channel.
The first media pilot is just being concluded as we speak. Product assortment. Our main platform Moments has not been properly launched in China and our product range has not been aligned Beck. Going forward, our key focus will be to drive moments and introduce market specific products built for the Chinese consumer and its unique trading calendar. The other focus areas are centered on our network size both on and off line.
There's a clear expansion road map in place. The retail experience Both in terms of visual experience as well as the selling ceremony needs to be closely linked to the emotional connection with our unique brand proposition. Our digital setup needs further enhancement to be competitive. And finally, people. We are strengthening and growing our team.
We have evaluated each function and the business needs for the future to build a winning team fit for long term growth. By building a robust strategy derived from comprehensive insights, we are confident we can fix our business in China. More details of the plan will be presented later in the year at the Capital Markets Day. Finally, We do have a number of potential geo expansion opportunities. For instance, a proper entry into Japan and India.
We have decided to put this on the back burner and focus our short to mid term attention in our core markets, overdriving U. S. And setting up China for success. Now I will hand over to Carla Louni, our Chief Marketing Officer, who is with us from Italy to talk about our strategy of products and design.
Thank you, Alexander, and hello to all. Let's now take a deeper look into our 4th growth pillar, design, and specifically, how we're going to drive innovation, consumer centric innovation. With the mission to create a sustainable growth for Pandora, we have established a very simple framework Beck. With 3 clear business priority. 1st, protect the core.
Our core is moment which represent around 70 Beck. And it goes without saying that we must keep moment relevant to current users while reactivating lapsed users. We will do so by fueling charms, Additive Power and by creating new growth engine for Moment, new wearable location, new carriers, New Collabs. The number 2 priority is fuel with more. Pandora brand cannot just stand on one leg.
This is quite intuitive. If we look at key players in the jewelry industry, their brand architecture is made of several collection. Cartier, for example, has Love Collection, Justin Klu collection, Panter collection, similar cases for Tiffany. But even if we look at more accessible business like fragrances, Chanel doesn't just stand on Chanel number 5. They have Gokoma Domacel, they have Channel Chance, Alu and so on and so forth.
So, beside Moment Universe, We will create new growth engine, new brand universe that will target different consumers with different needs. Last but not least, our number 3 is to ensure we have dedicated support model. Our go to market It will be fundamentally important to bring a live strategy. We will mirror key priorities Beck. With dedicated communication, media, in store, training and so on and so forth.
This will allow us to fuel incremental growth While minimize cannibalization of existing business. With this in mind, we have defined A roadmap for growth for Pandora. The starting point has been the segmentation of the jewelry market. We segmented the market based on key drivers of consumer choices in the category. We looked at functional and emotional consumer needs Combined with the Saip product future, we then clustered the needs and mapped in the market.
As you can see from this chart, we have identified what we call 10 enduring concept platform. Each one of these platform or segment answer to why a certain group of consumers buy jewelry, What is the role of the jewelry and what is the product associated to cover identifying needs? For me to make it easier to understand, we'll give you a couple example. If you look at the terminal treasure at the top Left of this chart in blue, what you see in there is the consumer need. Jewelry is eternal, it never goes out of fashion and he will always be there.
Here, we find consumer that buy jewelry because it stands, it never goes out of fashion, and as a Beck. Consequence, the product future expected is somewhat traditional with long standing design. Conversely, if you go at the bottom of the chart, at the center, you see a platform which is called creative expression And what you read in there is life is too short to wear boring jewelry. Obviously, this consumer buy jewelry to spice up their life, and they will expect product design, which are fun, playful, and allow them to express Their style and the personality. After having done the segmentation, we went through Each one of these is ECPs or segment, and they're all very sizable and globally relevant, But we selected 5 where we know Pandora has the right to win today.
These are the 5 we selected. And how we did that? We did that by looking at brand fit first, Material fit, what kind of material was fitting in that platform? Affordability, price point, global sites, And so on and so forth. We believe we have today 5 ECP.
They will deliver incremental growth for the brand. The result is summarized in the following chart. As you can see here, we have Pandora House. And what you see here, beyond the purpose which Beck. Existing collection and new collection and we have linked assisting a new one to the 5 ECP to the 5 enduring concept platform or segment, so each of our collection, Existing our future has a clear place, a defined target consumer and the universe to refer to.
If we start with Moment, for example, you see that it sits into my story ECP. Jewelry is like a biography, A story that tells many chapter of my life and moments will answer to that need by offering high quality, affordable jewelry With the meaning, this is who we are. Communication will give jewelry a voice by communicating love, passion, aspiration, desire, A milestone in consumer life. We will create for each collection distinctive and honorable proposition And the fun things about this is the innovation and communication will be focused around space, so we can minimize cannibalization And we can maximize incremental sustainable growth. To bring this to life, I will show you a couple example on what is coming next and how we plan to grow in 2 ECP with 2 distinctive proposition.
Under creative expression, SAP, Life is too boring to wear boring jewelry, life's too short to wear boring jewelry, We have developed Pandora Me global relaunch. Under iconic hallmark, the brand I wear says Everything about me, we will launch Pandora Brilliance, our first sustainably lab created diamond collection. Beck. And affordability, they just do in a very different ways, targeting different consumer group, 1 more millennials, The other one more on generation Z and most importantly, allowing us to generate different proposition And as a consequence, minimize cannibalization. Let me go a little bit more into the detail and give you Becker.
Pandora. Me this fall in October and it will be a major relaunch. We have identified 4 key factor To drive success, 1st and foremost, we target and design the entire proposition for Gen Z. As Alexander said, we have done extensive research to deeply understand Gen Z motivation, aspiration, needs, And we will offer a proposition that is being created for them that mirror and anticipate their needs And it will empower self expression and personalization. We know this is very critical for Generation Z.
The second piece, we will offer a full cross category proposition, a very attractive assortment, Shifting category mix to what's most relevant for them. Beyond bracelet and charm, which of course we'll offer, We will have rings, earrings, necklace, while we will ensure the right price point and mix In the assortment because we know that for this generation, value is very important. The 3rd piece is We have created a 360 digital first communication. We will be where these people are. We will be where they talk, where they are in their channel and communicating with their language, With music as a creative catalyst of the campaign.
Lastly, we believe we have a winning proposition because concept, Communication, product have all been qualified and we believe that this is a very different proposition Beck. So let me show now A little video that give you a taste of the new Pandora Me product. Much more to come in September at the Capital Market Day. So, I hope you enjoyed the video. Beyond Panorama, we will also explore a new territory as anticipated before.
Sustainably Lab created Diamond, Pandora Brilliance. This will be introduced in UK on May 6 With global rollout in 2022. As you might have seen from the press release this morning, Lab created diamonds are basically identical to mined diamond, but growing in a laboratory rather than being taken from the mine. They have the same optical, thermal and physical characteristics and are graded by the same standard nose as the 4 C, Beck. We think there is an opportunity to make Diamond accessible to a broader audience.
Okay. So, allow me to introduce Pandora Brilliance. Pandora Brilliance collection has been created with this in mind: lab grown diamonds Becker. Capture in a pure, emblematic design, a reimagined infinite simple. So why Brilliance?
With Brilliance, we want to do 4 simple things democratize diamond, making it affordable to a broader group of consumers, Beckman. Tap into the growing DKK 500,000,000,000 diamond market. Signal Our commitment to sustainability by launching our first carbon neutral product. And finally, develop further our position in the iconic hallmark ECP. Overall, we've seen a great acceptance of this proposition, but we know in many ways this is a new territory for us and we will make sure we test and learn in UK market before we roll this out in other country.
So let me show you now A little video which introduce you the products.
Becker. It's the biggest disruptor the diamond industry has faced. Lab grown diamonds provide an
Beck. Today, what I'd like to talk to you about is that love of form
and it's something continual,
Beckner.
In a nutshell, how the assortment will look like? Pandora Brilliance will launch with what I would define a complete assortment. We have rings, pendants, earrings and bracelet. It's 5 carat in silver, white, gold and yellow gold. And we're going from what is 0.15 carat to 1 carat.
0.15 carat with an entry price for silver at £250 And 1 carat in yellow and gold with an entry price of £12.90 One thing which is important for us to stress, these price points are obviously much higher than other Pandora Collection, but They are very competitive versus the mined diamond market. I want to stress this is not about raising Pandora pricing, But it's about making diamond jewelry affordable and provide consumer with real value occasion versus the rest of the market In a sustainable way, which we know it's absolutely critical, especially for millennials. If we go to the next chart, we will see we will talk about what is the concept behind this Product. We have created a winning concept behind Brilliance. We didn't want to go into the bridal space And we certainly didn't want to go into one of once in a lifetime consumption.
So we created a concept. We tested extremely well with consumer, which is about transformational journey. It's highly, highly relevant in today context. It basically capture a diamond in the rough Transforming into a brilliant creation. It creates a parallelism between the product And the concept that you the video that you will see in a second.
We obviously have a lot of product videos that explain Lab grown diamonds, glorify the product and educate consumer about it, but the main video Beck. Capture authentic transformation story and highlight what every woman can become With determination, optimism, resilience, it's all about infinite possibility. We have 2 great talents. We have chosen 2 great talents. They are both incredibly successful women, But they are equally well known for the difficulties they had in life and for how they overcome it.
Ashley Graham. Ashley was once bullied for being overweight and today is a famous model, As you know, an advocate for body positivity. Rosario grew up on Leslie and today It's a famous actress. Both of them are authentic and relatable role model with strong values, and we believe They're the best possible ambassador to launch Pandora Brilliant's sustainably created diamond. Let me show you our 2 videos Which brings the main concept to life.
From the time I was a little girl, I felt this spark. This positive force that always pushed me forward. I was like a diamond in the rough. I knew the woman I wanted to become, strong, optimistic, resilient. A brighter future is in All of our hands.
And I believe the best is yet to come. Introducing the Pandora Brilliance Collection, sustainably lab created diamonds. I was a diamond in the rough. I was raised by strong, powerful women. They gave me the choice To decide who I wanted to become.
And we all have that power to do anything, be anything, create anything. That's what made me who I am today. A brighter future is in all of our hands, and I believe the best is yet to come.
John Beckman.
So It's the end of my session. To sum it up, just few things. We have defined a roadmap for growth Beck. Rooted into consumer centric portfolio architecture. As we go to market, we will protect the core, Beck.
Fuel the brand with more. You've seen Pandora Me, you've seen Pandora Brilliance and there are many more things in the pie. And lastly, we will definitely mirror our go to market and support model to business priority because we know execution is key. So many exciting things in front of us. I hope you enjoyed and I thank you.
Now I hand it back over to Alexander.
Thank you, Carla. I apologize for the first three quarters of the presentation, which was my boring readout. But if we had had the Capital Markets Day, maybe we would be able to put a bit more spark on it. But I think Carla made a terrific job on showcasing some of the outcomes of this strategy. And the way I'd like to think about this growth strategy is we're fusing art Beckman with science at scale.
That's the Pandora of the future. And with those words, I will now hand it over to the operator so we can get into the Q and A.
Beckman. Beckman. Our first question comes from Frans Hoyer from Handelsbanken. Please go ahead.
Beck. Yes, hi. Thank you. It does sound like you are really making some Major fundamental changes and very exciting to see where this will go. I wanted to ask about the issue that Karl raised regarding price points.
I also noticed, I think I'm right in saying that you have launched a number of products with more gold in them lately. And of course, the diamonds will take that even further. And how do you think about Analyzing the extent to which your core consumers, customers will be receptive and supportive Of these types and trusting of these types of price points that you're going into?
Beckman. Carla, maybe you want to give it a go first?
Yes, absolutely. Hi, nice meeting you. So 1st and foremost, what I want to say, it is clearly the reason why we are going first into UK Beck. That we have lots of confidence on, but equally, understanding how current consumer sees us. We do not have any concern about confusing consumer.
We have a strong Pandora Moments Business which will continue to fuel with innovation. We will also have new innovation coming, which are going to be In the same price range, if not more affordable than Pandora Moments, which is Pandora Me. Pandora Brilliance is A different case. And what I want to stress is a couple of things. 1st and foremost, conversely than the past, We are not going into high end luxury.
We are actually claiming that we are gonna go and make diamonds affordable To our consumer, so our main main promise to consumer, which is offering you handcrafted, affordable, High quality jewelry, it's absolutely the same and remain absolutely the same. Also, the Pandora Brilliance is quite High value equation proposition. If you think about the entry price at 2.50, You will see in against a mined diamond, this is half of what a mined diamond would cost and this is the case for all the carats. What I think is also important is to point out that these diamonds are actually real diamonds and the reason why We believe we offer a strong value equation to the consumer is because they've been evaluated against the same quality standard That the real diamonds would be would do, which is this for sea. So, in brief, a, we will obviously monitor Consumer acceptance, which is the reason why we are going to UK first.
B, we have, Together with Brilliance, strong programs behind Moments, strong programs behind me, which remain the most affordable proposition within this. And 3, This is not about raising price. This is actually about offering a strong value equation to consumer and making diamonds Affordable, not one of in a lifetime occasion, extend the occasion to what we know it's important from the test we did, Which is more an everyday usage.
The only
thing I could add
to that, Frans, is That we've the launch has been preceded by deep, deep research both from a concept standpoint, but also from a price elasticity This standpoint, so we've learned a lesson from the past. And therefore, we've spent an inordinate amount of time to convince ourselves With quant based methodology that there is a high acceptance levels on these type of price points. But as Carla rightfully puts out, One thing is what you do in concept testing. The other one is what happens in real life, and that's what we will experience now going forward in the U. K.
Launch.
Beckman.
Our next question comes from Elena Mariani from Morgan Stanley. Please go ahead.
Hi, thank you very much. A couple of questions For me, one is the main one and the other one promises a small one. The first one is on demographics. So What is the average age or the range of ages you are targeting? And how do you expect to be able to keep The existing consumers and grow with them, but at the same time, targeting the very young clientele.
So Do you see a risk that some consumers might be puzzled or confused by some of these launches? And how do you plan to tackle this? Because I've always been Wondering exactly right now what's your age distribution? I don't know if you have an answer for this and maybe how do you plan to evolve this Beck. And then second very small question.
I was very curious to hear who do you see as your main competitors? I know that the market is very fragmented, but I was wondering just in terms of positioning, which are the brands that you see as more similar to Thank
you. Carla, you can give the first one a shot, and I'll try to deal with the second one.
Beck. Okay. Okay. I'll go with the first one. So the average age hello.
The average age of our consumer is 37 point Beck. Obviously, this is 38 years old. Obviously, this varies by market. What we see in China is younger versus in other market is slightly older. And we also, as Alexander said at the beginning, the current owners, which is around 44%, if I go by memory, are between 18 35 years old.
So we actually have quite we are actually very wide Beck. Spread because, you know, we like to think that Pandora is for everyone, but we also know that it's absolutely critical to promise to a certain Target consumer a certain proposition. So we do not see at all a risk of confusing. If you look at, you know, Key competitors, if you look at also the most affordable fragrance market where gifting is very important, as long as we are true to And our promise is about ensuring that we offer consumer a platform for self expression in an affordable way with our with high quality Product, it is absolutely enriching for a brand to demonstrate that we are not just about charms, a bracelet. I fundamentally believe that innovation, even if these two initiatives that we just presented are not successful, Innovation is something good for the brand.
We need to wake up the sleeping beauty. We need to keep our Current users happy and they are because we will continue to offer moment proposition, which is true to ourselves with a holistic and consistent Communication, which is about, you've seen in the presentation, it's about my story, it's about celebrating With new charms, because we know it's important to keep the brand fresh and to keep the Moment franchise relevant to them Without contradicting who we are, together with this, on top of this, it's also equally important to stretch the brand a bit. A stretch the brand doesn't mean contradict to who we are. We are about self expression, but the way in which we talk to very young consumer generation Z And the offer in term of product and communication has to be customized to them. Otherwise, the risk is They will become older together with our audience and that's not clearly where we want to go.
I hope I answer to your question. Alexander, if you want to build on the second one?
Yes. I mean, the simple answer on this one is Nobody really or a lot. It depends on what you think about. A large proportion of the volume in our business is gifting. So which means that the average gift size or value of the basket is maybe $100 to $150, euros, pounds what have you.
And of course, there are other options for gifting in that kind of price range. So that's one way to think about it. Now if you narrow the scope and say that the gift is going to be in the jewelry space, globally, there is no main competitor. We have different competitors in different geographies. So if you take the U.
S, you would have a company like Alex and Annie, for instance. If you go to China, you could possibly look at APM Monaco. I'm conscious of not mentioning Swarovski because I think Swarovski, At least the old Swarovski that we knew, they are also kind of changing now. But the old Swarovski was much more focused on style. Beckman.
And our customer comes to us because we offer them meaning. So the key driver is not style. Of course, they want nice style, but that's not the key driver. Whereas in Swarovski's case is about the style much more than the meaning. So therefore, from a geographic standpoint, you could argue that they are kind of where we are, but I don't see them as a meaningful competitor from that standpoint.
So globally, there is really nobody today. Locally, there are kind of pockets of local competition.
Beckman.
Okay. Thanks very much. Very clear.
Thank you. Our next question comes from Antoine Boes from Exane BNP Paribas. Please go ahead.
Yes. Hello again, that's Antoine. I think you mentioned data and analytics. I was under the impression that you already made some progress in the last like 18 months. Have you done some kind of benchmarking against, I don't know, Consumer brands or consumer retail companies and where would you put Pandora In that journey, do you think that you're already, I would say, above average or any sort of perception there?
Beckman. Antoine, it's a very, very relevant question. So yes, we have done extensive work together with Bain When we defined the whole digital strategy as it were and in fact one of the topics there was Who do we use as a benchmark? Who do we get inspiration from? Because, of course, Pandora started from a very analog point from a few years back and now moving forward.
So if we kind of set the benchmark across a number of criteria, Then versus the, let's say, direct competition, if other jewelry brands, then probably we are But if we then comparisons with other specialty retailers or other brands, let's talk about some of the Beck. The suspects I mentioned before like the Nikes of this world or Sephoras of this world to talk about a specialty retailer, then I think we still have Beck. Some ways to go to get to where they are. So in our strategy, we've essentially gone through a 3.60 review of all aspects of digital. And now you can divide that up in essentially revenue oriented exercises and also cost and efficiency.
The focus on our strategy, Pfenex, is on driving revenue. So in that space, we've then gone through a whole slew of benchmarks and we've established Where we currently are, where the jewelry competition is, where, let's say, our gold class benchmark looks like and then we made some very specific choices Beckes. On what to drive first because this can be a very expensive exercise and can also quickly become an unfocused exercise. So we have a very detailed plan. And when we meet you in the Capital Markets Day, I'm happy to go through exactly where we think we stand, Beck.
What the kind of key points are. But as you can see, as one of the 4 key growth pillar, personalization is one that we've picked and we're going to overdrive. What we haven't really spoken about today because we don't have the time is to show exactly what that means. So we'll kind of uncover that and share that with you in September.
Thank you. Our next question comes from Silke Agrawal from Citi. Please go
ahead. Hi.
I just wanted to follow-up on Pandora Brilliance. Maybe could you just guide a little bit on the cost structure And whether this is a gross margin dilutive versus your underlying silver business, any indication, just qualitative is fine. I understand you cannot
Beck. Hi, Silke, it's Anders here. I can I think it's we will not provide a lot of comments on that yet? But obviously, we when we have been developing the Brilliant concept, we've So been looking at the financial aspects of it and from that perspective, it's a quite interesting additional Beck. Play on the infrastructure in the business.
The gross margin will depend quite a lot on volume, Beck. How where that takes us. And I think initially, you should expect it to be slightly gross margin diluting, but still Beck, accretive on the bottom line. I think that's what we can say and that accretive from a margin perspective on the bottom line, I should say. Beck.
Okay. Thanks.
Thank you. Our next question comes from Tara Bassan from JPMorgan. Please go ahead.
Hi, thank you. Hi again. From your presentation, it sounds that you have Many different projects going on at the same time. So I was wondering whether there is any priority in terms of, say, for example, Prioritizing the strengthening of U. S.
And China versus expanding trends beyond Moments and also Beck. And into the other categories and into Brilliance and Pandora Mi, if you have any sort of priorities within all these projects? And then All these projects, especially when it comes to expanding Transpeon Moment and within the other categories as well, Is your aim mainly to drive repeat purchase with your existing customers or attracting new customers? Or are you thinking about Beck. And linked to that, how are you thinking about your marketing budget in this effort to especially if you're trying to recruit new consumers?
Becker. Thank you.
So maybe I'll start and then I'll flip it to Carla. So in fact, I think the strategy is extremely focused. We have made some very, very distinct choices. We could have gone into other countries, and that is a big effort in and of itself. We could have expanded into new categories.
We could have gone into watches and accessories like many Beck. Other companies in the jewelry space do, but we haven't done any of that. So we've essentially said we stay focused on the jewelry space. We stay focused on the Pandora brand. And then within that, we put the product strategy in place and we have a very clear sequence on how we go about expanding Beck.
The number of ECPs that Karl has spoke to. So in fact, it is a very, very focused effort that we're doing. Beckman. And yes, and even from a geo standpoint. So I do believe that we are very, very clear on our Priorities going forward.
And maybe I'll flip the back half of your question to Carla.
Yes. So just to Clarify a little bit. Our number one priority is obviously to protect our user base, existing user base, Our moment business. And this is where you would see and what you've seen already in the last 12, 18 months. We refocus all our energy, all our support, all our innovation, all our media budget behind Moments.
And the reason behind this is obviously, a, to ensure that we have a strong base to start with, b, To keep the brand relevant and see to just obviously wake up the sleeping beauty. That's our number one priority. We need to attract new consumers. We need to attract new users. And the segmentation that I display that I just shared before Just show that there is enough space in the market.
Pandora has, the right to win in this market By offering different proposition to different consumers. So, A, we do want to minimize as much as possible cannibalization. B, Obviously, we want to create incremental business. Incremental business is not just about Creating a nice piece of jewelry or a nice piece of communication. Incremental business goes from creation To how we go to market.
And I think this links back and try to answer to your question on how do we think about marketing model. Obviously, we're going to have a very refined marketing model because it's not that every new innovation will have, you know, Plenty of media budget. We obviously want to make sure that, a, we create desirable consumer proposition, Beck. We have compelling financial for our shareholders. So we are very, very conscious about that.
But at the same time, we also know that for consumer to see that things exist, we need to make sure that we create that level of awareness Through different channel, whether it's broad based TV or only digital launch depending on how the proposition is. Most importantly, we need to make sure that our store and our store ambassador, which are fundamentally a Fundamental communication element for us has the ability to sell moment and at the same time Any new collection that will create and will be successful, so that on one side, number one job is to protect the core, Number 2 job is to fuel the brand with more across the entire value chain from creation to final execution to the last store of Pandora.
Our next question comes from Patrick Ifferson from ABG. Please go ahead.
Thank you very much. First, one question on Brilliance and then one short one as a follow-up. Beck. But starting with the Brilliance question, Anders, you said it was margin accretive to the bottom line as well, if I heard you correctly. And I wonder Whether that is true for both channels, I.
E, the owned and operated concert stores and the e commerce store.
Beckman. Patrick, when I talk about this being margin accretive that I think about it as a for the group consolidated EBIT EBIT margin. There will be no big differences between the channels in terms of margin, except I think it would probably think that there will be More of an O and O sort of physical store part of revenue in a price range like this Beckman, and then online. But it's in terms of the EBIT margin for the group when I think about that is EBIT margin accretive.
Excellent. Thank you. And one short one, if I may, regarding the loyalty programs. Wondering if you're open to share how many loyalty members you have today and how many you had like, say, a year ago or 2.
Beck. Thank you. Our next question comes from Frans Hoyer from Handelsbanken. Please go ahead.
Yes, thank you. Just am I not right in thinking that you did mention M and A as a possibility, an element That you might activate going forward, what would be the objective of such action, I mean type nature. And also regarding Pandora Brilliance in the stores, I would have thought there must Becker. Some significant implications if you want to sell a product that is, I think quite a lot different from what you have at the moment. It ought to also have a bearing on the way you organize your shops.
Yes. So I'd just like to clarify the M and A point because I see that we received a fair few questions on that. So if we zoom out a little bit and I'll come back to the specific point is, so when we decided on kind of the profile of this strategy, we were kind of very clear on Different avenues of growth. One of them was we have the Pandora brand. You can take the Pandora brand into different categories, as I think I mentioned.
You could go into watches and all sorts of adjacent categories. So that could have been one option. The other option could be to add brands to the company, which obviously comes back to the M and A point. What we have said and in the short- to medium term focus is to stay focused on the Pandora brand, Beck. Stay in the jewelry space and drive out growth there by expanding the number of ECPs that Carla just touched upon.
That is the main idea. Then we zoom out and then we say, okay, who is Pandora? We have a number of things working in our advantage. We have a manufacturing capability and capacity, which bars none. We're the biggest guy in town.
We have a global distribution network. So we have assets which arguably you could bolt on other things on Beckman and kind of get a good return on. But that is, of course, something which we think is not for now Because we have so much opportunity within the core that we actually don't want to get distracted by acquiring other companies. Beck. And for those of you that follow statistics, you know that out of 10 M and As, 5% to 6% typically are shareholder negative, Becker.
2 are neutral and 2 are positive. So M and A, whilst it sounds like a nice revenue opportunity, it actually comes With a fair amount of risk attached to it, Pandora has zero history of making M and A. So where we are now, we've just come out of a turnaround. We want to focus, we want to stabilize the company, we want to ensure Beck. That we drive out the growth opportunities that we have in front of us.
And then M and A might be an interesting opportunity going forward. It's a very fragmented market across the globe. We're one of the big players. We have a strong balance sheet. So there might be an opportunity for us to be part of a consolidation Beck.
But it's certainly not something which is in the let's say, at least in the near to midterm horizon. We want to stay focused
Beck.
And then your second question on reorganizing the shops. Yes, this is going to be a different approach. And I think as we get into more ECPs, more collections in the store, We will have to learn how to deal with this. So that's one part of the learning journey we are through going through now in U. K.
Just to put it in perspective, in an average shop, we can showcase something like 1,000 pieces. This range, Beck. As Karl showed before, it's a quite narrow range. So we're talking about, I don't know, 35 pieces, let's say, to showcase the range. So right now, that is not the challenge.
It's more how you actually visually merchandise this, the sales narrative and the training that goes into to Support our staff so that they can kind of guide you through that shopping experience. And those are all things that we are now uncovering as we go into this Brilliance launch.
Our next question comes from Lou from Flower and Tree. Please go ahead.
Hi. I have a question regarding retail operation. So in the past Pandora used to have Slow moving SKU in the building up in the channel, that's right, the program now bought back inventory and we focus on the charms, Beck. So with the Pandora Amyl relaunch and the Pandora Brilliance, what I see is that you You're doing 2 things at the same time. 1, you're extending pricing point both downwards and upwards.
And second, you're extending the Baekke. You're increasing the product offering outside of charm, such as like earrings, rings and necklace. So this will increase Beck. The complexity of the retail operation multifold. So in today, how do we make sure that Beck.
The past mistake of slower moving SKU doesn't happen again. How do we control the SKU inventory? Beck.
Okay. Carla, you want to go?
Yes. I think this is you summarized it pretty well. So first and foremost, this is a constant effort. We constantly work with merchandising to ensure that we have the right assortment. As you rightly said in the last few years, there's been lots of focus An effort in making sure that our assortment is as productive as possible.
And I think we made a big, Beckett. Big step forward in terms of simplification, while ensuring that we offer the right assortment to our consumer. This is an ongoing We will continue to do so, both on existing collection as well as with new launches. And just to give you perspective, it's not that we are talking zillions and zillions and zillions of DVs. Pandora Me, it's about 50 DVs And Pandora Brilliance is about 36 DBs.
But obviously, this is a fundamental important piece of our operational discipline And we are all very, very keen to continue to keep this operational discipline machine going because we know that on one side, Creating new things is absolutely critical for the business, but the operational discipline of assuring the right assortment In every single store and the most productive assortment, it's something that we do daily. We have a strong merchandising team. We have a strong commercial team. Baek. So this will keep doing that.
Absolutely.
Is there any chance that we Baek. Can further shorten the supply chain, so that we only need to have a minimum inventory in the channel. And whether the e commerce platform can Play a role of reducing the excessive inventory that required in our retail business.
I'm not okay. I mean, it's an interesting question. The inventory position inventory holding in the shops is, what, 15 weeks roughly, and then we hold a bit more in the LCs. So in fact, it's not Beck. It's dramatically been reduced in the last 2 years, I should say, on one hand in absolute.
But the second one is also we have A better control of which type of SKUs we promote. So in fact, we have segmented the assortment in Beck. And we are now focusing much more on the top sellers than maybe we did in the past. So I do think if I compare to, Let's say 2 years ago, the effectiveness in our supply chain and the ImmTOR holding is significantly improved. In fact, to the point where We think we may be on the low side because when you're in a high margin business, the one thing you don't want to do is to be out of stock Beck.
Because the cost benefit analysis is very simple to do. If you lose that sale, which is an 80 Beckman. You don't make that up for the cost of capital to hold a bit of inventory. So that is actually not a major concern for us today.
Understood. Very clear. Thank you very much. Beck.
Thank you. Our next question comes from Michael Rasmussen from Danske Bank. Please go ahead.
Yes. Thank you. So just a follow-up question on the brilliance. So what is your game plan in terms of moving on To other markets after the U. K, I don't know if I've missed it if you already commented on that.
But also if you could kind of comment on Beck. What kind of share of group revenues are you guys targeting here once it's fully rolled out? Just in order to me get a bit of a hand on kind of Beck. What kind of meaningful this will have on group revenues? And finally, how are you going to report?
Will it be Split into the normal product categories, rings, earrings, bracelets and so on? Thank you.
Beckman. Let me be the boring guy on the first one. As we said, today is not about numbers. So you will have to wait a little while before we conclude that. And then maybe I can Anders, you can answer the reporting question.
Yes. That's a good question, Beck. Michael here. But if you in one of the notes to the company announcement this morning, you will see that as part of what Carla explained earlier on the ECPs and the way that we work with our product portfolio, we will also Going forward, we'll be changing the way that we report on product categories and aligning with the ECPs because that's how we work with products Internally, so you will follow the going forward, the GPU structure Beck. And the subcategories below that to moving away from thinking about a charms category and a bracelet category, etcetera, because that's not how we Work with our product portfolio going forward.
And as if and when Brilliance becomes a meaningful part of that, that Becken, so I'll outline as part of those subcategories in the global business unit, the GBUs.
Fully understood. But on the markets, I guess, you could comment on kind of the level of markets, the U. K. Market. Beckman.
The game plan is to, 1st of all, ensure that we can take all the learnings from the U. K. So that before we kind of push the button globally, because I think as somebody mentioned before, it does require a bit of a difference in the operation in the store, so So we need to figure out how we manage that. And on the assumption that all of that somehow is okay, what we're currently planning to do, Then mid next year, we would start thinking about rolling out into a few other geographies. For competitive reasons, I will refrain from mentioning which they are today.
Beckman. Great. Thank you very much, Alexander.
Thank you. Our next question comes from Martin Brenau from Nordea. Please go ahead.
Beckman. I have two questions. The first is that I noticed that the Reflection platform is not mentioned anywhere. Is that going to be phased out? And if you could just tell us what the platform's share of revenues on the group today, That would be great.
Carla, you want to take that one?
Yes. So the Reflection platform We'll be obviously, we will actually we have quite some plan behind it and it's included in the timeless Platform. We did an extensive research with both consumer as well as with our product design. And we went through product design features, what are the key motivating factor. So we will create one collection which It is timeless, which will incorporate reflection and we have new product newness coming Beck.
We are not going to forget about it. To the contrary, we are going to make it part of a broader proposition and we have some news coming up.
And do you have the timeless proportion of today? Is what 19% 19% 19%
is around 19% of the business. 19%, 19%.
Yes. So Reflection sits Inside that 2019, so it's not 2019 standalone, just to be clear.
All right. Thanks.
But I'd like to just pick up on that because it's a very Beck. Question. The way we think about it, this is the whole notion of the platforms. So rather than having lots and small its and bits Beck. Rather than launching and leaving, which unfortunately was a little bit the missteps of the past.
But we've learned from that and going forward. But that also means that you cannot have 18 different collections. So that's been part of the work we've done in trying to kind of Streamline that and put stuff where it makes sense based on this mapping that Carla went through. So some things will fall off and some things we will be Beckman. Relaunched and let's say revitalized and the reflections is part of this effort.
Thank you. Our next question comes from Sharav Bastien Beckman from JPMorgan. Please go ahead.
Hi, thank you. Just a quick follow-up question on your store concept. And I was just wondering whether you're also reconsidering your store concept, especially as you need to accommodate for a broader Beck. Back an update also on that at the Capital Markets Day. Thank you.
Carla, you want to take that? Shall I take
it? Yes.
So we are in the process of developing a new store concept, obviously. And yes, in the Capital Market Day, we will have an update What I think it's however, it's important for us to recognize is that this The new store concept will obviously bring to life, refresh, let's say, the brand because the current one The current store obviously are a little bit tired, but beyond that, we also know that the dynamic of purchasing Are not just about collection. So it's not that we are going to throw away what we have today because actually operationally our current store works Extremely well and it's very efficient, but we need to do is to combine the way in which by category some of the Some of the moment consumer buy, which is you go in store and you ask for a charm, which is about family. But at the same time, exploring much more The walls, the display, digital tools, they will allow us to have the flexibility to talk collection When consumer want to, and at the same time to also ensuring that we can also talk category, should consumer wants to buy by category. Beck.
We are doing lots of work in this to make sure that we have a brilliant store in terms of look and feel, but an equally brilliant Beck. So when it comes to operational an operational machine because that has to work.
And I guess when you say also from an operational Point of view, you also the omni channel proposition and how to
Absolutely. Beck. Absolutely. It has to be totally integrated. That's going to be one of as Alexander mentioned, we started with Kick and Collect, But there is so much more we can do to ensure that this is a truly on experience rather than separated offline versus online.
So yes.
And I'll just piggyback on that because that is maybe a bit, let's say, hidden inside the growth pillars of the strategy. But when we talk about personalization, that really kind of covers all of that. So rather than having this division of talking about the store and talking about e commerce and talking about You know, the website, whatever, it all sits under the umbrella of personalization because that's the outcomes that we want to achieve, that people feel that we're taking special care of each and every one of you when you're a Pandora customer, regardless of where you decide to kind of interact with us, be it just from a marketing standpoint or Beck. From a transactional standpoint, so that's where it's encapsulated. I know it's a bit hidden there, but that's we will go through that in more detail in the CMD.
Now I'm getting a red flag here. We can take one more question and then we'll go to a close.
Thank you. There appears to be no further registered questions. So I will hand back to the speakers.
Okay. So maybe we go to the there are 2 slides at the end of the deck. So the quick okay. So I mean, in a nutshell, what we wanted to plant with you today was a high level overview Beckman of the growth strategy going forward. We've talked about 4 growth pillars.
We've shared with you a little bit more detail on the design piece, And I'm quite pleased that that's where all your questions were centered on because it was a bit more concrete. I hope we can replicate that across the other three pillars, including some of the Foundational elements, which we'll go through in the Capital Markets Day. And I'll just essentially close on that note. So we have planned it for September 14, we hope you can pencil this into your calendars. And on the assumption that travel restrictions are Lifted, we will welcome you to our show in London in September.
Thank you very much for attending our session today.