Pandora is taking advantage of the real estate downturn by opening new stores

Danish jeweler Pandora, one of the few retailers currently increasing the number of stores it operates, is using the property decline to improve its rents and secure better locations.

Alexander Lacik, the jeweller’s managing director, said that before the Covid-19 pandemic, rents were “running hot” and it was difficult to get the best store locations in city centers or malls.

“Now that times are tougher, there are many opportunities to get good rents, but more importantly to get triple-A locations,” he told the Financial Times.

Known for its charm bracelets, Pandora is one of the world’s largest jewelers by pieces sold and competes in the mass market rather than the high-end market like luxury conglomerates like LVMH.

Last year, the Danish group opened 88 net new stores and expects to open another 50 to 100 in 2023. By the end of 2022, she had 2,540 branches worldwide, two thirds of which she operated herself. The rest are operated by franchisees or other retailers, while their wares are sold in nearly 4,000 other locations like stores within larger retailers.

“Half of our customers are men. Men need help with jewelry. We need to know what you’re looking for. Brick and mortar are super relevant to us. I’ll be dead before that changes,” Lacik said.

Pandora’s businesses increased operating profitability within a month or two and were cash flow positive within a year, he added.

Many retailers are moving away from physical stores as online sales gain traction. H&M, the Swedish fashion retailer, for example, closed 336 net stores last year – about 7 percent of its total – and said it will close another 100 in 2023.

E-commerce has also grown for Pandora, accounting for 12 percent of total sales in 2019 and 21 percent last year. But in-store sales have also increased by nearly 20 percent over the same period. Sales last year were 26.5 billion DKr (3.8 billion USD) and operating profit was 6.7 billion DKr.

Lacik said that when he started a global real estate group at the Danish group, “the first thing I asked for was to get myself out of all long-term leases”. Now Pandora can exit “the vast majority” of its deals within 3-4 years.

He then asked his group to discuss the terms with the landlords. “I want more flexibility and a better location. If it’s the same price, that’s fine,” Lacik said.

Pandora is forecast Sales growth between minus and plus 3 percent this year, which means that profitability remains “untouched”.

Lacik added: “The reason a lot of retailers are closing stores is because they [go] from black to red pretty quickly. Rents are high, labor costs are high. I can lose half the volume and still break even.” Pandora is taking advantage of the real estate downturn by opening new stores

Adam Bradshaw

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