Pandora A/S

Morten Eismark – Vice President, Group Investor Relations Allan Leslie Leighton – Chief Executive Officer Henrik Holmark – Executive Vice President & Chief Financial Officer

Michael Vitfell-Rasmussen – ABG Sundal Collier Lars Topholm – Carnegie Investment Bank Antoine Belge – HSBC Bank Plc Stephanie D'ath – Bank of America Merrill Lynch Patrik Setterberg – Nordea Bank A/S Chiara Battistini – J.P. Morgan Cazenove Fasial Kalim Ahmad – Handelsbanken Capital Markets

Thank you and welcome to Pandora’s Conference Call following the release of our Q3 2014 results distributed through the wires this morning at 8:00 A.M. The presentation for this call as well as the full version of Pandora’s Q3 releases available on Pandoragroup.com/investor.

My name is Mort Eismark from Pandora Investor Relations and with me here today is CEO, Allan Leighton; and CFO, Henrik Holmark. In accordance with the agenda on Slide 2, Allan will go through a few Q3 highlights followed by Henrik who will talk you through Q3 numbers in more detail.

Finally, Allan will conclude the presentation and we’ll be happy to take your questions. Before handing over to Allan, I kindly ask you to pay close attention to the disclaimer on Page 3.

Allan, please.

Thank you, Mort. If you turn to Slide 4.

Good morning, everyone. As you can see from the numbers, we released earlier this morning, the strong development we saw in the first half of the year has continued into the third quarter.

Revenue for the quarter was DKK2.845 million, an increase of 26% with a bit of tailwind from currencies of about 1.6%. As in the previous quarters, growth was driven by all the geographical regions, and supported by strong sales in particular from our two core categories, charms and rings.

Rings, as you know, we focus on, the sales almost doubled compared to the same quarter last year, and as evident from the year-to-date numbers, is expected to surpass DKK1 billion in revenue for full year, which is very encouraging. We launched two new Pandora collections in the quarter, Pre-autumn and Autumn, and they've both been well-received.

The store network continues to evolve, and during the quarter, we opened 93 new concept stores. Concept stores contributed nearly 56% of our revenue for the quarter and grew at 43% compared to the second quarter last year.

Our focus is concept stores first and branded; quality, not quantity of stores. And as you can see, we have closed around a 1,000 white and silver stores in the past 12 months.

Sales out, which I’ll return to continue be positive with positive like-for-like sales now in all four reported markets. EBITDA for the quarter surpassed DKK1 billion for the first time with an increase of 34% compared to Q3 last year.

And the EBITDA margin was 35.9% which includes a tailwind from the gross margin of around 4.1 percentage points driven by lower commodity prices. The increase in profits leads to free cash flow of DKK567 million for the quarter.

To reflect the strong performance in the quarter we've upgraded our revenue guidance for the year to more than DKK11.5 billion, and also upgraded our expectations to our EBITDA margin to more than 35% from previously approximately 35%. Our share buyback program is on track and we've bought now what corresponds to around 3.6% of the share capital during the first nine months of the year or shares worth DKK1.7 billion after the total DKK2.4 billion program.

If you turn to Slide 5, for the quarter, we saw double-digit revenue growth in all geographic regions. Revenues from the Americas increased 17.8% in local currency with the U.S.

up 13.9%. We started renewing the process of renewing the network in the Northeast of U.S.

As we announced in August, we've acquired 27 stores from the U.S. jeweler, Hannoush.

The stores were handed over toward the end of the quarter and therefore had no impact on the numbers for Q3. As part of that transaction five stores located outside the Northeast region have been handed over to an existing franchisee.

The rest of the U.S. is performing well with the West Coast in particular driving growth.

Revenue from other Americas was up 28.4%. Revenue in Canada, which represents more than two-thirds of the region, was up 16% for the quarter.

The inclusion of revenue from Brazil, which if you remember was in other Europe in Q1, added around DKK14million to the region in the quarter. Revenue from Europe is up 27.4% for the quarter in local currency.

UK, Italy and France being the primary drivers. The UK increased 26.4% in local currency, driven by strong like-for-like sales-out growth, and continued solid contribution from the eSTORE as well as network expansion.

Compared to Q3 2013 the UK has opened 37 new concept stores to a total of 144. Revenue in Germany increased 2% as highlighted a couple of times earlier.

We continue to be in transition phase and revenue will be a bit volatile. And during the quarter we did some additional clean-up work of our network and actually reduced the number of unbranded stores by about 160 which clearly had an impact on revenues.

Other Europe increased 34.3% in local currency; Italy and France being the major drivers. In Russia we continue to grow and take market share.

And our Russian distributor continues to develop the store network. We opened 14 new concept stores in Russia in the quarter and the revenue growth as well as like-for-like sales growth in Russia remains positive, although at lower levels than in the recent past.

Revenue from Asia-Pacific increased 40.5% in local currency. Australia was up 15.6% in local currency.

And that's driven primarily by organic growth and rings. Rings in Australia, the vanguard of it really continued very well and actually revenue for rings in Australia increased by around 30% in the quarter and represent 25% of our revenue in Australia.

Revenue from the other Asia Pacific, which is also very big for us, increased 69.3% in local currency. Hong Kong, Singapore, Taiwan and China being the primary drivers.

It's still early days. China has continued to be really positive with the stores performing well in China.

If you turn to Slide 6, this is about sales-out. Sales-out positive in all the major markets.

The positive like-for-likes rates continued in the third quarter across all the four major markets and continue to be driven by newness in our stores and improving and continuous focus on in-store execution in all the markets. Sales-out growth for the U.S.

is 3.7%, an improving trend. And as mentioned, variance continues across the regions in the U.S.

with the northeast still in negative territory and all the other major regions doing mid-single digit growth or more in terms of like for like. As previously mentioned, measures have been taken for the return of the Northeast to positive territory.

Sales-out growth in Australia at 22.9% and the UK at 20.6% are again above our expectation and are among other things driven by increasing revenue from rings. Germany out in the first half of the year is really driven by our owned and operated stores which in the quarter increased 12% in like-for- like sales-out growth, while the franchise stores were slightly negative.

We continue in our focus in Germany on O&O and we opened eight new owned and operated stores during the third quarter. Now we have total of 51.

If you turn to Slide 7, this is really about the newly launched products, they continue to do well, half of our sales-in is created by products launched in the last 12 months. And as I mentioned, the Pre-autumn and Autumn collection was launched and both are being well-received.

The Pre-autumn collection, which was launched in late July, had 25 new products compared to only 5 for the 2013 Pre-Autumn collection and consequently we got some incremental revenue there. ESSENCE launched a year ago, showing encouraging performance.

The UK, Italy and Asia Pacifics are the markets where ESSENCE is really performing strongly. Disney was launched in the U.S.

and Canada last week, so early days. But selling in during the fourth quarter and so obviously had no impact on Q3.

If you go to Slide 8, following another strong quarter we decided to increase our revenue guidance to more than DKK11.5 billion, this is basically a result of incorporating better-than-expected Q3, a stronger set of like-for-like numbers and the fact now that we are going to open more than 300 concept stores up from the previous 275. And we've also decided to grow our EBITDA margin to more than ##% to reflect the better-than-expected profitability in the third quarter.

CapEx is downgraded a bit, to around DKK500 million and this is really due to the timing of our planned production facilities in Thailand which will slip over to Q1. Tax rates are unchanged and around that 20% mark.

So with that I'll hand you over to Henrik who will talk a bit more detail about the financials.

Thank you, Allan. Please turn to Slide 9, you will see that strong revenue growth at all – across all regions led to a total revenue for the quarter or growth for the quarter of 26.6%, or total revenue of DKK2,845 million.

In local currency, revenue grew by 24.6%. Volumes increased by 15.7%.

And the average sales price increased to DKK245 from DKK133 a year ago. The ASP increase was primarily driven by an increase in sales revenue coming from rings as well as a shift in channel mix.

More revenue is not coming from O&O stores, which impacts that channel mix effect. On a product-by-product basis we have made no price changes from prior periods.

Like-for-like organic growth and sales-in generated roughly two-thirds of the growth for the quarter, whereas network expansion represented the remaining third of the growth. In Q3, 86% of our revenue came from branded distribution which is up from 82% same quarter last year, in line with our strategy focusing on branded sales channels and concept stores in particular.

Please turn to Slide 7, looking at the development in our distribution network. Total number of points of sale reduced by 205 compared to Q2 2014 to a total of 9,841 points of sale globally.

During the quarter we added 93 new concept stores and a net total of 183 branded point of sale. The majority of the concept stores openings in the quarter were in Europe and Americas with Russia, UK and US being the largest contributors.

During the quarter we increased the number of O&O concept stores with 43, of which 22 is related to the Hannoush acquisition that Allan previously referred to. Bear in mind that the Hannoush stores are not adding to the total store count, they merely changed status from franchise stores to O&O stores.

Of the 21 new owned and operated stores outside the Hannoush acquisition, five of those were opened in Brazil and eight were open in Germany as Allan previously mentioned. We are now below 10,000 stores, which is a consequence of the strict strategic progress on branded stores and, as I mentioned, concept stores in particular.

The numbers of unbranded points of sale have been reduced by more than 900 stores in the past 12 months, primarily due to reductions in Germany, Italy, the Netherlands and the Nordic market as well as in some of our distributor markets. Please turn to Slide 11.

Looking at the product mix where you'll see that both of our core categories are continuing to perform well. Revenue from charms increased by 22% compared to the same period last year, while revenue from silver and gold charm bracelets was up 27.6%.

These categories together represent 76.5%, which is a reduction from 78.5% a year ago, but driven by the strong – which is due to the strong growth of our rings category. Rings increased by 98% for the quarter and represented a record high 12.1% of total revenue in Q3 2014.

And important to note, this is also reflected in our sell-out performance where around 12% of our sales-out of concept stores is coming from rings. The revenue from rings continues to be driven by an improved offering, as well as increased marketing activities focusing specifically on rings.

Particularly Australia, as Allan mentioned, and UK have seen strong contribution from rings, but actually most markets are increasing the share of revenue generated from rings. The other Jewellery category increased 4.5%.

Necklaces in particular did well in the quarter with revenue from the category increasing more than 50%. However, revenue from earrings was markedly lower than the same quarter last year due to a very strong product launches in last year's Q3.

The watch category which has been discontinued in 2014 contributed negatively for the quarter with close to 5% points on the other Jewellery category due to returns received from retailers. Please turn to Slide 12.

Gross profit was $1.999 million compared to $1.493 million in the same period last year, resulting in a gross margin of 70.3% in Q3 2014 compared to 66.2% last year. The increase in gross margin for the quarter compared to Q3 of 2013 was driven by lower hedge prices on commodities.

The slight decrease in gross margin compared to Q2 was primarily due to an increase in re-melt cost impacted by lower spot prices on gold and silver. Excluding our hedging and the time lag effect from our inventory, the underlying gross margin in Q3 2014 would have been approximately 72% based on average gold and silver market prices for the quarter.

Under the same assumptions, a 10% deviation in quarterly average gold and silver prices would impact our gross margin by 1 to 2 percentage points. Please turn to Slide 13, which looks at the OpEx development.

Operating expenses for the quarter were $1.36 million versus $785 million in Q3, 2013 representing 36.4% of revenue in Q3, 2014 versus 34.8% in Q3, 2013. Sales and distribution expenses were $440 million an increase of 24.3% compared to Q3, 2013 this corresponds to 15.5% of revenue which is in line to last year where this was 15.6% of revenue.

The nominal increase in sales and distribution expenses was mainly driven by higher revenue; an increased number of Pandora owned and operated stores as well as costs related to the expansion of our e-commerce platform. Marketing expenses were $259 million compared to $211 million in Q3 2013, corresponding 9.1% of revenue to compared to 9.4% of revenue in Q3 2013.

Due to Christmas and the launch of the Disney collection in the U.S., marketing expenses are expected to increase significantly for the fourth quarter. Administrative expenses for the quarter was DKK$337 million representing 11.9% of revenue, compared to 9.8% in Q3, 2013.

The increase in administrative cost was primarily due to cost related to relocation of offices, higher IT costs, and generally increased headcounts. Furthermore, administrative expenses for the quarter includes the full accrual of the potential severance payment through to the end of 2016 related to the agreement with our CEO, Allan Leighton.

Please turn to Slide 14, EBIDTA of Q3, 2014 increased by 33.8% to $1.20 million resulting in an EBITDA margin of 35.9% compared to 33.8% in Q3, 2013. The EBITDA margin for the Americas for the quarter was 41.3% which is down 2.9 percentage points compared to the same quarter last year despite a positive gross margin impact on the regional margin which however was partially offset by some higher customs that we had to pay in Canada.

The EBITDA margin decline was primarily due to cost related to refreshing the Northeast network in the U.S. as well as a general increase in marketing expense.

Furthermore, as in the two previous quarters, the inclusion of Brazil in other Americas as opposed to previously other Europe has a negative impact of around 1.5 percentage points for the third quarter EBITDA margin in Americas. The EBITDA margin for Europe increased from 39.6% in Q3, 2013 to 47.8% for Q3, 2014.

The increase was primarily driven by the improved gross margin, as well as leverage on the cost base from increase in revenue particularly in the UK and the new markets in the region. The EBITDA margin for Asia Pacific region improved by 5 percentage points to 45.2% the improvements was primarily driven by increasing revenue in the region, as well as the improved – general improvement in gross margin.

Please turn to Slide 15. For the quarter, net financial income amounted to a loss of DKK$57 million of which DKK$44 million was an exchange rate loss, non-cash exchange rate loss primarily due to fluctuations in exchange rates translations of intercompany balances.

The opposite was the case in Q3, 2013 where the same element generated again of $54 million. Income tax expenses were $181 million in Q3, 2014 implying an effective tax rate of 20% which is in accordance with our guidance.

Reported net profit increased by 18.5% to $725 million in Q3, 2014 compared to the net profit of $612 million in Q3, 2013. Please turn to Slide 16 to look at working capital development.

Operating working capital at the end of Q3, 2014 corresponded to 24.9% of preceding 12 months revenue, compared to 25.6% at the end of Q3, 2013 and 18% at the end of Q2, 2014.Inventory was DKK 2.126 million at the end of Q3, 2014 corresponding to 19.7% of preceding 12 month revenue, compared to 16.5% in Q2, 2014 and 19.2% in Q3, 2013. Of the increase, roughly DKK100 million relates to raw material inventory, including some late buying, in the last date of the quarter, of gold and silver.

The remaining increase is mainly due to higher revenue, as well as higher revenue in – sorry, higher inventory in owned and operated stores, due to an increase in the number of Pandora owned and operated stores, which also includes the Hannoush stores’ inventory which was transferred to Pandora at the end of the quarter, together with the actual stores. Trade receivables were DKK1.327 million at the end of Q3, 2014, corresponding to 12.3% of preceding 12 months revenue, compared to 7.8% in Q2, 2014, and 12.2% at the end of Q3, 2013.

The increase compared to Q2, 2013 is primarily due to the timing of revenue within the quarter, as well as the extended credit terms in some markets which is customary at this time of year. Trade payables at the end of the quarter, were DKK758 million, compared to DKK481 million at the end of Q3, 2013, and DKK633 million at the Q2, 2014.

The increase from Q2, 2014 is mainly due to the increase in raw material inventory. Other receivables decreased to DKK219 million, compared to Q2, 2014; this was primarily related to a repayment from the German tax authorities of DKK175 million, related to VAT previously paid in Germany.

This is the last extraordinary payment from the German authorities related to 2012 and 2013 VAT. Finally, I’m happy to say.

In Q3, 2014 Pandora’s CapEx was DKK135 million primarily related to opening of owned and operated stores and office moves. Investment in intangible assets was DKK57 million mainly related to key money in connection with the opening of Pandora owned stores.

Net interest bearing debt at the end of Q3, 2014 was DKK9 million corresponding to a ratio between net interest bearing debt and last 12 months EBITDA of zero. With this I’ll hand back to Allan to continue.

Thank you, Henrik. If you go to Slide 17, strong quarter, consistency of performance.

Now revenue up 26.2%, the diversification on product categories and geographies, well on track. Revenue from concept stores really important to focus on this, up 43%, now 56% of revenue, gross margin up 70.3%, EBITDA of over DKK1 billion and just under 36%.

Free cash still strong DKK567 million, and revenue guidance upgraded to more than DKK11.5 billion and basically the share buyback on track. So that really concludes our presentation and we will open up as normal for questions.

Thank you very much. So, I have three questions please.

I'd like to start with hedging and if you could start and just explain us the dynamics between the re-melting costs and how the gross margin declined by 100 basis points on an unhedged basis from Q2 into Q3? So if you could first explain so we understand this more in detail.

And secondly, isn't this going to continue or even accelerate into Q4 or into 2015? And also on your 2015 hedging, I don't really understand how most of the hedging levels that you give for the next four quarters are around $20 for silver.

I believe silver hasn't been at $20 since the end of July. Second question being on your eSTOREs in Europe.

I see that you have now added Italy as well, well done, you are in seven markets now in Europe. I was hoping for a bit more flavor on performance in some of these markets outside of the UK and how bigger share of Group revenue should we see online sales go to, please.

And final question, if you could give us a bit more of an update on the U.S. Northeast Coast.

It seems like you are still struggling a little bit in this region. With what you have seen in the Hannoush stores so far, are you sure you're going to be able to fix this problem in the short time?

Thank you very much.

I’ll do the reverse ones first. U.S., we took Hannoush – I mean, first of all, more encouraging trend I thought in the U.S.

like-for-like reserve a good step up. Two, in the Northeast, we took Hannoush at the end of the quarter.

We’ve now got it, we are operating it, we've put test them to very basic things about execution for the inventory, clearly purchases, are making sure that we are consistent to where we'd be and we wouldn't have done it if we didn't think that it would have an impact. And we very much expect that to be the case.

So we've always been and still are very optimistic about the U.S. performance.

And as I say, in my mind over the next couple of years that is a market that as in the UK and Australia should go again and market position is not changed on that. The second thing is in terms of eSTOREs Italy has just gone and post on these, and so it to believe which put later on.

If you obviously stay outside the UK, I think where France is looking very encouraging in terms of the metrix that we've got there. Germany a bit behind that Austria, not of any significance by the way I would think about that.

And in Netherlands too, a bit too early. In the UK, it continues to be a very strong performer and we are very, continue to be encouraged by that.

The male purchase piece of this is increasing, which is key for us because we've got a higher share of male. And actually in some of the gifting times is higher 60% or 70% to the purchases in key gifting times.

So that is a very encouraging stat for us. Our service levels continue to be phenomenal.

And I have said to you all the time, my views overtime that that there is no reason that the online business for the business as a whole shouldn't be in the realms of 10%. It will just take time to build it.

But clearly that is the potential for that business. Henrik, you want to just comment on the hedging points?

Sure. First addressing the hedging levels.

I mean these are the hedging levels. I mean, we build our hedging according to the mythology that's described in the announcement 180% and 60%, 40% for the four quarters ahead.

And this is then based on the hedging prices that we arrive at. Obviously, I mean, we will benefit from the current lower hedge prices as we move along if they stay where they are but these basically are hedged prices as they look right now.

Hedging versus re-melt, you have a question, what is basically the challenge between the prices for the re-melt and our hedge prices on our purchasing is that the benefit that we get from the reduced raw material prices on our purchasing is delayed 12 months, whereas when we re-melt that gold and silver products then we get ahead straightaway because we sell it at spot prices in the market. So, unfortunately, there is that lack of symmetry, you could say, which then has this impact in Q3.

So Henrik, but that should be even bigger in theory in Q4 then, right?

So Henrik, but that should be even bigger in theory in Q4 then, right?

We know that fairly. Because it really depends on which products are re-melted and also depends on – and the time of production of these products.

So we had a sharp decline in gold and silver prices in Q2, started Q2 last year. So I mean further that we come along the closer relationship everything else being equal I mean we would have between when the production prices and re-melt prices.

But obviously again depending on how gold and silver prices develop going forward.

Okay, great. Thank you.

And I guess there isn't much silver in your watches but you're re-melting anyways.

Okay, great. Thank you.

And I guess there isn't much silver in your watches but you're re-melting anyways.

But Michael, the way to think about this is it is absolutely to do with timings, and therefore doesn't necessarily trend put in that way.

Okay. Thank you very much.

Okay. We’re ready for the next question, operator.

Yes, thanks for taking my questions. I do have a couple.

The higher customs cost in Canada, is that a one-off or is that something continuing, and what's the amount? And likewise, the cost for the re-location of offices, how much is that?

And is it a one-off? Then a question on your store expansion pace.

The number of stores you're opening now on a 12 months basis around 300 is that a run rate you expect to be able to maintain going forward? Not forever, of course, but looking at the next couple of years.

And then a final question here. You mentioned that your revenue in Q3 was skewed towards end of the quarter.

Is that any different from a normal seasonal pattern or just as you would expect it to be? Thank you.

Well, well, we will just check whether the revenue is skewed to the end of Q3. Let me take the stores point.

Lars is – so, we are around 300 concept stores it’s difficult to say whether that should be a run rate. As you know the whole focus is on quality of site.

And I think the thing that you should really take from this, which I think is significant for us going forward, is this focus on concept stores. And on one hand that’s the pieces of business we are growing, whereas the other end of our distribution, white and silver is being reduced significantly.

And if you look at the concept store growth in the quarter, it’s 40%, it’s now 56% of the business. And that is not just to do with basically having stores, it’s the quality of those stores, which is making the different.

So in my mind the thing to focus on is concept stores revenue is what will grow, that will be driven by quality of location and if it’s 200 or 250 or 300 in my mind is not relevant. The thing that’s most relevant is what is the quality of each of those individual stores.

And so I think that’s the way to think about it. And so wouldn't you go – I wouldn't work into the 300 as the run rate.

But I would absolutely read into today’s concept stores is the growth engine of this business, and that is what the business is very focused on. If you – and they outperform, I think that's the major point because of course you got control and total bounded.

Henrik, you want to take these other two points.

Sure. The higher customs cost in Canada, we're not providing the number as such.

But it’s a – we may have this fluctuations between the U.S. and Canada.

We are looking into an opportunity to work more favorably with the transactions between U.S. and Canada, some mechanisms in the U.S.

that makes this possible, but we cannot give any timing on that. But it's a minor impact compared to the other impacts on the EBITDA margins in the Americas.

Relocation of offices, if you’re looking at admin overall, slightly more than half of the increase in admin is related to, say, Helen's exit. Of the other pace, it's mainly IT cost and the additional headcounts that really impacted.

So the relocation of offices is a minor part. And, yes, relocations is say, by definition one-offs, but they come from time to time, but it’s a small amount.

In terms of the skew of revenue towards the end of Q3, well, generally if you look at last quarter, same quarter last year, we also had around 12 points. I think this year it’s 12.3%, last year was 12.2% of our receivables at the end of the quarter compared to 12 months revenue.

So it’s a comparable level and that – but it’s generally higher than the other quarters, because the revenue is more skewed towards the end. And also as I mentioned when presenting the numbers, we have some extended credit terms, which is basically customary for this time of the year where we start some Christmas deliveries already towards the end of Q3.

So it’s not something extraordinary for this year.

So in other words, when revenues skewed towards the end of the quarter I shouldn't read too much into that regarding momentum building up through the quarter or anything?

No, no. Your receivables are always impacted by when your invoicing takes place.

So but you shouldn't read anything to add in terms of momentum. It's business as usual compared to prior years.

And then if a major – just one household question, it's only because I'm stupid, but how can an intra-group loan trigger a currency swing in net financials?

You're not stupid. This is something I think only for accountants to try and understand.

It’s a little bit technical and it’s because of a lack of symmetry between the way, this is treated internally in the Group because of some IFRS rules. So there is a receivable between two Group companies.

In one Group company the currency adjustments go to the equity in the balance sheet and in the other group company it goes to the P&L, due to the way the accounting rules are. And when you then consolidate you only have one leg represented in the P&L.

And this year has a negative impact. Last year had a positive impact.

The important thing is that it's a – you say it's a non-cash element, but it obviously it impacts the year-over-year performance when it comes to the net profit line because it's almost a DKK100 million impacting between the two years as a gap.

Fantastic. Thank you very much for taking my questions.

Thanks a lot.

Thanks.

So what was the percentage of sales through truly owned stores in the first nine months, and how do you see this evolving going forward? Honestly, what will be the impact on your CapEx?

And if you could maybe give us a bit of information about the matrix like CapEx per square meters and also what type of margin you expect compared to the store – for the concept store, the one that you don't truly own? Thank you.

Okay. There is a few questions.

Antoine, sort of let me go. So the U.S.

I mean, the way to think about the U.S. is work in the Northeast is primarily driven by let's get a hold of Hannoush, that was the big impact in all.

And I articulated earlier what we do with that, and that will have – definitely have an impact. Just generally in the U.S., a bit more marketing spend, bit more – a lot more focus on stores and execution.

And also just looking constantly to see how we can refresh the network. So all of the things that we do everywhere else we just do with a slightly more intensity.

And clearly Hannoush gives us a bit more opportunity to make an impact slightly faster. We don't talk about like-for-like by regions apart from saying that the Northeast has been down.

But we would expect that to improve. And we would expect, as with all our markets, and for the Northeast at some stage, to go into being like-for-like positive.

I feel very good about the work that has been done there. And as you can see anyway, generally in the U.S., there was an improving like-for-like trend in the quarter.

And it's in that range we will talk about for the U.S. the 3% to 5% like-for-like being a very good number.

And clearly a number that's close to 4% in the U.S. this quarter, by U.S.

standards would be at the top of the pack. So that's the U.S.

Marketing generally, there is a lot of activity in Q4. Clearly, we have the Christmas campaigns, we will have Disney in the U.S., we would be doing lot of marketing around rings and we've got ESSENCE.

So we've got more products to get behind. And also we will be on national TV in the majority of the big markets.

And clearly, there is real momentum in this business and clearly Christmas is a great time to enhance that momentum. And so that's the talk behind Q4.

Again, we never guide to what the number is, we always talk – I go on and on, on and on and on. But I would like to be able to spend 10% every quarter in overall markets, because our P&L construct and our model allows us to do that.

But I want to make sure that the majority of that money is spent on consumer facing things. So that's our thought about Q4, will be big marketing, lot of programs, lot of products to support, and rightly so.

I think we – the TVCs, the TV commercial I've seen and on the research we have on those TV commercials, which suggest the best we've ever done. And so let's get behind them.

In terms of owned or operated, again, the way we think about owned or operated is we tend to use it in countries where we're starting out in towns, so to build the business, show the P&L and then build on the franchise on the back of that. But in certain markets where we are either rebuilding or constructing the network then owned and operated plays a bigger role.

So I think we open about a 100 owned or operated stores this year, and I think we've got about 200. A lot of those are – probably Hannoush comes into those numbers.

But there is a lot in Turkey and Brazil which we've taken over from distributors, but in the core markets, in prime sites, then we will put down owned and operated stores where the franchisee cannot really afford the rent. And our ability to go in these prime locations is now very high.

And there are a number in the counties. So owned or operated for me is a really important tool, again of how we're driving that concept-store business.

And I would – our owned or operated stores are outperforming our concept – franchise concept stores in terms of growth. Now, what comes with that is a slightly more CapEx upfront, not significantly so.

And in the early – I'd say in the first six to nine months of opening those stores your EBITDA margin is slightly rather than, it would be in the franchise store. But of course your cash margin is significantly higher.

So we play in the mix, and we play these things strategically. And in a market like Germany where we're completely rebuilding the network, then owned operator is playing a big role.

So we’re really pleased with these stores. It doesn't signal a change in strategy.

They will be a bigger part of our business. They are very profitable.

And in the right location are providing a very strategic tool for us in our network build.

And I think you asked about the share of revenue from owned or operated stores. As we mentioned previously, it’s around 15%.

Okay. Just maybe, I mean you mentioned the impact, you've a bit more CapEx and then the impact on the EBITDA.

What about in terms of inventories and thus working capital?

You have a little bit more inventory there, but it's – and none of this is of great significance is the way I'll think about it.

Okay. All right.

Thank you very much.

Thank you very much.

Yes. Hi, everyone.

I have three questions. The first one is on volume growth, it declined to 16%, where you still have over 25% volume growth.

Could you maybe specify in which categories or geographies we’re growing as fast in terms of volumes? My second question relates to the coming back to the margin contraction in America.

So encouraging results in terms of like-for-like reacceleration, and obviously the impact from the Northeast region continuing, but how do you see Americas margin evolve. And do think this could be under pressure in the coming quarters as a result of integrations of Hannoush?

And then my third question is on the exchange rate loss. How should we think about that going forward in the coming quarter?

Thank you.

I'll get Henrik to exchange rate. On the Americas, I think we've stayed consistent I have stayed consistent anyway.

I think if anything we probably been making too much money in the U.S. our EBITDA margin has been too high.

And therefore that there is an adjustment in that in terms of support, in terms of OpEx and marketing that you can see. In the America as a whole, there are a number of things moving around at the moment.

And as you see the Brazil impact has an impact on in this quarter, a negative impact on their EBITDA margin. The Hannoush in Q4, Hannoush actually will have a negative impact on the U.S.

margin. Because, we basically, we bought, we’ve already taken our margin.

And therefore the only margin we’re going to get on the stops that’s already in there is the whole sale margin. And so that will – we’ve already taken one chunk of the margin, so that would deflate our EBITDA in Q4, off the back of Hannoush.

But of course over time it works its way through. So a number of one-offs in the U.S., but my view is we need to invest a little bit more in terms of the EBITDA margin.

As I said, I see the U.S. as a growth market and a big growth market, and therefore we should get behind it.

But that will be a bit of osculation over the next three, six – next three quarter, I would say. And some of these things swing in and out.

But frankly, we're only interested in the U.S. in the mid and long-term, still a very profitable business for us even at the levels that we’re at today.

And we feel very comfortable. But it will be returned and to good EBITDA margins, when we move our way through this next phase.

But I want to invest in it because it supported the rest of the company for a period of time. In terms of volume, and the volume is becoming not that relevant to us now because clearly there is a big mix issue here, big change in the volume is the mix of rings, clearly it’s a much higher average price than the core businesses.

The way I look at the volume is that and of course you got very high, you got very high comparables. And when I looked at the numbers, I looked at these numbers, I think I’m right in saying that when you look at the real volume.

We sold about 4 million more units and than we did. And so when you look at the real volume that’s going through the real volume increase of those percent, it's very significant.

So we're not worried about this about this at all. It's absolutely what we would expect.

On the exchange rate loss, that is I mean difficult to predict because it really depends on development in the U.S. dollar rate.

But generally you could say an increasing U.S. dollar rate against the Danish kroner would have a negative impact on the group accounts, whereas a reduction in the US rate against Danish kroner would have a positive impact.

So it's difficult to get a few quarter guidance I hope on that.

Okay. Thank you.

Yes, good morning gentlemen. So I would like to ask a question about the German operation.

You're mentioning in your presentation that the market is in a transition phase as you made some changes in your distribution setup. I was just wondering, how long time period this transition phase will last.

And secondly, what would be a fair growth level for this market during this transition. Should we look at the 2% growth you reported in Q3 report as a fair reference?

Well okay, I mean let’s start from how you, so Germany is a complete rebuild. It is a like staffing again, and I'd say we've been on that now 12 to 14 months.

I think we’ve made good progress, and we’ve got, we can see in our owned or operated stores, key number to account in Germany is the sales-out not the sales-in and because that’s what we’re very focused on. And if you look at our owned and operated store, like-for-likes in Germany, I think they are close to like 8%, which is a pretty big number.

And so I think we feel pretty good about that. And we will continue to build our network with owner-operated, closing down of the stores and closing down the tail.

In my view, there is at least another 12 to 15 months worth of work to do, because we’re building a complete network. And we're in – we'll do it as fast as we can, but I don't want to repeat the history of the past which is that the German team is only focused on the absolute quality of location.

It's not a numbers game. So I think we’ll see the volatility on actually very pleased with the progress we’ve made.

I’d say were 40% is where we need to get to. We're not going to open stores rapidly.

We'll go at the pace which we need to do and get the quality of location. But I would be fixated on the, which I am, on the sales-out of our owner-operated stores in Germany, is the real factor of how that business is doing.

Okay. Thank you very much.

Hello. Good morning everyone.

And Just a couple of questions from me, please. One on Disney, if you could comment on the launch and the early reception from the retailers now that you have launched officially at the beginning of November.

And then just a follow up on gross margin and on the silver moves really as silver has taken a further leg down in the last month, so I was wondering whether, first, you’re planning to invest any of that move back into pricing. And then, two, if you're seeing any pressure from retailers for the time being to have higher margins, well, to leave them higher margins.

Thank you very much.

Okay, it's Allan I’ll do (indiscernible) I mean, we don’t –we really do not think about pricing about pricing in any way to do with what happens with commodities. We've been there before.

Now I think we're very consistent. Our pricing is, we think we're in a great spot in terms of affordable luxury.

We haven't changed it for a long period of time. And as far as I'm concerned, we're never going to change it.

And so what happens to commodity, it has to be managed elsewhere, but one of the ways it is never going to be managed is putting the prices up. So that's the first thing.

The second thing, we’re not really seeing any pressure from retailers for more gross margin. As you can imagine, if you are a Pandora concept store franchisee and your business is growing plus 20%, then you're feeling pretty good about things.

And that's good because we want them to feel really good about things. So we're under no pressure for more gross margin from our retailers, and we're under no pressure to put our prices up in any way, shape or form and won't be.

As far as Disney, I think it was – was it Disney you said. I couldn't quite hear at the beginning, was it Disney….

Yes, yes, the Disney launch and the reception from the – the early response, I guess, from the retailers.

Yeah I mean, so Disney launch is taking place it’s very early days, I would say the reception from our franchisees was probably the best reception we’ve ever had on any product launch we’ve done. U.S.

and Disney it’s a big deals. And so early days, but the reception from our franchisees was exceptional.

That’s great. Thank you very much.

Fasial Kalim Ahmad from Handelsbanken Capital Markets. And I have a few questions from my side.

Firstly on the Russian market, I mean, and the ruble has continued to slide a lot, what are you exactly doing with your wholesale prices? Earlier during the year you chose to eat some of that hit yourself, what's your plans going forward.

And maybe if you also can comment a bit about trading and consumer trend on that market. That's the first question.

And second question relates to your concept store openings and plans for this year. I mean, you have upgraded your targets for the full year once again.

I mean, which markets are surprising you, yes, that's my questions, thank you.

Okay, well let's start with concept stores. The additional openings that we flagged in our guidance here are across – the usual suspects.

It’s across the world, it’s all of the market, all of the key markets. I've got three, four more concept stores.

And that's what we're largely seeing. The spread of the concept stores is pretty much the spread of our business geographically.

And it’s very encouraging. And I think monotonic goes by two things, one is clearly franchisees lining up to take these stores, but secondly, which is by far the most important to me, the quality of these locations is very high.

And as I say a thousand times, I'm much more interested in that than the numbers. And as far as Russia was concerned we’ve not changed our position.

We’re taking a long-term view of Russia, we’re not taking a short-term view of it. We supported the – our distributor there in terms of margin to enable us to hold our prices down, that has not changed.

The fact that we are in that position is that we are taking market share and we've got positive like-for-likes and sales-in which is quite unusual in the Russian market today. And I sense that the market in Russia is still – how do I describe – I don't think people are very reserved in what they're doing.

I think the continue spending is down, without any doubt and people's confidence levels, which is probably the most important thing, are also down. But as I say, we tend to focus on our position and we're doing exactly what we said we would do and getting the results we expected to get from that and that will just continue as we take this long-term view of Russia.

Okay. And just a follow up question on the concept store openings.

The guidance, which you have provided us for Q4 as far as I can calculate, it's around 19% to 20% growth in FX for Q4. What’s the contribution, growth contribution from concept stores or space openings in Q4 in that number?

Yes, we're not – I mean, we're not providing that kind of guidance on a quarterly level, but generally you could say retail is a strong – Q4 is a strong retail in quarter. So you can expect the higher share of O&O in Q4 just because of that.

Okay, okay. Perfect.

Thank you. That's all from my side.

Thank you.

Yes, it's Allan. So thank you very much for that.

I think I'll point you in four directions of the back of these numbers. First of all, continuation of that strong performance, but I’d really focus you on the performance of concept stores, and what would that mean for the business and our focus on that as the driver, key driver of our growth.

I think the second thing I focus on is rings. This is now becoming a substantial business, and it’s been a big part of our move as I described it to right i.e.

that we keep our core charms and bracelets business strong and both those businesses grew plus 20% in the quarter.

And then finally, I think the core market performance, the U.S. beginning to pickup again, the U.K.

and Australia we are just, we were at a loss of 20% like-for-like to see, if there is just something that happen. They don't, we just have absolutely quality of network, which is what we are trying to get everywhere, and largely, concept store driven business.

And I think those are the threads that you need to weave into how you think about where the business is progressing to. Anyway we’ll see some of you tomorrow and over the next few days, and but so thank you very much for being on the call.