Pandora A/S

Magnus Jensen - Vice President, Head of Investor Relations Anders Colding Friis - President and Chief Executive Officer Peter Vekslund - Executive Vice President and Chief Financial Officer

Kristian Godiksen - SEB Michael Rasmussen - ABG Chiara Battistini - JPMorgan Lars Topholm - Carnegie Elena Mariani - Morgan Stanley Antoine Belge - HSBC Klaus Kehl - Nykredit Markets Piral Dadhania - RBC Frans Hoyer - Jyske Bank Sherri Malek - Bank of America

Thank you and welcome to PANDORA's conference call in connection with our Q3 2016 results, which we announced earlier today. My name is Magnus Jensen from PANDORA's Investor Relations and with me today are PANDORA's CEO, Anders Colding Friis; and CFO Peter Vekslund.

In accordance with the agenda on Slide 2, Anders will present some of the highlights for Q2 before Peter will walk you through the numbers in more detail. Finally, Anders will conclude the presentation and following we'll be happy to take any questions you might have.

Before handing over to Anders, I kindly ask you to pay attention to the disclaimer on Page 3. Anders, please.

Thank you, Magnus. Now please turn to Slide number 4.

Following a strong first half of 2016, we continued the positive development into the second half of the year. For the first nine months of 2016, we now increased revenue in local currency with 27% which is a bit better than last year’s 25% for the comparable period.

For the third quarter revenue increased 18% or 21% in local currency to DKK4.6 billion. All three regions continued the positive development especially EMEA and Asia-Pacific, which increased 25% and 47% respectively in local currency.

The U.S. continued the solid development with 8% growth and 3% like-for-like whereas Latin America continued to be impacted by the weak macro-environment.

All the individual product categories increased with double-digit growth for the quarter supported by a continued relevant product offering including the autumn collection launched during the quarter. Revenue for our concept stores including the eSTORE increased 26% compared to the third quarter of ‘15.

And during the quarter, we opened 90 new concept stores. The eSTORE generated 3.1% of Group revenue for the quarter compared to 2.5% in third quarter of ‘15.

The like-for-like sales growth for the Group excluding the eSTORE was 4% and EMEA and Asia-Pacific continued the positive trend, whereas Americans like-for-like for the quarter was flat. In general, Americas impacted by difficult retail environment and some market were negative territory for the quarter.

However the like-for-like in the U.S. was a positive at 3%.

As eSTORE is becoming an increasing share of revenue, we’ve decided to include the eSTORE in our like-for-like numbers going forward. In the third and fourth quarter of this year, we’ll provide regional and Group like-for-like with and without eSTORE.

And in starting from the first quarter of ‘17, we’ll only give like-for-like numbers including PANDORA’s eSTORE as that is also how we operate the business internally. The Group like-for-like including eSTORE was 5%.

EBITDA for the quarter increased to DKK1.8 billion and corresponded to an EBITDA margin of 39.9% compared to 37.2% in the third quarter of ‘15. The improvement was primarily driven by higher gross margin as well as operational leverage in a number of key markets.

The free cash flow was DKK577 million compared to DKK263 in the third quarter of 2015 and during the quarter we bought back shares of around DKK1.2 billion as part of our DKK4 billion share buyback program for 2016. Now please turn to Slide number 5.

Before turning to our regional revenue development, I would like to focus specifically on China, which is becoming an increasingly important market for PANDORA. China, which is expected to the biggest fashion retail market in a couple of years, is already the world’s largest jewelry market with a value of around U.S.

$100 billion. Furthermore, the country has more than a 100 cities with more than million inhibitions making China a very interesting market for PANDORA.

Today 6% of our revenue is generating in China and is increasing fast with more than a 100% growth in the third quarter. Part of the growth is driven by the fact that we are opening new stores.

This year we will open around 40 new concept stores and the other part of our like-for-like sales growth which for many quarters have been extremely strong and was 40% this quarter. One of the key drivers for growing like-for-like sales in a new market like China is awareness.

Awareness from our consumers is increasing and our latest statistic show around 55% of women in the largest cities China now know about PANDORA. That is coming from only 35% a year ago.

Another sign of increasing popularity can be measures on a social media platform like the Chinese WeChat, where our followers increased ten folds in the last year to around 140,000. What is very encouraging in that our best performing stores are spread across China and not only driven by the Tier 1 cities.

In fact, we see very strong sales coming from Tianjin in the north, Chengdu in the west, Guangzhou in the south, and of course Shanghai and Beijing. In other words, we see a broad acceptance and interest in the PANDORA brand across China.

In terms of our store rollout, we currently target primarily Tier 1 and Tier 2 cities and in 2016 we’ve entered four new cities in China. As you can see from the map to the right, we have broadly based in China with a majority of our stores on the East Coast of which most are in Beijing and Shanghai.

We’re well a set open around 40 stores this year which is also what we expect for the coming years. Finally, we launched online on Chinese Tmall this October which provide a further avenue for our consumers in China to purchase PANDORA.

Going forward, we expect to continue opening stores at controlled but ambitious space with focus on prime locations which improving average store performance by increasing awareness as well as in-store execution. With that please turn to Slide number 6.

Americas reported DKK1.5 in revenue, an increase of 6% in Danish kroner as well as in local currency compared to third quarter of ‘15. The like-for-like sales growth for the quarter was flat as the positive development in North America was offset by negative like-for-like development in Latin America driven by Brazil and the Caribbean Islands.

However, including our eSTOREs like-for-like in Americas would have been 2%. The overall growth in the region was driven primarily by the U.S.

which generate revenue of DKK1.1 billion corresponding to 8% growth in Danish kroner, a 9% in U.S. dollars.

Despite the difficult retail environment, the U.S. delivered like-for-like sales growth of 3% for the quarter driven by a flat to positive development in all major U.S.

regions. Growth was supported by a successful Save More Spend More campaign launched in September as well as a good progress in the U.S.

eSTORE. Furthermore, 31 new concept stores were opened in the last 12 months.

As part of the strategy to focus on the branded sales channels, we have decided to close around 700 multi-branded stores in North America in October. The expected revenue impact from taking back inventory from the closed multi-branded stores is around DKK150 million which will be accounted for as a provision in the fourth quarter of ‘16.

Furthermore, there will of course not be any revenue realized in the stores in the fourth quarter of ‘16. In the fourth quarter of ‘15, this number was around DKK150 million.

Like-for-like in Canada was high single-digit, while revenue was unchanged compared to the third quarter of ‘15. The flat revenue was primarily driven by the decision to close more than 100 multi-branded retailers in October 2016 in Canada.

And as a result, we had limited sell-in in Q3 add of the closers. Revenue in EMEA was DKK2.2 billion and increased 18% in reported revenue or 25% in local currency.

The EMEA concept store like-for-like growth was 5% or 6% including the eSTOREs. Excluding the third-party distributors which include Russia, the EMEA like-for-like development would have been around 10%.

Compared to the earlier quarters, we saw a slowdown in the like-for-like in EMEA which was primarily a consequence of the slowdown in the like-for-like in the UK which represents almost 40% of the EMEA like-for-like number. Reported revenue in the UK increased 16% in local currency particularly 3% in Danish kroner heavily impacted by the depreciation of the British pound.

Growth in the UK in local currency was primarily driven by the positive performance in our existing store network as well as the addition of net 38 concept stores. Like-for-like growth was in the range of 3% to 5% as we saw a slowdown in the like-for-like growth for the quarter.

The lower like-for-like is an actual consequence of the UK becoming increasing developed, but also likely from cannibalization due to the sizable increase in the number of concept stores in the UK. Italy and France continued to perform very well and revenue in the two countries increased with 70% and 35% respectively compared to the third quarter of ‘15.

The growth was primarily drive by like-for-like growth, double-digit in Italy and high double-digit in France. On this note, let me just shortly clarify that with low double-digit means growth in the teens and high double-digit means growth above 30%.

Everything between is just labeled double-digit growth. Revenue in Germany decreased 13% for the quarter, but excluding provisions related to product returns as we clean up the network in Germany, revenue increased 6%.

Growth was driven by low double-digit like-for-like sales growth partially offset by the closer of around 250 multi-branded stores in the last 12 months. Revenue in Asia-Pacific increased with 46% or 47% in local currency to a total of DKK882 million, while like-for-like sales increased 7%.

The slowdown in like-for-like compared to earlier period was an actual consequence of the lower like-for-like growth in Australia, which went from high double-digit to low double-digit growth. Australia makes up more than 50% of Asia-Pacific like-for-like.

Australia revenue increased around 30% compared to the third quarter last year driven by low double-digit like-for-like growth which continues to be drive by a very high brand awareness and perception as well as strong install execution. Furthermore, 12 new concept stores were opened in the last 12 months.

Revenue in China increased around 120% compared to last year and represented around 30% of revenue in Asia-Pacific for the quarter. Finally, revenue in Hong Kong was up 5% in local currency and generated around 15% of the revenue for the region.

However, like-for-like in Hong Kong was negative primarily due to the number of new stores opened in the last 12 months as well as the general decline in traffic due to the economic environment in the area. Now please turn to Slide number 7.

With only a couple of months to grow in 2016, we are untracked to meet our full year revenue guidance of more than DKK20 million. However, with an expected headwind from currency of around 4% compared to 3% when we reported in August.

Furthermore, as we go closer to the end of the year, we are comfortable in being a bit more precise on our EBITDA guidance, which means we now expect to be around 39% from previous states above 38%. The vision is primarily based on a better than expected ability to cope with increasing product complexity as well as marginally higher than expected operating leverage.

CapEx and tax expectations are unchanged, whereas we upgrade the expectations to net number of new concept stores to more than 325. With this I give the word to Peter, who will give you some more details on the numbers.

Yes, thank you, Anders, and please to turn to Slide 8. For the quarter, revenue from concept stores and shop-in-shops increased 26%.

The branded store’s contribute was 76% of revenue, up 5 percentage points compared to Q3 2015. Revenue from PANDORA owned stores increased 43% and represented 32% of the revenue compared to 26% a year-ago.

The increase was driven by a good performance in our stores and eSTOREs as well as addition of 123 new and owned and operated concept stores. The eSTORE represented 3.1% for the quarter compared to 2.5% in Q3 of last year.

Compared to Q2 2016, we saw a small decline in the share of revenue from the eSTORE from 4.4%. This was mainly related to the UK which was negatively impacted by the weaker British pound as well as the U.S.

where in the Save More Spend More campaign was not offered on the eSTORE. Revenue from multi-brand stores decreased 9% for the quarter, primarily due to the more than 1,300 store closings primarily in the U.S., Italy, Germany and Spain.

In the U.S., 208 were related to the upgrade of Jared stores. Please turn to Slide 9.

In Q3, we added net 90 new concept stores to a total of more than 2,000 concept stores globally. Out of the 2,000 concept stores, 563 is PANDORA owned and operated.

Shop-in-shops increased with 160 new stores for the quarter, of which 110 was related to Jared upgrades. During October, Jared finalized the last upgrades and have now upgraded 222 multi-branded stores to shop-in-shops in total.

Please turn to Slide 10. Revenue from Charms increased 10% for the quarter and represented 58% of revenue.

Growth in Charms was impacted by single-digit negative growth in the U.S., primarily due to lower revenue from the Disney collection, which primarily consists of Charms. Excluding Disney, Charms revenue in the U.S.

would have increased around 10% compared to Q3 last year. Revenue from Charms in Asia-Pacific increases around 40%, whereas Charms in EMEA increased 10%.

Bracelets increased 35% and was again driven by a number of new bracelets introduced in the first three quarters of the year including eight new bracelets in Q3. Rings generated revenue of DKK686 corresponding to an 11% growth.

Rings in EMEA and Asia-Pacific increased with around 25% and 50% respectively, which rings revenue in Americas for the quarter was impacted by the decision not to repeat a ring campaign in North America which was launched last year in the beginning of October and as that we focused on earrings. Revenue from other jewelry which contained earrings and necklaces increased with 67% for the quarter.

As a consequence of our increased focus, revenue from earrings increased around 100% compared to Q3 2015 supported by among other thing the aforementioned earring promotion in North America. Revenue from earrings for the quarter corresponded to 6% of total revenue compared to 4% in Q3 of last year.

Finally, revenue from necklaces increased with 40%. Please turn to Slide 11.

Gross profit was DKK3,464 million corresponding to a gross margin of 75.1% compared to 74% last year. The increase was mainly driven by tailwind from favorable raw material prices having a positive impact of roughly 1 percentage point and an increase in revenue from owned and operated stores also with a positive impact of around 1 percentage point.

Production complexity as well as unfavorable exchange rates had a negative impact of approximately 0.5 percentage point each. Furthermore, the gross margin in Q3 2015 was impacted by approximately minus 1 percentage point due to the takeover of distribution in China.

Regarding the raw material prices, our expectations for 2017 and 2018 are unchanged based on current prices and we expect a headwind of in very rough numbers around 1 percentage point for 2017 and a headwind of around 2 percentage point for 2018 and onwards, both compared to the full year 2016 and of course under the assumption that commodity prices stay unchanged. Sales and distribution expenses increased 16% to 20.3% of revenue compared to 20.6% one year ago.

The increase was primarily driven by the increase in activity as well as more owned and operated stores. The decrease in percentage of revenue was primarily driven by operating leverage particularly in Southern Europe and China.

Marketing expenses was DKK360 million and unchanged compared to Q3 2015. As a percentage of revenue marketing expenses was at 7.8% for the quarter compared to 9.2% in Q3 2015.

However for this decrease in ratio is that we will now have a higher share of owned and operated revenue which compares wholesale revenue demand, a lower marketing spend relative to revenue. Administrative expenses for the quarter increased 17% to DKK451 million equal to 9.8% of revenue compared to 9.9% for Q3 2015.

The absolute increase was primarily due to ongoing higher IT expenses as well as increase in headcount particularly in IT. Now please turn to Slide 12.

The Group EBITDA for the quarter was DKK1,842 million, up 27% compared to same quarter last year, equal to a margin of 39.9%. Americas increased the EBITDA margin by 0.9 percentage point to 35.7%.

The increase was primarily driven by improved gross margin. EBITDA margin in EMEA was up 2.5 percentage points to 43.9% primarily driven by a higher gross margin supported by operating leverage in the region due to the higher revenue primarily in Southern Europe.

The EBITDA margin for the Asia-Pacific region increased 7.4 percentage points to 37.3%. The increase was driven by operational leverage particularly in China, which improved EBITD margin with around two percentage point.

Furthermore, the margin for Q3 2015 was negatively impacted by roughly five percentage point due to the takeover of distribution in China. Please turn to Slide 13.The operating working capital at the end of the quarter correspondent to 19.8% of the proceeding 12 month revenue and increase of 4 percentage point compared to the end of last quarter.

The increase was primarily due to higher inventories as well as trade receivables. The inventory increase was primarily due to more owned and operated stores as well as a planned inventory buildup ahead of the Christmas collection.

Comparing to Q3 2015, the increase is mainly due to Q3 last year being a bit too low whereas we now have a very healthy inventory level. The increase in receivables was due to revenue in the third quarter being skewed towards the end of the quarter, particularly in the U.S.

with the success of the Spend More Save More camping. And similar to last year, we have allowed extended credit terms ahead of Christmas in selected markets.

Comparing to Q3 2015, the increase was mainly related to a higher share of revenue from Italy, which is one of the countries that allows extended credits ahead of Christmas. Q3 CapEx was DKK324 million compared to DKK384 million in the same quarter last year.

CapEx for the quarter was primarily related to the opening of owned and operated stores, investments in Thailand, as well as IT infrastructure projects. We ended Q3 with a total interest bearing debt of DKK4.8 billion and net cash position of DKK438 million.

Our net interest bearing debt to EBITDA at the end of the quarter was 0.6 which is in line with our capital structure policy. And with this, I’ll hand over to Anders, who will summarize the quarter.

Thank you, Peter. So please turn to Slide 14.

So in summary for the third quarter, revenue increased 18%, 21% in local currency, driven by all regions and categories. We continued rollout of concept stores with addition of 90 new concept stores during the quarter.

Online presence was established in Canada and China. The gross margin was 75.1%.

The EBITDA margin is 39.9%. We had a free cash flow of DKK577 million.

And the revenue guidance intact EBITDA now expected to be around 39%. So all in all a second quarter for PANDORA allover I’m pleased across the world done a remarkable job.

So we’ll now open for any questions to the quarter. Operator, please.

Hello gentlemen, couple of questions from me please. Maybe first if you could explain the discrepancy of 6.5 percentage points between the sales out like-for-like growth of 4% excluding the eSTORE and the 10.5% for the organic growth.

The way I see you have that some of the discrepancy is 1 percentage point is from the eSTORE and then 2 percentage points is due to the difference in the waiting of the distributor markets. So maybe if you could explain what the remaining 3.5 percentage points is?

That would be my first question. Secondly, when should we expect an analyzation of the owned store openings in Hong Kong and hence expect the like-to-like growth to reverse and be positive?

It will be the second one. And the third one, you’ve mentioned that operational leverage on sales and distributions from the existing networks was more than 2 percentage points, primarily due to Southern Europe and China, but I guess what about Germany, that should also contribute significantly, I would assume as it's primarily an O&O market and do you have generated that double digit like-for-like in Germany?

Thank you.

Thank you, Kristian for your questions. I think that’s some of the calculations that you're trying to do is actually we have to say quite impossible, because we are comparing apples and pears.

When we talk about half of our organic growth, half our growth coming from organic, we look at our sales into the stores and sales out of the stores, which has been opened for more than 12 months. We can't build that based on the like-for-like numbers.

And I think we tried to give a little bit of flavor on the reason for that in this quarter. If you compare a couple of markets in Asia, which is I think a good example.

You have an Australian market which is representing more than 50% of our like-for-like numbers, and then you have another market which is China, which is a little bit more than 10% of our like-for-like numbers. Those two markets are from a business perspective equally big now, but when you build our like-for-like numbers, you get very, very different results.

I should take another example then look at Russia, around 10% of our total stores on Russia, but the Russian market is only representing again roughly in the regional weight in EMEA 15%. So therefore you can say that it is very difficult to build this.

And I think this quarter is probably the best example why it is not possible.

Okay.

And I think Peter will take the…

Actually the analyzation in Hong Kong, they have opened six concept stores in the last 12 months and 2 concept stores in Q3. So to say all concept stores in Hong Kong will be in the like-for-like numbers in Q1, Q2 next year.

The question around operating leverage, again it is primarily due to Southern Europe being Italy and France and also China. And you’ve mentioned that Germany, Germany is however only 10% of the revenue in EMEA whereas Italy is 25%.

So reason being that the revenue in the countries where we see leverage is way bigger than in Germany. Of course, as we have said, we are working to increase the revenue in Germany and that will give some leverage, but it takes a bit of time in Germany.

Okay. Just may be just one follow-up.

So on the like-for-like sales out compared to the organic growth, which metric is the one you think we should focus on them?

Well, I think that is meaningful to look at both actually. The only thing is that with the weights that we have just for the share mathematics of it, and market like the U.K or market like Australia gets a very, very heavy weight whereas a market like China gives very little weight.

So I think it's of course interesting to follow the like-for-like numbers, but clearly if you look at how the business is developing, it is important to look at the 21% that we have in growth for the quarter, and that is the really important number.

Okay. Maybe just one final household question, average O&O stores impacted EBITDA margins negatively by 1 percentage points as you ride the gross margins improved 1 percentage points, but sales and distribution increased to 2 percentage points and what should we expect going forward from as the store base also increases?

You're right on the numbers you mentioned, and what to expect for what again an average owned and operated stores say margin as the rest of our business will big variations between the markets. The stores we’re opening in China, we see a pretty fast ramp up and also very healthy EBITDA in those stores.

Okay. So basically just to get a feel for that.

So we're already now Chinese stores once they've been open in 12 twelve month, they should be margin neutral or they margin accretive?

There is differences you can say, so yes they're doing well, and we've actually seen a very good development in China. If you look at another market like Germany, of course, as we are building it, we don't have the same margins.

Go to another place in the world like Brazil, we will never get to those margins. So I think that there's a good basket of different opportunities in different markets.

Okay, thanks a lot.

You’re welcome.

Thank you very much. Three questions for my side also.

First of all, if you could add a little bit more details on the marketing costs, above the level we saw in the third quarter i.e. below 8% of revenues, should we expect this to continue into 2017 as the O&O share, I would expect to continue to grow?

And then my second question is on the UK, am I right in my assumption that Charms sales are actually declining in the UK right now? And then finally, on the U.S.

and the Q4 provisions, what kind of margins assumptions should we have on the DKK150 million? Thank you.

As well as the first one, marketing cost as we see it in of course varies from quarter-to-quarter and depending on the how much trend there is in the fourth quarter is relatively big for us. Clearly, as we increase our share of the own and operated, it will have a little bit of a percentagewise deflation on the marketing.

But I think that when you look at it from model getting purposes also in the future, we will do our utmost to make sure that we keep a good relationship to our consumers, so still expected to be in the 9% to 10% area.

Okay. So, no leverage on that one?

In case, if you ask and Charms in the UK, yes they decrease in Danish currency.

But what about in local currency, it seems like that cash go is slowing a little bit versus the other categories of the UK?

Sorry, in local currency, they are increasing slightly.

Okay.

And then the last question was about the U.S. provision that Peterwill.

Yeah, around with the U.S. provision just to the numbers, it’s DKK150 million for taking back inventory.

If you’re apply the average group margin of that than that will probably be a good assumption for that and that will be booked in Q4 as well. So right in the announcement then the stores we’re closing last year in Q4, they have revenue of round DKK150 million.

And of course we do the closings in order to have that revenue in some of our concepts stores how much time will tell as Q4 develops.

Great, thank you very much.

Hello, good morning. Thank you for taking my questions.

First question on our full year guidance for sales, on my calculation that implies that Q4 growth should be broadly in line with the Q3 growth, although the comps get tough there and you have this negative impact from the closures I think in the U.S. So I was wondering whether you could give us more colors on what drivers of acceleration instead you’re expecting to take place in Q4, please.

Then overall on the U.S., could you please spend some or give us more color on the U.S. market generally and it’s great to see your like-for-like still tracking on positive like-for-like even without online which is a strong outperformance versus some of your least peers.

Could you please maybe tell us what you’re doing back there or differently from peers in the U.S.? And finally a clarification on your guidance for the gross margin pressure from raw materials, you’ve mentioned that this has not changed versus what you gave us on Q2, although raw materials have got cheaper versus Q2.

So I was wondering why and the guidance has not changed on that? Please.

Thank you.

Thank you, Chiara. First, our full year guidance, we expect to do more than DKK20 billion and that is our full year guidance.

And clearly what we can see is that they are of course small deviations also in currency, but that is the number we have for you at this time.

Maybe just having, if you do the calculation on Q4, you could say about DKK20 billion in revenue guidance. If you go exactly on 20.0 that implies an 11% growth in Q4, but it is guidance above DKK20 billion for the full year.

But with more FX pressure, I think for compared to Q3?

Sorry, could you repeat that.

With more FX pressure, this 11% is including FX pressure, correct?

Yes, overall you’re right that the full year currency impact is around 4% and the prior quarters have been just below 4%, 1% in Q1, 5% in Q2 and 3% in Q3.

Yeah.

So, a bit more pressure on currency in Q4, that’s right.

But still we stay above 20. And thanks for the comments on the U.S.

we’re also very happy with the development that we see with the 3% increase in like-for-like numbers. And if we look at it, we see a quick development across the U.S.

so we have a quick development in all the different parts of the country. If we look at what is it that is supporting us, I think that in the U.S.

we’ve seen not least in this quarter a strong development in our rings and - sorry earrings and that has of course supported it. So I think what we can do is that we can move into some of the newer categories and we can see good traction.

Now remember that earrings is actually the biggest segment in jewelry in the U.S. so that’s of course good support for us.

And then, on the guidance of raw material I’ll leave that to Peter.

On the raw materials, you’re right, raw materials prices they go up and they also go down a bit and recently they have been declining a bit. However, the guidance we have given is in round numbers it’s around 1 percentage point negative next year and around 2% in 2018.

That is round numbers and you need to get to the decimals to have the impact of the recent changes in the raw material prices.

Okay. Understood.

Thank you. Can I just have a follow-up, on the organic growth for the quarter four, are you expecting any acceleration versus Q3, anything that’s going to turn more positive and driving faster growth in any of the regions implying the guidance?

I think that what we see is that we expect that with the product offering and the Christmas collection that we’re putting out in the market where we expect that to be well received and also see that the gross collection that we have now put into a plot to all our markets has been very well received. So we are encouraged with the development that we’re seeing and that’s also why we expect to be stay with our guidance.

Great. Perfect.

Thank you very much.

Yes, just a couple of questions. So the Latin America and Russia, clearly two of the geographical areas tracking down the Group like-for-likes, can you give us some flavor us to what group like-for-like would have been if we strip out these two?

And related to that, when will these headwinds in Latin America and Russia be in the comps? Then a clarification question and as you mentioned that when you claim something growth double-digit, it’s more than growth in the teen and less than 30%.

So when you write like-for-like in Germany, Italy and France, Group double-digits, does that mean each of these markets grew in the 20s or how should I look at that? And yeah that’s basically for now.

Well, let’s start with Latin America and Russia. Russia I think we know where that is, it has been a kind of a situation in Russia four or five year now where we’ve seen negative like-for-like.

So we are in the fourth quarter coming negative numbers now. What we don’t see is a big change in the financial or economic environment in Russia and that of course will be something that potentially could support our development.

In Latin America rather you can say that two areas where we have challenges and that is Brazil and also especially because we have a lot of stores there in Puerto Rico. And in Russia, we can see that - sorry in Puerto Rico, it is around 15% of the like-for-like number truly in the Americas.

What we see is that we don’t see stabilization yet in Brazil, but hope to see that soon. Whereas when we talk about Puerto Rico, it’s about them having a debt problem that has to be solved by support from the U.S.

Congress as Puerto Rico is part of U.S. territory without being a state.

So hopefully when the election is over, there will be an option for them to get a little bit support and thereby also change the market dynamics of it. Maybe just saying that Russia is 15% of the like-for-like in EMEA, but as we also know just about or around 1% of our sales in for the company.

Based on that information; is it correctly calculated that your like-for-likes in Latin America is down around 20% and Russia down between 30% and 35%?

I don't think we can be that specific Lars.

Is it a wrong calculation?

I think you’re calculating numbers here, but anyhow I don't think we give exact numbers for that.

Okay. But Latin America, when is that in the comps?

That would in the comps…

Say in Brazil, we opened 25 stores in the last 12 months out of 82. So over the next year than one third of the stores will roll into the like-for-like.

Okay. Thank you very much.

Hi, good morning. This is Elena Mariani from Morgan Stanley.

A couple of follow-up questions from me please. One is on marketing again, it looks slightly weird to me that marketing as a percentage of sales is down so much in the quarter, and if we had assumed slightly higher percentage over sales, clearly our EBITDA margin would be below.

So could you explain a little bit better the reason why you require a lower marketing spend in owned and operated stores? And then you're saying that you have an unchanged guidance of marketing as a percentage of sales of between 9% and 10%, is this specifically for 2016 or is this for the medium term, so how should we think about that also in the fourth quarter please?

The second question is around the full year guidance on sales. So you've increased your planned number of openings for the year, but guidance is unchanged.

Should we assume that perhaps you expect a lower like-for-like in Q4, so you are somehow compensating with new store openings? And then the third question is again about the U.S., you’re saying that you've had a bit of a slowdown in Charms in the U.S.

market due to the Disney collection. Can you give us further color on that one?

And also on the change in promotions, this time we had an impact from rings, should we expect something in the upcoming quarter or anything that we should note on that front or in any other markets? Thank you very much.

Well, we'll try lots of good questions here. Let me start with the marketing.

And if you look at this year, we expect to and we don't have guidance, but we have an indication and indication is around 9% this year for marketing as a percentage of our revenue. Maybe relating to the owned and operated and franchise - and our guidance on marketing, when we do owned and operated stores, we will actually double our revenue and that would mean that the percentage would, if you just have the same number be halved.

So, therefore as we move a little bit further into owned and operated stores, we expect the overall spend on marketing to go down a little bit. At the same time, what we do is, we do what we find is relevant, I can assure you that we're not holding back on marketing, we do everything that we find is meaningful.

And also going into the fourth quarter this year, this would be a time where the spending is going to move please a bit, because this is where we really need to make sure that we get a good communication to our consumers. I hope that clarified the marketing question.

Sorry, one slight follow-up on this one. So if this percentage over sales should come down, so you’re saying that overall your medium term guidance is unchanged, so how should we tight up the two things?

Sorry, I am just trying to understand this better.

What I'm saying is that this year we expect marketing to be around 9% of our revenue. And then I say next year, we have made our plans for that and we haven't said anything about it.

But I think that you should probably think we've said historically around 10% and I think that what you should expect who's between 9% and 10%, but it's also driven by how we develop in different markets. Take China as an example, of that take Germany, we're rebuilding in Germany and we're building in China, and clearly we want to make sure that we do some extra spending in those areas to make sure that our grandstands a strong as possible.

We can see already now in China for instance that the work we've done so far has paid off with an increase in our awareness in the market and that's clearly something that we will continue developing overtime. But we will spend the necessary funds on marketing and building our brand.

Great, thank you.

Then I can take the question regarding concept store openings and impact full year guidance. Say first of all, we have a guidance of above DKK20 billion and opening additional 25 stores, which some of them are owned and operated, some are franchise stores, but there are also some distributor stores, and distributors they operate a center warehouse for the country.

So there's a big variety on revenue of those and the openings are coming late in the year. So there's of course some impact, but not a lot.

On the other hand, we have also closed the 700 unbranded point of sales in the U.S. which brings down the full year and have an impact on the full year revenue.

So, these two elements working in opposite directions. And then you asked about the slowdown, now clearly when we look at in Charms, when we look at our Charms sales in the U.S.

last year we had the novelty impact of Disney and that we don't have to the same extent this year, and not of course has an implication for our sales. Then rings and then earrings change from quarter-to-quarter.

And one of the things that we previously said which is very important for us is that we don’t become too predictable in our promotions, and that's why we changed them around. So if you look at rings, last year in the beginning of the fourth quarter, we had a ring promotion and we sold in towards that in the third quarter and of course gave us quite some extra sales in the U.S.

for rings in the third quarter of last year. This year the same promotion is on earrings, and that means that we've sold a good bit of earrings to the stores prior to that.

So that will change from quarter-to-quarter. And I think that when we look at the development of our categories, you have to look at it overhead slightly longer period of time.

Thank you very much.

You're welcome.

Yes, it’s Antoine Belge. So the first question for me is on the like-for-likes, I mean they were a bit below 5% for the first time, and what's your long term view about like-for-like, is it still around the mid-single-digit number and specifically Asia being below 10%, is it something normal for you?

My second question relates to the UK, I think you’ve mentioned a word cannibalization from stores impacting like-for-like, so is it something you are happy with or is it something that you intending to tackle maybe by streamlining the store network in the UK? And finally, regarding your new facilities in Thailand, you’ve mentioned some tax exemptions, so how is that going to impact your OpEx rates going forward?

Thank you.

Yeah, the like-for-like - like-for-like what you are asking is how do we see this. Well, I think that what we have indicated also previously is that overtime we would expect our like-for-likes in more developed markets to be more normalized.

I think we view numbers like 3% to 5% previously, they can be a little lower, it can be a little bit higher, but I think it's just giving a framework of what we expect in more developed markets. And as we are seeing more of our markets being more developed, clearly that is going to have a slightly higher impact on our numbers also going forward.

I think that when you look at Asia-Pacific specifically you can say that that's where we have this bias with two markets Australia and China, which is actually in our total revenue of exactly the same size, but Australia in the like-for-like is representing more than 50% and China around 10%. So that gives a little bit of a bias and of course not a total representation of how our sales is there.

When we look at the UK, we are actually pretty happy with cannibalization in the fact that what we want to do is to develop a good and strong footprint. And maybe the best example we’ve had historically is actually Hong Kong where we were running out of retail capacity.

We build a lot of new stores. We got into negative like-for-like numbers.

But at the same time, we saw our Hong Kong business is continuing healthy growth in a very difficult environment. It is a little bit the same things that you’d see with the UK.

In the UK, we have open stores, some of them are closer located to existing stores which are like-for-like stores and that will have an impact. But we are still committed to building the right networks and we will not at any time not opening the store because we want to keep the like-for-like numbers at a certain rate, so we’ll do what is right for the business going forward.

When we look at our new facility in Thailand, it is correct that we have the same BOI kind of arrangement for the new facility as we have for our existing facilities. The reason why we continue developing in Thailand is because we may get right and good and skilled labor.

So that is a driver of that and it has no impact on our expectations for our tax rate as it is actually the environment that we already operating within in Thailand.

Okay. And maybe I mean I think I was very interested by the strong increase in brand awareness with the Chinese customers.

Is that I think is an impact on to Chinese consumer growth. Maybe could you give a maybe a sort of evolution of how much Chinese spending abroad represent of your total sales and how that evolve versus maybe one or two years ago?

I don’t think we have a number for that. Clearly the Chinese, they love to shop when are at travelling and there’s no news in that.

And we see them also visiting us in Australia. We don’t have a number for this.

I think one of the things that I find is, is quite interesting with PANDORA is that our tourist sales in general is relatively low and so it’s mostly locally based. And I think that what we see in China is also very, very strong locally based sales.

Thank you.

You’re welcome.

Yeah, hello. Klaus Kehl from Nykredit Markets.

Same three questions from my side as well. First question is say when I look at the online sales it seems to me that it’s declining compared to the second quarter of 2016.

Is any particular reason for this? And secondly, a couple of questions related to networking capital, it’s now is on the rise and has been that for quite a while.

And I understand that you are building up inventories ahead of Christmas, but could you give us any indications for where could in the end of the year. And in that respect, also you mentioned extended credit lines in some markets and I believe that you mentioned Italy, but could you elaborate on that point as well?

Thank you very much.

It is a sharp observation that our online sale was actually 4% in the second quarter and 3% in this quarter. It will fluctuate over the year and it’s going to be very interesting to see how we are going to end up in the fourth quarter.

I think that’s one big reason and that is the Buy More Save More campaign that we had in the U.S. was not available in online.

So I think that’s one thing. And the other thing and that’s just a reflection on the on the British pound, it has gone down and of course that also means that our sales translate into Danish currency is a little bit less.

So let’s say that I think Peter will take - well maybe I should say one thing about our inventories and then Peter can cover the rest. We are very happy with the fact that we have now historically, we’ve instructing to have enough inventory going into the fourth quarter.

Now we have a good support from our manufacturing facilities. So I’m personally very happy with the fact that we have good inventories and we can cover the needs from all our consumers around the world.

So Peter will give you a little bit more flavor in that.

And maybe starting on the receivables, say our - just to start with our standard terms of payment and that is running month plus 30 days, which gives days sales outstanding off say in the 45 plus or minus category. In Q3, in Italy, we gave some extended Christmas terms to make sure that the stores, our franchisees they have the right stock or inventory ahead of Christmas.

All that is being paid before Christmas and it’s only granted of course to good customer with the proven payment record. And historically we have had close to zero losses on data.

In terms of the inventory as a standup set we are happy on the inventory level that we have in Q3. And also if you look historically at the numbers then inventory to cost of goods sold also inventory to revenue that ratio either been there been pretty stable or declining if you look at the percentage of sales.

So overall and no concern on inventory or receivables from our side.

Okay, so just the follow-up. So you say the extended credit lines, that’s only related to Italy, no other markets?

It’s in Q3 it’s primarily Italy. In Q4, we will grand that also in a couple of more markets including the U.S.

And U.S. is also you can say we had a very, very good strong campaign just by the end of the quarters, so the replenishment in the stores of course we done slightly before the quarter ended and are of course goes into the receivables, so we will see fluctuations like that.

Okay. Thank you very much.

Thanks very much for taking my questions this morning. If I could just start with your revised margin guidance, I presume that includes the dilution we’re going to get from the buyback of inventory in the U.S.

and the potential less sales in the U.S. market which you’ve quantified DKK150 million each.

So I guess the revised 39% EBITDA margin the way I look at it suggests an even higher underlying margin upgrade on the basis that there is some dilution from that buyback. So can I just confirm that the revised guidance is inclusive of all those U.S.

moving parts?

If I confirmed.

Okay, fair enough. Thank you very much.

And then just secondly, just thinking about the U.S. store closures that you that you guys have announced this morning, am I right to think that 700 store closures out of a network of broadly 1,500 or so multi-brand points of sale that is, is roughly half of the network.

So I was just curious as to kind of what the rationale behind such a material change in your distribution strategy in the North American market, what was driving that and if you could just provide some more color on the rationality behind that decision?

I think the rationale behind the decision is that we want to have a good granted network also in North America. And what we’ve been aiming at is taking out the stories which are either unbranded or not branded to the level that we wanted to be.

So those are the stories that we’ve chosen to close. Now at the same time, we have also over the year upgraded the Jared stories to shop-in-shops.

So they’re taking out of that number and then put into to shop-in-shops which we believe is a good representation our brand. So what we’ve seen across the world is that the stronger we stand with our branded - with branded representation in retail, the stronger development we see now brand.

So that is the rationale behind it. And now we had the chance to a bit more in the U.S.

we believe that we’ve done good cleaning up this year in North America.

That in terms of the numbers, you’re right that this is round half of the unbranded stores in both Canada and U.S. that we are closing.

We will as we have said focus on concepts stores and shop-in-shops but also in some markets, we will have gold stores, which is also a branded environment because there’s basically not enough people in a given city to hold a concept store. But the silver and wide accounts, those we are closing in all markets.

Okay, understood. And just clarification, we all those closures take place in the fourth quarter of this year or will some of this spillover into next year?

No, it will all be done in fourth quarter.

Okay, brilliant. And then just finally, are you able to give any comments on current trading since October, obviously as someone else mentioned the comparatives do get a bit tough in the fourth quarter for you.

I just wanted any kind of early indications around the like-for-like evolution if possible? Thank you very much.

I think the only thing we can say is that we feel comfortable with the guidance we have of more than DKK20 billion this year.

Okay, brilliant, thank you.

Thank you.

Thanks very much. Yeah, on the like-for-like sell out calculation that you do, how many percent of your sales to these shops included to that collection or calculation actually cover, is it around 50% mark, I think you've mentioned before?

No, it’s more like than 90% mark, when you look at like-for-like numbers from our concept stores, it would be covering around 90% of all the stores.

And not just your own concept stores, but all those concept stores?

All franchise and our own.

Yeah, understood. Okay, a question regarding the Rose collection, just could you expand a bit about how that rollout globally has worked and where you see this developing in the future, is it here to stay, it is a rather novel concept in at PANDORA?

The answer is we're very happy with the development that we've seen. We started in the U.S.

as this is a plated product, we wanted to make sure that the consumers got it, but also that we didn't get any reclamation on it. We haven't seen that and we did in the UK and now we've done it in the rest of the world.

And the first indications we're getting is that we're getting some healthy support from the launch of it. It is a collection that we expect will stay with PANDORA and it gives us an opportunity to also play more on colors in our collections, but also in the stores.

So this is something that we believe will stay with us, and we’re happy with the good start we’ve had.

Have you ever told us about how big Rose is in the States?

No. We've said it's a meaningful contribution to our revenue, and what I can say is that it's also a meaningful contribution in the new areas where we've introduced it.

Okay. And then finally just coming back to the U.S.

and the upgrading of the stores network to focus on branded stores, how much, I mean is this the end of it so to speak, what this initiative or would you expect there is more work to do along those lines?

I think that we will at all times make sure that we have the right representation. And let me take the UK as an example, in the U.K.

we've seen that we've had opportunities to our more concept stores and in that connection of course to close some more of the unbranded and semi-branded stores. So it is an evolution that will continue, but I think that we are taking a very, very good an important step forward with the closure of the 700 stores.

Thanks very much.

You’re welcome.

Yes, hello gentlemen. Just a couple of follow-ups from my side and can you maybe comment a bit on the magnitude of margin contribution, we should expect new facility in Lamphun starting year the first of January?

Secondly, are there any structural reasons for concept stores openings next year and the coming years not being more than 300 as you have done so for the last couple of years? And then thirdly, could you comment a bit on the drag on your margin from FX movements into 2017 as it’s high bad has appreciated compared to Danish kroner and you continue to see some headwind on to top line from some of the other currencies the type where you have a very high margin?

Thanks.

We're very happy with our new facility in Lamphun. We expect one of the things that we get out of that is that we actually be able to cut all lead time and that is the focus point we have.

Remember that our products are hand finished and we still need to hand to finish it, so don't expect to get a lot of the productivity gains out of that. The concept stores what was the question there was…

Why should…

The number of our concept stores, we are very happy within. The fact that we have given you a little bit of insight into 2017 and 2018 and we believe that we can still open stores.

We stand by the number we have between 200 and 300 at this time. One of the things which is important for us is that we do not get ahead of ourselves, we want to continue opening quality stores around the world.

So this is the number that we see right now.

Then as two exchange rates and impact on 2017, we'll of course get back to that in connection with our full year guidance in February next year.

Okay. And then maybe just the last follow-up on the Lamphun facility, they’ve reduced lead time, it was up and reduced inventory or will it just be that faster reaction to the market or how should we - what are the positives?

Fast reaction to the market.

Okay, thank you.

Thank you.

Hello, hi thank you very much. It’s a very quick one.

Just wanted to be 100% sure. The closure of the stores - of the doors in the U.S.

the DKK150 million plus the DKK150 million, it would be a DKK300 million lower sales in Q4 2016, is that correct, in the U.S.?

I think - yes. Anything else being equal, what we do hope that some of the people who would otherwise support in these stores will find their ways to some of our beautiful concept stores and buy there.

So the DKK150 million yes, the other DKK150 million we hope that’s some of the people will find their way of buying other beautifully branded PANDORA stores.

Understood. So it’s not going to be hopefully that DKK300 million impacts on sales?

You know, whereas consumers’ loyalty is that to the brand or is that to the stores, and of course there's probably a few people who are very focused on the store. So we might lose some of it, but we do believe that we have some great loyalty will make some of the customers come to one of our concept stores or maybe back online.

Perfect. And if I may also add, what - can you help us with the impact on the gross margin from the takeover of these inventories, any help would be really appreciated?

Thank you.

The takeover on the gross margin, we expect DKK150 million for buyback of inventory expect around the group gross margin when calculating the impact.

Okay, okay, thank you.

Actually two question, because I think you forgot to answer my question on like-for-like and in Italy, Germany and France if all three were grown between 20% and 30% like-for-like? And then a follow-up, you mention and as that you were going to extend credit in the U.

S. during Q4, I wonder if you consider why you're doing this, this is temporary thing or a permanent thing and the change goes from what to what?

Thank you.

Well, I think what I’ve said in the U.S. was that we had a very successful campaign, the Spend More Save More campaign, which meant that the refurbishment of the stores were very close to the end of the quarter, and not of course increased our receivables, so just to clarify that that was the reason.

So there's no change to any credit terms in the U.S.?

No.

And then Italy, France and Germany?

And just on the credit terms, I mean you can track up people that have gotten extended credit terms, because when we open stores, and when we open new accounts and so on, we do extend credit terms, but we have no changes, but no changes what we have done in the past 20 years on this.

Okay.

On the like-for-like maybe just to summarize, so single-digit from zero to 10, low from 11 to 20, top from 21 to 30 and then high double digits from 31 and above.

So that means Italy, France and Germany each grew 21% plus right?

What we have said is that Italy double-digit, France high double-digit, and Germany low double-digit.

Okay. Thank you.

Hi, good morning. I have three questions.

Firstly, on the way you've done in North America and obviously to that region and disclosure of mostly branded stores, could it be the case that we see acceleration in other parts of the world going forward? My first question.

Secondly, on the launch on Tmall I know it's very early days, but I’m curious to know what reception has been so far, I mean have exceeded expectations or should you just be quite gradual ramp up online? And finally on the product collections, you’ve clearly been benefiting from strong reception to Disney and Rose, do you think novel collections likely will be common ongoing part of the business in order to staying very proud momentum and ultimately keep driving traffic into the stores?

Let me start with the first question. North America, you can say we’ve done closures around the world for a very long period of time.

And I think that where we have done a lot historically, we’re getting closer and closer to the point where we have the right number. Will there still be some in the years to come?

Yes, there will, but we've really done a lot over the years. And I think the steps we've taken in North America is a very big quick step for us.

And I think it's exactly the right thing to do. So less in the future, but there will still be some.

If we look at Tmall, we have done a soft launch which means that we hadn't done any extensive promotions on that and we want to make sure that it works first. So we're happy with the fact that it works, and we've also seen costumers they are buying PANDORA products, but we don't have any news, it's very, very early days.

For us it’s not that important whether people buy online or they buy in a physical store. We actually enjoy them coming into our physical stores.

What we think is important for us is that they have the choice between the two different channels. If you look at our product collections, we will of course always look at what can we do of novelties, which is important and interesting for the consumers, let me say, if you look at Disney as an example, I think you should look at that as a onetime thing, it's not so that we would do anything with Hello Kitty or anybody else in the future.

We will stick with Disney, it is meaningful for us, and we think that that is their cooperation we will have. On the other hand, if we look at Ross, our product teams are very creative, which we are very happy with, and they are of course looking at how can we continuously put our product which will resonate with women around the world, so that is something which is ongoing and we will hopefully see new great things also in the future.

We try to stick to the fact that we want to be in front of the curve in our product offering.

Thanks very much.

You’re welcome.

Thank you. I just had a couple of follow-ups.

The first one is on the 25 additional store openings, which split should we expect in terms of owned and operated and franchise and I would assume this mainly impact the revenues in 2017? Second follow-up question is on Canada, you’ve seen quite a big step in like-for-like improvement, what exactly has happened, have you done something specifically or do you think it's market driven?

Thank you.

Well, I think that we are very happy with the numbers we had in Canada, and of course it changes a bit from quarter-to-quarter based on the product offering. We saw some good development also based on the campaigns we did in Canada in the quarter.

So we will see that is basically in a very well developed market as Canada, so just happy with the development. I think that what we also talked about is last time that we saw some of the stores in the network, which was not doing so well.

I think some of that has been rectified is also was supporting the development. But we will continue developing the stores and of course having growth and campaigns and products and that is the driver of it and I think you will remain.

And on the concept store opening, the 25 additional that we have announced, that's a little bit in all markets, so no changes to our overall split on regions, and no changes to the around one third which is owned and operated of the store openings.

Thank you very much.

You are welcome.

Thank you very much for your participation today. It's been a pleasure and wish you all a great day.

Thank you very much.