Pandora A/S

Magnus Jensen - Investor Relations Anders Colding Friis - Chief Executive Officer Peter Vekslund - Chief Financial Officer

Lars Topholm - Carnegie Michael Rasmussen - ABG Anne-Laure Bismuth - HSBC Piral Dadhania - RBC Capital Markets Hans Gregersen - Nordea Kristian Godiksen - SEB Thomas Chauvet - Citigroup Fredrik Ivarsson - Kepler Cheuvreux Klaus Kehl - Nykredit Markets Peter Testa - One Investments

Good morning and welcome to the conference call for PANDORA's Q3 2017 results. My name is Magnus Jensen from the PANDORA Investor Relations team and with me I have our CEO, Anders Colding Friis and CFO, Peter Vekslund.

As per the agenda outlined on Slide 2, Anders will present the highlight for the quarter before Peter will talk you through the Q3 numbers in more detail. Following the presentations, we will be happy to take any questions you might have.

Before I hand over to Anders, I would like to point your attention to the disclaimer on Page 3. Anders, please.

Thank you very much, Magnus and good morning to everyone and thank you for listening in on our call this morning. The result for the third quarter came in more or less on par with our expectations, while the underlying performance contained some positives as well as some negatives.

Our growth markets including Germany, Italy, Australia, and China continued to perform well while the retail environment in the U.S. continued to be a challenge.

Now turning to the highlights for the quarter. Revenue for the quarter was DKK 5.2 billion , which is an increase of 13% compared to the third quarter of last year or 16% in local currency.

The growth was driven primarily by the continued solid performance of our owned retail business, which delivered a 35% increase in revenue. Revenue from wholesale increased 5% for the quarter, positively impacted by the addition of 53 franchise concept stores as well as the launch of our Disney collection in EMEA early in October.

Furthermore, growth was supported by all product categories, which all delivered double-digit growth in local currency for the quarter. The profitability of our business continued to be solid and the EBITDA margin for the third quarter was 37.8% compared to 39.9% last year.

Free cash flow for the quarter was DKK 637 million and slightly higher compared to last year. Cash flow came in as expected and we will pay out a quarterly dividend of DKK 9 per share later this month on top of the DKK 652 million used during the quarter to buy back shares.

Turning to Slide 5, we maintain our financial guidance for 2017. However, we now expect to end up in the low end of the guided revenue range of DKK 23 billion to DKK 24 billion.

This is mainly a reflection of currency headwinds, which was increased with around DKK 700 million since we guided in February. Additionally, we expect a headwind of around DKK 150 million related to the hurricanes in the U.S.

and the Caribbean Islands during the third quarter. Looking across our markets, this is -- this of course also reflects a continued difficult retail environment in the U.S.

But success in other markets such as Italy and China has been able to compensate for a fair share of this. Looking at the fourth quarter revenue, please be aware that we currently expect the tailwind from foreign -- forward integration of around DKK 500 million.

Additionally, revenue in the fourth quarter of last year was negatively affected by DKK 200 million related to product returns in the U.S. This will not reoccur.

The EBITDA margin guidance is maintained at around 38%. Guidance on CapEx and tax is maintained and we continue to expect to owe more than 300 concept stores for the year.

Moving to the next slide, let me give an update on the progress on a number of the strategic initiatives during the quarter. Developing our product assortment remains a key focus in PANDORA and our offering has improved over the year.

However, we continue to see some challenges in terms of lack of newness in the more penetrated markets. As highlighted on earlier calls, we have a strong belief that the recent changes we've made to our product team will have a positive impact in 2018.

This includes, a new design team, more new concepts to be launched, our ability to fast track products, and a shorter development cycle. During Q3, we launched the autumn collections in stores.

The collection includes 20 fast track products, which was well received by our consumers. As we highlighted last quarter, fast tracking products is a mean a fulfill identified opportunities with our consumers and reflects the significance of our market-leading manufacturing capabilities and improved lead times.

The new collection included 32 Rose products, which was very well received and revenue from the PANDORA Rose actually tripled compared to the same quarter last year. This illustrates the importance of adding new concepts and as earlier communicated, we plan to launch at least 4 new concepts in the next 3 years.

Finally, following a successful launch of the Disney collection in Americas and Asia, we launched the collection in Europe early October. And we are delighted to see that the products already work well with the European consumers.

We continued to take increased control of our store network. Earlier in the quarter, we took over the store network in South Africa and in late September we acquired our distributor in Spain.

This has added a total of 66 concept stores to our own retail network and will support revenue with some DKK 500 million in the coming 12 months. In addition, we've opened or acquired a total of 154 concept stores during the quarter.

This brings the number of PANDORA owned concept stores to a total of 865 concept stores or more than 35% of the concept store base. Our expansion in newer markets continues and revenue in Asia Pacific for the quarter increased 26% and now represents 21% of group revenue.

Growth in the region was mainly driven by our expansion in China, where revenue increased by 62%. Following the establishment of a regional office in Panama, we have strengthened our focus on Latin America and in the third quarter, we opened 10 concept stores in the region.

Revenue in Latin America now represents 13% of revenue in Americas, an increase of 20% for the quarter or around 40% if you exclude the Caribbean Islands, which were impacted by hurricanes during the quarter. Finally, let me give you an update on the latest development in the U.S.

market. The retail environment continues to be tough, which is reflected in the performance of our U.S.

operation. Mall traffic declined with 4% in the third quarter and promotional activity among retailers continues to be significant.

To support our U.S. business, we decided to launch our Christmas collection in the U.S.

in October compared to November in earlier years with selling in September. This was done to strengthen sales at a time where competition for consumer spend is fierce.

In essence, it means that we'll have the Christmas products in our stores for an extended period. On promotions, we continue to stay relevant and in the third quarter we maintained a promotional level comparable to last year in the U.S.

It is always important to have the right promotional level and we believe that we are striking the right balance. Our gross to net sales for the first 9 months in the U.S.

was above 85% and on par with what we saw last year. Going into the fourth quarter, we plan to strengthen the promotional activity across the world, as well as in the U.S.

to remain competitive. And with this I'll hand over the word to Peter.

Yes, thank you, Anders and good morning, everyone. Turning to the next slide, we'll look at our three channels.

Revenue growth for the quarter was mainly driven by PANDORA owned retail, which increased revenue by 40% in local currency. Growth in retail was driven by a like for like development of 5% as well as an increase in our owned and operated store network through both new stores and acquisitions.

The main driver of the like for like growth was the eSTORE, which increased by 94%. While still early days, we believe this is a good indication that our online platform works.

The eSTORE represented 5% of total revenue for the quarter. Franchise concept store revenue increased by 7% in local currency compared to the same quarter last year.

This was mainly driven by network expansion as well as the selling of the Disney collection to franchise concept stores ahead of the launch in October. When analyzing our store productivity, I would like to highlight that owned and operated stores is our preferred ownership model and as such high revenue locations are either be opened as O&O stores or being acquired from franchise partners.

Franchise stores are primarily being opened in Latin America and in smaller markets in EMEA, which typically has a lower revenue per store. Revenue from other points of sale in the wholesale channel increased 3% in local currency.

The slightly positive development was driven by a number of non-branded stores that we upgraded to branded stores. The positive impact from the upgrades was offset by planned store closures as a part of optimizing the global store network.

Revenue from third-party distributors increased 6% driven by several markets in EMEA and Asia. In terms of distribution, we continue to increase our branded presence and in the last 12 months we have opened net 318 new concept stores globally.

At the same time we closed more than 1,500 other point of sales. Now please turn to the next slide where I am talking through the performance in each of the 3 regions.

Starting with EMEA, the region generated revenue of DKK 2.6 billion corresponding to an increase of 17% in local currency. Revenue in the U.K.

increased 22% in local currency. Growth was mainly driven by the expansion of the network, the selling of the Disney collection, as well as some timing of shipments between quarters.

The retail environment in the U.K. remains difficult and we saw a negative development in the existing physical store network, partially offset by a good performance in the eSTORE.

Italy generated growth of 26%, which was a result of a good performance in the concept stores. Half of the revenue in Italy is generated in other point of sales, which saw a slightly positive development in the quarter despite the closure of around 130 other point of sales as part of strengthening the store network.

Revenue in France was flat compared to Q3 of last year. The concept store network in France saw a positive growth for the quarter and was supported by a good performance in the eSTORE, while other point of sale, which represent around 25% of revenue in France continued to be challenged.

Our business in Germany accelerated with the revenue up 26% for the quarter, driven by the positive performance of our strengthened German concept store network. Please turn to Slide 9.

Americas reported revenue of DKK 1.5 billion, an increase of 6% in local currency. Revenue in the U.S.

increased 4% in local currency, with the growth driven mainly by the eSTORE as well as expansion and acquisition of franchise stores. Furthermore, growth was supported by selling to franchisees related to the early launch of the Christmas collection in the U.S.

The exact impact for the quarter is not possible to quantify as this also had a natural adverse effect on replenishment orders on earlier collections. As Anders has mentioned, the retail environment in U.S.

is still tough and we still experience some lack of newness in our product assortment. This resulted in a negative like-for-like in our physical concept stores as well as in other point of sales.

This was partially offset by a positive development in the eSTORE. Reported like-for-like growth in our retail network was 5%.

For the quarter the Americas region was impacted by around DKK 50 million related to the hurricanes that had hit the U.S. and the Caribbean Islands during the quarter.

The full year is expected to be around DKK 150 million as several stores are still not open and consumer confidence in some of the impacted areas continues to be very low. Now turning to Slide 10.

We continue to see a strong performance in Asia Pacific. Revenue in the region was DKK 1.1 billion, up by 32% in local currency.

Revenue in Australia increased 21% compared to Q3 last year. This was mainly driven by store expansion, which included the addition of 11 new concept stores in the last 12 months.

China which represented 8% of revenue for the quarter continued to be an exceptional growth market and revenue for the quarter increased 62% compared to Q3 of last year. The increase was driven by the strong development of the brand, supported by the addition of net 62 PANDORA owned concept stores in the last 12 months.

We are making good progress with our online business in China, which includes our collaboration with Tmall and it continues to perform well. E-commerce contributed around 10% of revenue for the quarter.

From Q4 the Chinese eSTORE will be included in the reported like-for-like numbers as it has now been operating for more than 12 months. Now please turn to Slide 11, which is an overview of our 5 product categories.

Revenue from Charms increased 12% in local currency, driven by Asia Pacific as well as EMEA, which included the selling of Disney. Revenue from Bracelets increased 16% and was supported by 5 new bracelets including a fast track Silver Mesh Bracelet which was very well received by consumers.

The Rings category performed well and revenue increased by 19% driven by a stronger product offering including the best-selling ring, the Wishbone silver ring introduced this autumn. Demand for Earnings and Necklaces & Pendants remained strong and they delivered growth of 31% and 39% respectively.

Both categories have been well supported by successful marketing campaigns and a greater focus in store. Now please turn to Slide 12.

Gross margin for the quarter was 74.2% compared to 75.1% last year. The decrease was driven mainly by 1 percentage point headwind from currency and a negative impact of around 1.5 percentage point caused by metal mix related to the growth in the PANDORA Rose collection, which currently is partially produced externally.

This was partially offset by the increase in share of revenue from PANDORA owned retail which had a positive impact of around 1.5 percentage point. The EBITDA margin for the quarter was 37.8% compared to 39.9% in Q3 2016.

The development was driven by the gross margin as well as a different phasing of brand-building activities related to the third quarter last year. Administrative cost provided a slight leverage.

Now please turn to Slide 13. The operating working capital for the quarter was 18.9% of the preceding 12-month revenue, a decrease of 0.9 percentage point compared to the same time last year.

The decrease since Q3 2016 was mainly related to our inventories. In terms of receivables days sales outstanding were at 63 days, up 7 days compared to same quarter last year.

The increase in day’s sales outstanding was primarily related to the strong selling of the Christmas collection during September ahead of the October launch, as well as the acquisition of our Spanish distributor where we have taken over receivables. Finally receivables in the U.K.

and Italy were slightly higher due to the usual extended credit terms ahead of Christmas. CapEx investments were around 7% of revenue on par with the same quarter last year equal to DKK 380 million this year compared to DKK 324 million last year.

We are investing significantly in our manufacturing facilities in Thailand, an increasing number of PANDORA owned stores as well as on various IT projects building our digital capabilities. Our net interest bearing debt to EBITDA was 0.7 which is in line with our overall capital structure policy and slightly up compared to the same quarter last year.

And with this, I'll hand back to Anders.

Thank you very much, Peter. So to summarize the quarter we've continued to see strong growth in a number of our key markets like Australia, China, Italy and Germany.

However, the group performance was also affected by the challenging conditions in the U.S. Rings, Earrings and Necklaces & Pendants continues to perform and revenue from the 3 categories increased 21% in the quarter.

Our owned retail business recorded a 35% increase in revenues and I am delighted that we've strengthened our retail network further by taking over distribution in South Africa and Spain during the quarter. Finally, we remain on track to meet our guidance for the full year, however, at the low end of the guided range.

Before we move over to the Q&A session, I would like to highlight that we've decided to reschedule our Capital Markets Day and as mentioned in the Q3 report will now take place on January 16, instead of December 13. As most of you know, there is a significant external focus on our 2017 numbers.

Additionally, we are of course also internally focusing on meeting our numbers. So before we start to communicate on our longer-term plans at our Capital Market Day, we'd like to conclude 2017.

We are, of course, sincerely sorry for any inconvenience for those of you who've already signed up for the day. Thank you very much for listening in.

I will now take questions. Operator, please.

Yes, just a couple of questions on my side. So first, if you can comment a little bit more on China and how the physical stores grew [ph].

You have a 77% higher store count, you have Tmall, you have your own online business, yet sales only grow 62% if I can say only for that. I wonder if you can comment on like-for-likes.

And a second question that regards to the early selling of the Christmas collection in the U.S. and I fully understand you.

You will not and maybe you cannot give the net effect of this. But can you maybe put some comments on the gross effect, is it fair to assume the selling value of that collection is more than DKK 150 million or how should we see?

Can you maybe comment on how much it is per concept store have been even and selling effect? And then a third and final question is regarding the U.K.

You also mentioned this, some timing of shipments. Can you comment on what those changes are partly well what's the fiscal impact is, but also which I assumed you have delivered differently compared to previous years?

Thank you.

Thank you very much, Lars, for your questions. I will do the first and I'll give you a framework on the second then Peter will continue and do the third.

So if we look at China in general, we are very happy with the development that we've seen in China and we are expanding our store footprint. As we have said, we are not giving any numbers for like for like in China, but as we have said we are developing city- for-city and that, of course, has an impact on the like for like numbers.

One thing you should be aware of is that we've also transferred some of our former shop-in-shops into concept stores. So the net movement is smaller than what you are looking at here.

We're very happy with the development that we've seen in our eSTORE and Tmall over the quarter. And as mentioned the like-for-like numbers in China has been more normalized.

And I think that's as far as we can get on that. Maybe, I'll just give a couple of comments on the selling in the U.S.

and then Peter he can continue talking a little bit more about it. But if you look at it, the reason behind it is, we know that the consumers in the U.S.

are the ones who are most newness oriented. And to make sure that we have a good newness in the stores for an extended period of time, we decided to launch our Christmas collection a bit early and get the commercial value out of it.

And do remember that it is more than Santa Claus and stockings we have in that collection. And then Peter?

And as to the impact of this on the quarter, this is simply not possible to estimate this as it was announced for franchise partners in mid-September and of course had some natural adverse effect on replenishment orders in the quarter. And I know there is a request for a lot of the building blocks in our performance in the U.S.

There are a couple of building blocks that we do not provide that is eSTORE, acquisitions and network growth and so on. So overall this, of course, had some impact but not something that is possible to estimate.

But is it fair to assume that shipping Christmas early moves the needle by more than 10 percentage points in the U.S.?

It's again, I can repeat, it's not possible to quantify the impact. Of course, you can do the assumptions in your calculations.

But it's not something that...

No, I'm just asking if my assumptions are fair or unfair. I'm not asking you to quantify.

Just tell me if my assumptions are completely wrong or are they reasonable?

And again, Lars, this is not something we will get closer to an answer too. We have not been able to estimate the impact as it does have an adverse effect on replenishment orders.

To say finally on the…

Yes, but I asked about the gross impact, Pete, and not the net impact, the gross impact.

Maybe let me just also add that if you look at our receivables in the U.S. it is flat compared to the same quarter last year.

Sure. But that was not what I asked.

I asked about the gross impact from this. I fully accept you cannot estimate the net impact, but the gross impact, I'm sure you realized because you know exactly what you've shipped to stores.

I think that we have -- historically we've had too many small building blocks, DKK 50 million here, DKK 20 million there, DKK 50 million there, to put it together and it made things more complicated and we will try to avoid that.

But in previous quarters you've had a slide specifying the effect of timing differences in the U.S., now it's shown no longer here. But are you saying these are DKK 20 million to DKK 50 million building blocks or is it more than that?

I'd say you are right. We have a table and that was a table we also said all along during the Q2 roadshow that that was the last time we wanted to provide [it as a] table because it created more confusion around numbers than clarity.

Okay.

And maybe we should just take -- there was a question on the U.K. as well and I think we should just answer that.

Peter, will you take that?

Yes. And overall on U.K., the growth in U.K.

was driven by the launch of Disney, the network expansion as well as some timing of shipments underlying there was a negative development in the stores offset by a good performance in the eSTORE.

Thank you very much. I would like to ask a little bit more into the changed promotions in the U.S.

So looking at the fourth quarter, how do you expect -- how much growth do you expect this will drive and should we now understand that you are planning to be more promotional than the market in the fourth quarter or just be as promotional in the quarter? Now my second question goes to the new designs team that we have talked about on and off during the past year.

When should we expect kind of the big plans, the big launches from these guys? Is it early 2018 or do we have to look further out for this team and kind of as a follow-up on the second question, is this basically what you expect to be able to reset, i.e.

do better on the newness in stores, please? Thank you.

Thank you very much for your questions, Michael. Let me start with the promotions.

I think that it is very important to start by saying PNDORA is not a very promotional brand and have not been so. And one of the reasons why we've also given you the gross to net number, which we haven't provided earlier, is to just reinforce that and show you that we are not.

We are going to do a bit more. We are not going to be on the level of other retailers in the U.S.

market, that's for sure, in the fourth quarter. All we wanted to say is that expect us to be a bit more promotional.

You need to be relevant in the market and that is an important part of being a good and strong retailer there, so not very promotional but a bit more than we've done. But we will not need what you'll see.

Sometimes you see in the U.S. that you have store-off promotions.

We do not do store-off promotions. When we look at the new design team now, as I mentioned we are moving our Capital Markets Day.

One of the things that you will be able to see because we moved it to January is actually some of the new concepts coming from our new team. The new team's product will be in the market from the beginning of 2018 starting with the Valentine's collection which is the first one and we are very eager to show that to everybody when we can do that.

And further we had the -- a launch of a new concept in connection to drop 1 and we will be able to show you that new concept in connection to the Capital Markets Day in January and that will generate newness, we are quite certain of that.

Thank you very much.

Yes. Good morning, everyone.

It's Anne-Laure Bismuth from HSBC. So I have two questions.

The first one is it fair to assume that excluding eSTORE the like for like at the group level were flat to slightly negative? And my second question is about Q4.

What is giving you confidence in achieving an organic sales growth rate in excess of 20% in Q4 based on the low end of the fuel [ph] you also mentioned guidance of 13% reported sales growth or 15% that comes from FX including the negative FX impact of plus -- of minus 2%? Thank you.

Thank you very much for your questions, Anne. I think two excellent questions for Peter.

Starting on the first one with the like for like. Overall ballpark figures that is correct calculation you are doing.

Secondly, on the Q4 performance, Q4 is a big retail quarter and we also need to realize a lot of revenue in Q4, around DKK 8 billion in revenue. What gives us confidence in delivering this in Q4 is in order to reach the low end of the guidance we need a growth in reported currency of around 18%.

We have DKK 500 million in tailwind from acquisitions and we have DKK 200 million in a technical tailwind from the closing of municipality stores last year, including those two elements, around 11% of growth. So if you subtract the 11% from the 18% needed, then you are in the 7% to 8% range of growth in Q4.

And that we believe is achievable while still DKK 8 billion is a big number and we need to do a lot of revenue week by week in December also.

Thank you.

Welcome.

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

I was just wondering if you could elaborate a bit on what you just said in relation to the DKK 500 million tailwind from acquisitions. My understanding was that the second - well, the guidance at the half year was for DKK 450 million of acquisitions for the second half.

So could you just quantify that that's gone up slightly? That's my first question.

And then I will pose my second after that.

I think it's a good idea that Peter continues.

Yes, in connection with this, you are right, there is a small up-tick in the overall number of effect from forward integration. So the full year number is expected to be around DKK 750 million versus DKK 600 million in Q2, so DKK 150 million more than in Q2.

Okay, cool. And then just looking forward then into 2018, could you give us an indication of what your concept store opening run rate would look like and also what the contribution from acquisitions might look like in '18, because obviously the acquisition is a relatively new concept in relation to your expansion strategy and how you're growing your overall portfolio.

So I guess in terms of people's medium term assumptions, in terms of the contribution from space or scope, what would -- what should we be thinking about for the -- for the long -- medium term?

Yes, he will continue.

As to concept store openings in '18, we have previously said it would be somewhere between 200 and 300 concept store openings in '18. Of course, concept store openings is something we'll give you a bit more insight into our thinking on this at the Capital Markets Day.

In terms of forward integration effects in 2018, that currently will be around DKK 600 million of which Spain is DKK 350 million.

Okay, great. Thank you.

You’re welcome.

Good morning. A comment on your sales growth on a product level, to what effect have different campaign pressures in the various subcategories affected growth rates?

That's the first question. Second question, if we look on your eSTORE sales breakdown, if you can provide some comments?

And in that context also, if Tmall had been included in Q3 this year how much would that have added to like-for-like growth figures?

Yes, let's start with the impact of the different product groups and then Peter can take the second question. Hans, if we look at the different campaigns we do, we do that very much to support the different categories and that of course moved from category to category between the quarters.

We have had a bit more focus on Charms and Bracelets for the quarter and that has had an impact and that you can see and of course it does something to the other categories. We are still very happy with the overall development and now the new categories stand for 27% of our revenue for the quarter.

And in terms of the eSTORE and Tmall in China, revenue from that is around 10% of the revenue in China and it will be included in the like-for-like numbers from Q4. So based on this, I assume you can do some rough maths and estimate the impact.

About 10% of revenue in China is from e-commerce.

But my question was basic. Can you provide a little bit further insight into the sales breakdown of the overall eSTORE?

You mean by countries or where -- what do you mean?

Yes. What are the key countries?

Yes, yes.

Overall eSTORE, I think that has China, U.K. and the U.S.

and then we have the various markets in Europe which are doing okay, but not big numbers.

Thank you.

Thank you. I'll start with initial two questions.

So first of all, could you give some reasons for the like for like deceleration in the U.S. compared to Q2 and this is despite we've seen an improvement in the underlying U.S.

jewellery sales and also traffic mall data? And also I expect that you had higher impact on the product innovation side in Q3 compared to Q2.

And if you could take that also on the group level, that would be very nice. And then the second question would be just if you could elaborate a bit on - a bit more on why this guidance is guided down to the low end of the range now.

And I think in connection with the Q2 results, the FX impact is the same as guided in connection with the Q2 results and the impact from the hurricanes is basically offset by the additional revenue you now guide on from additional conversion effect? So, thank you.

That'll be my second question.

So if we start with the U.S. development and where are the like for like numbers and I can say we would have been happy to see a little bit of a higher number.

That's absolutely certain. I think it's definitely it is a difficult environment that we are operating in.

And if you want to have a little bit of flavour on one thing, we can say that we actually had one of our big campaigns in the U.S. at a time where traffic was quite severely down in the stores.

So that impacted our quarter in the U.S. If we look at your second question, which was the new product that we see and the launch of that, we've seen a good reception of our new launches.

But at the same time, there is of course also a reason why we have chosen to launch our Christmas collection a bit early and that is to provide more newness. I think we've talked about this a couple of times during the year that we have seen a lack of newness or a little bit too much of the repetition.

That's also one of the reasons why we are looking very much forward to seeing the reception of our new products in 2018 where we have our new team really on the ground. If you look at our guidance and how we have developed that and why we've highlighted the fact that we'll end up in the lower part of it the quarter, you're absolutely right that we also had a currency headwind when we talked to each other last time.

What we can see is that every time in connection to the quarter we actually make a new calculation, our expected development. And we see the hurricanes, we see a bit weaker development in the U.S.

And when we put together all the numbers, we expect to end in the low end of the guidance and that's what our numbers shows us now.

Just one follow-up, if you could comment on the like for like iteration on the group part of it, which also decelerates. And then you elaborated on the lack of newness, but I guess that was what we expected when you were reporting Q2 that should come in connection with the new autumn collection and hence you should have this acceleration in Q3.

Look at the overall reason for why our like-for-like numbers is a little bit weaker than we would have liked them to be to be honest in this quarter. There is two important building blocks of that.

One, you already know, and that is the U.S. You can see that the like-for-like number in the U.S.

is a bit lower. The other big stone in that is China, which is an important part of our retail footprint today.

And in China, we've gone from a very, very strong targeted development into a more normalized development in our like for like numbers. As I said, we don't give numbers for China, but that gives you a bit of flavour on why that has developed like this.

Okay. Thanks a lot.

Welcome.

Good morning. A few questions please.

Firstly on China, do you feel there are some PANDORA specific reasons for the slowdown in retail like for like, thinking maybe product assortment choices, pricing strategy, retail execution, are you - as we entering the fourth quarter and Chinese New Year, taking any immediate actions to fix that part of the business? Secondly, on e-commerce, can you just comment on the shop acceleration in growth?

I think you've added 1 country in the period, but what are the other drivers of the growth acceleration? And given that level of growth in absolute sales, I think you'll probably be over DKK 360 million for the full year eSTORE sales.

Are you seeing any interesting margin developments on that channel? And just finally, just housekeeping in the U.S.

With the closure of wholesale doors, buyback of franchisees and the positive retail LFL, can you tell us what is now in the 9 months the split between retail and wholesale sales? I think it was 20%-80% last year.

I'll take the first question and Peter, he will take the 2 -- second question. Let me just start by saying we are very happy with the development that we see in China and also there is no worries for us to look at there.

If you look at what is happening, we've seen a very, very, very nice development in our e-commerce channel and that of course has an impact on the overall business. But we'll also see our new stores ramping up.

And part of that is the way we have developed China and the way we've decided to develop China has been city to city, city by city, which also means that when we opened a third, fourth, fifth store in a city there will be a bit of impact on the existing stores and that's the way you should look at it. But we feel very good about the 62% growth that we've had in China for the quarter.

And on your question on e-commerce and the acceleration of growth, first of all, driven by China, which had zero in Q3 of last year because we launched in Q4 of last year. And then secondly we do see a good performance in the eSTORE, both in the U.K.

and in the U.S. In terms of the split on revenue in the U.S.

it's been around one third of revenue was retail revenue and two third is wholesale revenue growth numbers.

Thank you.

Welcome.

Yes. Thanks for taking the questions.

Just one on the margin in the Americas. It was down almost 5 percentage points in the quarter.

Any chance you could try to sort of quantify the markdown or increased campaign effect from the U.S.? Thank you.

Yes. I can start and maybe Peter will elaborate a little bit.

There is no markdown effect in the U.S. What you look at in the Americas number is that fact that we have put more emphasis on developing Latin America, we've opened an office in Panama and we have also opened quite a number of stores in the Latin America, 10 actually, in the quarter.

So we expand there and that comes with a little bit of the cost before we see the gain. And I don't know, Peter maybe you have more specific...

On the margin in Americas for the quarter that was negatively impacted by acquisitions of stores where we take that inventory, that impacted with minus 2 percentage point. Then the phasing of marketing activities over the year, minus 1%, the expansion in Latin America, minus 1%.

So that is the -- that is the overall and then finally 1, minus 1% on foreign exchange. So that's the building blocks on the EBITDA margin in Americas.

Very fair. Thank you.

Thank you very much.

Hello. And a couple of questions.

First of all, could you comment on the development in Germany, which seems to be picking up nicely here in Q3? And secondly, you have launched the Disney collection here in the beginning of Q3 and the Christmas collection in the U.S.

as well. Could you give us any indications of how these collections has been received or any early indications for Q4?

That would be my questions.

Thank you very much, Klaus. If we look at the development in Germany, we are very happy with the fact that we have reset the business, we've built a new strong network of stores.

What you should be aware of is that the productivity per store in Germany is still rather low. But of course we are happy with the fact that we see a 26% growth in the quarter.

So we will continue developing the German market. But the reception by the consumers, in general, has been good.

But it is a rebuild and it is going to take some years to get that done. If we look at the launch of Disney, I think we've also mentioned that in our announcement we are actually quite encouraged.

You might remember, we've talked about that at least that we were a little bit extra cautious to investigate how Disney would be perceived in Europe, not least, in the U.K. market.

And we see a very, very, very positive reception in the U.K. So early indications on Disney, and that's the only thing we can comment on, are good.

And what about the sales out of the Christmas collection in the U.S. here in the beginning of Q4?

We will be very happy to talk about when we meet next time.

Okay. Thank you very much.

You’re welcome.

Hi. Thank you for taking the questions.

I just had two on the U.S. One was just to try to elaborate on this point that was earlier discussed on the Christmas impact.

You said that the accounts receivable were flat and that the wholesale customers were made available or announced this in mid-September. Does that just sort of imply that not all of them participated in this quarter in the pre-buy of Christmas, i.e.

that's something that still rolls through? And then another question on U.S.

is you have roughly DKK 50 million of hurricane impact. I was wondering if you could give some sort of understanding of how your physical like for like would have looked net - gross of that, i.e.

without the hurricane impact. And I'm curious on your comment on Q4's DKK 100 million also reflecting consumer confidence in the region.

Is that basically more Caribbean Islands and U.S. mainland?

And then I had another question, just on the implied Q4 margin. You have a change in number of stores, you have the buyback impact, you had foreign exchange and so on.

I was wondering if you could give some sort of clue as to what are the underlying trends in margin changing in Q4 because there is a lot of, sort of, factors which are hard to look at on a one-off basis also affecting the comp last year? And the last question was just on other point of sale where that's only minus 80 in Q3 after a lot of activity over the last 12 months.

I was wondering if you could give some thoughts going forward as to whether you've thought the other point to sale location is going to be down at this sort of level or we should think about something else to work on going forward?

Let me start with the last one and I think the others would be very much for Peter. If we look at the other points of sales what you should expect is that they will continue to decline.

So we do not expect us to go out of all other points of sales. We believe it is a good idea for us to have some representation in less populated areas.

It would be in terms of the stores. You should think in the direction of more shop-in-shops, which is supporting our brand with a quick coverage of our the assortment as well.

But we still have stores to close. We've done quite a bit over the past years, closing around 1,500 stores and we still have some to go.

And then I'll leave it to Peter.

Yes. And on the...

Sorry to interrupt. Can you, sorry, could you just give some view -- my question was also around the pace.

I mean you have a very high pace at periods of time and a very low pace at other periods of time. What should we see as a representation of the pace now that you've done a lot of clean-up?

Okay. Good questions.

I didn't get that. Thank you.

You should expect the pace to be a bit slower. We've taken some very big chunks in Germany and now also last year in the U.S.

So clearly there are a little bit less other points of sales there. So expect to pay, the pace to be slower than what you've seen over the past couple of years.

Yes, on the hurricanes, overall we have around 90 stores impacted in -- of the hurricanes. 20 of those were owned and operated and around 70 was franchise owned.

And if you look at the overall split of the impact, the 150, then round numbers one third in the Caribbean and two third in the U.S. On the margin for Q4, one thing to remember is that last year in Q3 we did the global launch of PANDORA Rose.

So that impact is included in Q4 last year. So we'll not see a big impact this year.

And then round numbers, acquisitions will drag the gross margin of say around 1 percentage point in Q4, still on the other cost lines, admin 9 to 10-ish for the full year. Marketing above 9 around - or above 9 and then sales and distribution between 20 and 22.

Okay. I am sorry.

There was another question on trying to understand your comments on the earlier conversation around the Christmas selling. You said that it was offered mid-September and that accounts receivable were roughly flat.

And I was wondering whether that was meant to imply that you had a not full participation at that stage, i.e. that break of the quarter stage in the pre-buy or whether this was not the message you were trying to give.

Roughly more or less all participated in the buy-in.

Right. Okay.

Thank you.

Thank you. So first question will be, what should we expect you to focus on and elaborate on in the upcoming Capital Markets Day?

And I guess if you want to focus on 2018 and ahead, should we expect you to pre-announce the numbers maybe a day ahead with just the top line numbers or something similar? That would be my first question.

And then second is more of a household question. How much of the eSTORE revenue in China is from Tmall and is this margin dilutive?

And then the third and final question this time around is, how much positive effects should we expect on your gross margin when you in-source all your Rose production?

So first, clearly we don't want to talk about all the things that we're going to talk about the Capital Markets Day. But I think it's fair to assume that what we're going to do is we're going to focus on our strategy and we are going to talk about how we see the future.

And we - if you ask about a top line number, so will we give a trading statement before we have the Capital Markets Day, I think it would be fair to expect that. If you look at eSTORE in China, Tmall is the biggest part of our eSTORE and it is not diluting our margin.

And on the gross margin on the Rose part? And also how come it is that the Tmall is not margin dilutive.

I thought you sold it with, I think, once -- first of all I thought that Tmall has got a share of the pie and then secondly I - yeah, and hence it should be margin dilutive?

If you look at our overall margin it is supportive also of the business that we do with Tmall. Of course, they are paid to support us, that goes without saying, but it's a very small number, so it doesn't have a big impact on that.

I don't know...

And on PANDORA Rose and possible in-sourcing of that, it's difficult to quantify the impact. There will be some upside on the margin.

But this is not something we are ready to quantify for the time being.

And I also think that, we have to learn how to master this. So don't expect it to be a big thing at first.

But as we kind of get it in-house and learn to do this, we will share with you if there is any great highlights on that.

Okay. But just a follow-up on that.

So on the metals we know that the silver carries higher gross margins then gold. Will Rose be something in between or is it -- it will be more gold or more silver?

And then the second question on the Tmall part, so just to understand you correctly, when you said the margin is in line is that the in line the normal retail gross margin or is it in line your group gross margin? I think it's a big difference, right?

I think it is supportive of our group gross margin and that is where we can go on that. And what was your other questions on Rose, again, that was...

It was more to get an understanding of that window that's ...

It is in between. It is in between.

So between gold and silver that's the way you would look at it, absolutely.

Okay. Thanks very much guys.

You’re welcome.

Yeah, just to clarify, Peter, your comment on the inventory. Am I right to assume that the signal you want to send with your inventory statement is that this is not reflecting off that the pre-Christmas sales had a significant impact on sales in the quarter.

That's the first question. Second, regarding Australia, we know there is a huge degree of Chinese tourism.

How greater proportion of the existing business of the growth do you anticipate being tourist related?

Well, let me do the last one. We don't have an exact number on Australia, but we can see that it is - it is something and that's also the reason why we talk about it, it is something we can see.

The thing is that it's often that the Chinese with Australian residency who is buying and bringing back to China and that means that we can't follow it. So we don't have an exact number but we can see that it a number which has an impact on the Australian performance.

Anders, can you just highlight here on the call what is the price front as an index, Australia versus China?

Australia is around Index 80 and China is around Index 140, okay. Quite a big difference in price.

The question on inventory, we don't find it significant on the group, the impact, so that's why we are not putting a number to it.

I think it was maybe the receivable question, so -- and that clearly show we didn't see an increase in receivables as Peter said before in the U.S.

As a consequence of the selling of Christmas.

Yes.

Okay. Thank you.

You’re welcome.

Thank you. It was just that I forgot to get the answer to one of my questions.

It was if you looked at the in-store like-for-like excluding the hurricane impact whether you had a view as to whether excluding the DKK 50 million of hurricane impact, whether the fiscal like-for-like would have been still down or positive?

And then the answer to that question is that of course it had an impact but it was insignificant.

Fine. Okay, thank you.

Thank you very much, operator. Ladies and gentlemen, thank you very much for listening in on the call today and for your questions and we all wish you a very, very good day.

Thank you.