Shifting Consumer Spending Will Erode Traditional Jewelry Demand

Key Takeaways

• Consumer shifts toward experience-based spending and Pandora's dependence on legacy products risk stagnating revenue and undermining future growth.
  
• Rising sustainability demands, digital competition, and saturated markets are exerting pressure on margins, profitability, and long-term expansion potential.
  
• Broadening product offerings and omnichannel investments are fueling growth, while robust cost controls and expansion into affordable luxury strengthen long-term revenue and margin stability.

Catalysts

Engages in the designing, manufacturing, and marketing of jewelry products.

• The sustained shift in consumer preferences towards experience-based spending instead of goods threatens to undermine long-term demand for jewelry, and as discretionary dollars are channeled away from products like Pandora's, this is likely to result in structurally weaker revenue growth and potential stagnation in core product categories.
  
• Pandora's ongoing reliance on charm bracelets and legacy core offerings increases its vulnerability to rapidly changing fashion cycles and limits its diversification, putting future top-line growth and gross margins at risk if its product innovations, like Minis and Talisman, fail to resonate long-term.
  
• Accelerating demands for greater sustainability and transparency in sourcing, coupled with rising expectations from younger and global consumers, mean that any delay in adapting manufacturing or sourcing could significantly raise operational and compliance costs, resulting in sustained margin pressure and reduced net earnings.
  
• The proliferation of direct-to-consumer brands and emerging digital-first competitors is intensifying the online jewelry market, driving increased promotional intensity, eroding traditional pricing power, and likely reducing both future revenue growth and profitability, especially as Pandora's own like-for-like metrics slow sequentially.
  
• With key mature markets like North America and parts of Europe nearing saturation and physical retail transformation accelerating, further network expansion will yield diminishing returns and fixed cost leverage is likely to decline, compressing operating margins and threatening long-term earnings growth.

Pandora Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Pandora compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Pandora's revenue will grow by 4.2% annually over the next 3 years.
• The bearish analysts assume that profit margins will shrink from 16.5% today to 12.9% in 3 years time.
• The bearish analysts expect earnings to reach DKK 4.7 billion (and earnings per share of DKK 68.41) by about August 2028, down from DKK 5.4 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 12.5x on those 2028 earnings, up from 12.0x today. This future PE is lower than the current PE for the GB Luxury industry at 14.7x.
• Analysts expect the number of shares outstanding to decline by 5.35% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.92%, as per the Simply Wall St company report.

Pandora Future Earnings Per Share Growth

Risks

• Pandora's successful execution of the Phoenix strategy is broadening its product offerings beyond wristwear, opening access to the much larger remaining jewelry market, which could significantly boost long-term revenue growth if the brand transformation continues to succeed.
  
• The company's strategic investments in marketing, store refurbishments, and omnichannel capabilities-including a new e-commerce platform that has already yielded higher revenue per consumer-may sustainably enhance customer experience and drive both top-line growth and margin improvement.
  
• Despite persistent external headwinds from tariffs, FX, and commodity prices, Pandora has demonstrated robust cost control, agility in pricing, and effective hedging strategies, enabling the maintenance of strong EBIT margins near 24 percent and returns on capital above 40 percent, which supports resilient earnings.
  
• Pandora's strong presence and growth in the U.S. market, coupled with ongoing physical network expansion yielding high incremental margins, provides a substantial and relatively untapped growth runway, supporting both revenue and profit expansion in a key geography.
  
• Expansion into new product segments, such as lab-grown diamonds, and focus on more affordable and innovative collections like Minis and Talisman, position Pandora to capture new demographics and reinforce its leadership in affordable luxury, mitigating fashion cycle risk and underpinning long-term revenue and gross margin stability.

Valuation

• The assumed bearish price target for Pandora is DKK756.99, which represents two standard deviations below the consensus price target of DKK1208.16. This valuation is based on what can be assumed as the expectations of Pandora's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of DKK1650.0, and the most bearish reporting a price target of just DKK700.0.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be DKK36.7 billion, earnings will come to DKK4.7 billion, and it would be trading on a PE ratio of 12.5x, assuming you use a discount rate of 6.9%.
  
• Given the current share price of DKK844.6, the bearish analyst price target of DKK756.99 is 11.6% lower.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.