* Third-quarter operating profit lags forecasts
* Lowers 2019 sales outlook
* CEO signs sees signs of improvement
* Shares fall more than 16%
* Graphic showing Pandora's sales growth tmsnrt.rs/33hD5Wx (Adds CEO quote from analyst call, updates share price)
By Stine Jacobsen
COPENHAGEN, Nov 5 (Reuters) - Attempts to turn around struggling jewellery maker Pandora by new CEO Alexander Lacik are being hampered by subdued consumer spending in key markets such as the United States and mainland China and political unrest in Hong Kong.
The company’s shares fell more than 16% on Tuesday after it warned of a steeper-than-expected fall in sales this year, just months after a high-profile relaunch of the brand.
Pandora’s sales increased more than 10-fold in the decade to 2017 as it found a niche between cheaper accessories in stores like H&M and more expensive jewellery on offer from Tiffany & Co..
But more recently a lack of innovation and overstretching itself at the top and bottom end of the market kept both shoppers and investors at bay.
Lacik, who describes himself on LinkedIn as a “turnaround architect” and took the reins at Pandora in April, told investors on a call that the company’s turnaround plan was on track.
“We have indeed executed exactly as communicated and we have seen the first early results,” he said, pointing to an increasing number of shoppers in the company’s stores and improved, although still negative, like-for-like growth in October.
However, he cautioned that it was still early days: “I think this will be a bumpy ride for sure”.
The firm, which sold 280,000 pieces of jewellery per day in 2018, hired Lacik, previously CEO of British childcare products maker Britax, after former CEO Anders Colding Friis was ousted last year after several profit warnings.
In a bid to win back customers the world’s largest jewellery maker by production capacity has doubled down on efforts to refresh its image but costs related to the revamp, including reduction of inventories and promotions, weighed on the quarter.
The number of promotional days was reduced by more than 40% in the third quarter which had a negative impact on like-for-like sales which dropped 10% overall.
“One important aspect of this brand relaunch has been to reduce the reliance on promotions,” Lacik told Reuters.
By 1151 GMT, Pandora’s shares were at 287 crowns each, a far cry from a 2016 peak of more than 1,000 crowns.
“Pandora missed expectations on both topline and EBIT. With (full-year 2019) guidance now lowered, the market will question the timing and success of the brand turnaround plan, unlikely to be sooner than expected,” Citi analysts said in a note.
A weaker economy pressured consumer spending in some of Pandora’s biggest markets, including Britain and mainland China, while Hong Kong sales halved, disrupted by weeks of anti-government protests.
In contrast, companies such as German fashion house Hugo Boss and Gucci owner Kering have said that a boost in mainland China sales offset the impact of the unrest in Hong Kong.
Pandora now sees sales falling 7-9% this year, down from a previous forecast of a 3-7% drop and an operating profit margin excluding restructuring costs of 26-27%, down from 26-28% previously.
Third-quarter earnings before interest tax (EBIT) and excluding restructuring costs fell 25% to 891 million Danish crowns ($132.71 million), below the 986 million crowns expected by analysts in a company-compiled poll.
Speculation about consolidation in the jewellery sector was stirred last week after LVMH offered to buy Tiffany & Co, known for its engagement rings and ties to Hollywood glamour, with the owner of Louis Vuitton and Bulgari seeking to expand in one of the fastest-growing parts of the luxury goods market. ($1 = 6.7138 Danish crowns)
Reporting by Stine Jacobsen; Editing by Christian Schmollinger, Louise Heavens, Kirsten Donovan