Pandora to show what is in the box
CEO Anders Colding Friis promises greater disclosure and complains weak share price does not reflect Pandora’s ‘strong business development’
Copenhagen — The CEO of Pandora, which has been under siege by hedge funds this year, says the market is ignoring the jewellery maker’s growth potential. And to make sure investors get the message in future, management is looking into whether it can improve its communications.
"The developments in the share price have taken a lot of focus this year," CEO Anders Colding Friis told Bloomberg in an e-mail.
"Unfortunately, it seems the share price development has overshadowed the fact that Pandora on a business level has had a strong development.
"There are certain forces in the market that speculate against Pandora’s share," he said. "It doesn’t change anything for us as a company. We’ll continue to work hard and purposefully to create value for Pandora and the shareholders."
It’s not my job to assess whether the market has misunderstood us or not. I’m employed to drive Pandora forward and it’s the job of the market to price our resultsAnders Colding Friis
Pandora lost almost a third of its value this year after hedge funds scaled up short bets based on speculation that the US retail market is in trouble. But analysts have largely stuck with their buy recommendations and high share valuations. That makes Copenhagen-based Pandora one of Europe’s most undervalued stocks, based on average price targets.
Short interest peaked at 12.8% of Pandora’s share capital in November, according to data from IHS Markit. It has since slipped below 12%. At the beginning of 2017, short interest was about 1%.
Some funds have started to scale back their negative bets, and the Danish regulator on Tuesday said that AQR Capital Management had cut its short position to 1.99% from 2.09% previously, according to a regulatory filing.
According to filings to the Danish Financial Supervisory Authority, five hedge funds hold short positions that exceed 0.5% of Pandora’s share capital.
Pandora’s shares have fallen even as the company has met market expectations. On average over the past six quarters, net income has beaten analyst estimates by 1.1%, while revenue has missed estimates by 1%, according to data compiled by Bloomberg.
Add up the share price declines investors swallowed on each of those earnings days, it comes to a combined 36.6-billion kroner ($5.8bn), or almost a $1bn in losses every earnings day for the past one-and-a-half years.
"It’s not my job to assess whether the market has misunderstood us or not. I’m employed to drive Pandora forward and it’s the job of the market to price our results," Colding Friis said.
While analysts covering Pandora on average see it as a good investment, some criticise the company for not disclosing enough information on like-for-like sales and the timing of shipments. In November Carnegie said "poor disclosure" makes the stock "uninvestable to many."
"We listen to the feedback we receive from the outside, also from the analyst side, and we’re constantly looking into whether we can fulfil all the wishes that come. It’s just not always possible to meet all wishes at once, especially when the wishes are conflicting," Colding Friis said.
"Having said that, we are continually investigating whether we can improve our reporting form and we will do so in the future," he added.
The US makes up about a fifth of Pandora’s revenue. In the third quarter, US sales grew by 4%, but the result was helped by Pandora’s decision to introduce its Christmas collection earlier. The US market remains a challenge for Pandora and other retailers, Colding Friis said.
Pandora will hold a capital markets day on January 16 and publish preliminary fourth-quarter sales data before then. It is on track to "deliver the highest profits in Pandora’s history" in 2017, the CEO said.