Danish jeweler Pandora, one of the few retailers currently increasing the number of stores it operates, is taking advantage of the property downturn to increase rents and secure better locations.
Alexander Lacik, chief executive of jewelry, said that before the Covid-19 pandemic, renting was “hot” and it was difficult to find the best store location in the city center or mall.
“Now is a more difficult time, there are many opportunities to get a good lease, but more importantly to get a triple A location,” he told the Financial Times.
Known for its charm bracelets, Pandora is one of the world’s largest jewelers by pieces sold and competes in the mass market with higher-end luxury groups such as LVMH.
Last year, the Danish group opened 88 new stores on a net basis and expects to open 50-100 more in 2023. It has 2540 stores worldwide by the end of 2022, two-thirds of its own operations. Others are managed by franchisees or other distributors, while their goods are sold in nearly 4,000 other locations such as stores within larger retailers.
“Half of our customers are men. Men need help with jewelry. We need to know what they are looking for. Brick and mortar is very suitable for us. I will die before this change,” said Lacik.
Pandora stores have increased operating profit within a month or two and are cash-flow positive within a year, he added.
Many retailers are moving away from physical stores as online sales grow in importance. H&M, the Swedish fashion retailer, for example closed 336 stores last year – about 7 percent of its total – on net, and said it would close another 100 by 2023.
E-commerce also increased for Pandora, representing 12 percent of total sales in 2019 and 21 percent last year. But in-store sales have also increased over the same period, by close to 20 percent. Year-end revenue was DKr26.5bn ($3.8bn), and operating profit was DKr6.7bn.
Lacik said that he created a global real estate group in the Danish group “the first thing I asked to get me out of all long leases”. Currently, Pandora may be out of the “majority” of stores in 3-4 years.
He then asked his group to renegotiate the terms with the landlord. “I want more flexibility and a better location. If the price is the same, it’s okay,” said Lacik.
Pandora estimates sales growth between minus and plus 3 percent this year, something that means profitability will be “untouchable”.
Lacik added: “The reason many retailers are closing their stores is [go] from black to red quite quickly. High rent, high employee costs. I can lose half the volume and still break-even.