Exclusive-Pandora exploring ways to restructure struggling China business, sources say

Danish jewelry maker Pandora is exploring a major restructuring of its struggling China business, including potentially licensing its brand and assets for five years to local funds and e-commerce partners. This strategic pivot follows an 80% decline in China revenue since 2019, with the market's contribution to total sales plummeting from 11% to 1%, driven by post-pandemic consumer malaise, intense local competition, and a shift in consumer preferences. While Pandora aims to reposition its brand in the world's largest jewelry market, analysts caution that finding a suitable partner for the underperforming unit may be challenging, and any successful turnaround would necessitate significant investment.

Analysis

Pandora A/S (PNDRY) is pursuing a significant strategic restructuring of its China operations, potentially licensing its brand and assets for five years, following a catastrophic decline in performance. The company's revenue in China has plummeted by nearly 80% since 2019, reducing the region's contribution to group revenue from 11% to a marginal 1%. This collapse is attributed to a confluence of factors: post-pandemic consumer weakness, intense competition from digitally native local brands, and a market-wide shift in consumer preference towards gold and high-value jewelry. Despite the company's public commitment to the world's largest jewelry market, the operational instability, evidenced by three leadership changes since 2022 and ongoing store closures, underscores the depth of the crisis. While a licensing deal modeled after Gap's sale to Baozun could offload operational risk to a local e-commerce specialist, expert commentary cited in the report suggests finding a partner will be challenging and any turnaround effort would be costly and difficult, offering no immediate path to recovery.

Key Decisions for Investors

• View the potential restructuring in China as a necessary de-risking measure to stem losses, recognizing that the segment's financial impact on the group is now minimal at only 1% of total revenue.
• Monitor for announcements of a partnership; a deal with a strong local e-commerce operator could be a long-term positive, while a failure to secure a partner would signal the asset's unattractiveness and could precede a full write-down.
• Factor in that even with a new partner, a turnaround is considered costly and challenging, meaning any meaningful financial contribution from the China market remains a distant and uncertain prospect.