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Pandora Boxed


Image source: TY Lim / Shutterstock.com

What's going on?

It’s one of the world’s largest jewelry companies and goes by the same name as a US music streaming service: Pandora’s shares fell by 24% on Tuesday, following a less-than-dazzling outlook for the year. (tweet this)

What does this mean?

Pandora’s slashed its 2018 expectations for the second time this year (the first was in January). It’s now expecting sales growth (excluding the effects of currency swings) to be about half of what it was predicting in January, along with a lower profit margin.

The Danish company blamed lower footfall at UK and US malls (as customers do more shopping online) for sales undershooting initial plans – but it’s still aiming to roll out 50 more stores than expected this year. These new “concept” stores will house Pandora-branded products exclusively, so might help charm customers back.

Why should I care?

For markets: Some investors were actually expecting something like this.

Pandora’s shares have fallen by 50% so far this year – benefiting those investors who’ve bet against the stock (by shorting it). To do this, investors borrow shares from an existing shareholder (usually for a fee) and sell them in the market, hoping to buy them back at a lower price. As Pandora warned its sales growth in China was waning in May (as Chinese customers treat themselves to a fancy Hermès bracelet, they’re leaving Pandora’s more modestly priced jewelry on the shelves), some investors quit shorting the stock – but 8% of the shares are still out there on loan, their borrowers betting they’ll fall even further.

The bigger picture: The European heat wave’s helped some and hindered others.

Another European company that failed to sparkle on Tuesday was German ecommerce fashionista, Zalando, as its second-quarter sales came in below forecasts, and it lowered sales and profit expectations for the year. Zalando wasn’t prepared for the summer heat wave so didn’t have all the right stuff in place. On the other hand, fellow countryman Beiersdorf – maker of Nivea skin products – raised its sales forecasts for the year, as it saw a boost to sunscreen sales.

Originally posted as part of the Finimize daily email.

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