Pandora’s sparkling comeback powered by stimmy checks and lab-grown gems

Pandora A/S, the world’s largest jewelry maker, has hit a sales milestone, surpassing its pre-pandemic revenues as American consumers have come out in force to buy its charm bracelets, some with new lab-grown diamonds.

“Stimmy checks” had something to do with the latest splurge.

The Copenhagen-based jeweler on Tuesday reported total sales in the April-to-June quarter jumping 7% year on year. Investors cheered the news, sending shares up 3.5% in afternoon trading. Year to date, the stock is up more than 30%, outperforming the benchmark Stoxx Europe 600.

The growth was mainly driven by the U.S., where quarterly sales soared 63% from 2019, and doubled from 2020. China, on the other hand, was a big disappointment; Pandora sales in the world’s largest jewelry market fell 13% from pre-pandemic levels.

“Continued underlying strong performance is further accelerated by the stimulus packages,” Pandora said in a statement, referring to the American Rescue Plan Act in which Uncle Sam sent checks of up to $1,400 in the mail to millions of Americans, or direct-deposited the sum into bank accounts throughout the spring.

Europe, where the stimulus plans were much less generous, saw slower “sequential improvement” for Pandora, even as COVID-19 restrictions were eased.

China woes

The news differed from Pandora’s more upscale rival Tiffany & Co., which reported an excellent quarter, with momentum particularly strong in China and across Asia.

“We have dampened the expectations on the U.S. growth versus the first half, and then we have raised expectations in Europe when the stores reopen, and we are seeing that play out,” Pandora chief executive Alexander Lacik told Reuters.

Pandora previously raised its top-line guidance to 16% to 18% for the year, but on Tuesday warned “the guidance remains subject to elevated risks due to the pandemic.”

Analysts are wondering if the U.S. market can carry the company in the near term. “The questions arise for how long growth in the U.S. operation can offset continued weakness elsewhere, and can Pandora stabilize its European operations to coincide with slower U.S. growth?” said an analyst note from Swedish bank Handelsbanken sent to Reuters.

Pandora may have an ace up its sleeve. The Brilliance line, its lab-created diamond collection, was “progressing well,” the company said on Tuesday. Somewhat controversially, Pandora announced in May it would completely end the use of mined diamonds, making it one of the first major jewelers to do so. It sells the Brilliance gems in the United Kingdom and online, and plans, by next year, to make them available in stores in all markets.

Diamonds produced in a lab are visually and chemically identical to those excavated from a mine and aren’t plagued by reports of human rights abuses at mines and factories. Lab-produced diamonds also cost a third of the price of digging it up from the ground, Pandora’s Lacik said in May. With cost-, ethicality-, and sustainability-conscious millennials buying more engagement rings, Pandora is switching course on where it sources its jewels as opposed to luxury-minded brands like Tiffany that are still committed to mining.

As for China, Pandora has a turnaround plan ready.

“Consumers do not know what we stand for, and we have work to do to fix that,” said Johan Melchior, external relations director at Pandora. “Broadly speaking it is a marketing task—we will increase media investments, sharpen our messaging, work with key opinion leaders, etc. China is the largest jewelry market in the world and remains one of our top priorities.”