Pandora A/S: strong margins, a stretched balance sheet
A look at Pandora Group's FY2025 results: the five-year trend, where the cash went, two real competitors, what the auditor flagged as risky, my own view of 2026 and 2027, and what the share price implies.
How this was built
Figures come from the Annual Report 2025 and Pandora's Q4 2025 and Q2 2026 reports; market data is as of 25 September 2026. The FY2024–2025 ratios were calculated in a live Excel model, with each formula linked straight to the raw figures, and the cash flow, sensitivity, scenario and valuation figures sit in a companion workbook built the same way. This analysis is as of 3 October 2026, before Pandora's 4 November strategic update.
Revenue rose 39%, and margin held until 2025
EBIT margin sat in a tight 25.0–25.5% band from 2021 to 2024 while revenue grew in double digits, so growth wasn't coming at the expense of profitability. In 2025 that broke: growth slowed to 2.7% and margin dropped to 23.9%. Operating cash flow fell DKK 1.36bn, almost all of it from working capital, and cash conversion (CFO / net profit) fell to 1.40x from 1.67x, its lowest since 2022.
Stock sits for 262 days; customers pay in 13
Cash comes in within two weeks of a sale, but stock sits for more than 260 days. That gap sits behind the sub-1.0x current ratio and the rise in gearing to 2.84x. Select a row to see what it told me.
Shareholder returns, not working capital, drove the debt
Working capital cost Pandora DKK 0.43bn of cash in 2025, not DKK 1.9bn. The 1.9bn is the swing in Pandora's reported working capital ratio (from −1.7% to 4.1% of revenue), and the company says 530bp of that 580bp came from unrealised gains on commodity hedges, which are non-cash.
| Line | 2025 | 2024 | Swing |
|---|---|---|---|
| Change in inventories | −565 | −126 | −439 |
| Change in receivables | −424 | +106 | −530 |
| Change in payables and other liabilities | +559 | +932 | −373 |
| Total working capital | −430 | +912 | −1,342 |
Receivables absorbed more cash than inventory even though trade receivables fell (DKK 1,217m to 1,163m), so the drain is in other receivables, which the report does not break down. Payables days rose from 222 to 248, which cut the cash conversion cycle from 44 to 27 days and partly masked the inventory build.
Pandora returned DKK 5.95bn to shareholders in 2025, 118% of free cash flow (81% in 2024). Without the DKK 4.4bn buyback, net debt would have ended near DKK 9.3bn and debt-to-equity at 1.10x instead of 2.84x. Inventory's direct role is small: its DKK 565m cash build is about a fifth of the debt increase. Pandora bought back no shares in H1 2026 and will resume only once the platinum transition is further along.
Silver and tariffs cost about 300bps of margin
Silver jumped from USD 29 to USD 72/oz in 2025 (+150%), and new US tariffs hit Pandora's manufacturing base directly. Together with FX, these cost roughly 300bps of EBIT margin.
Levers in Pandora's favour
- Vertical integration gives more levers than a pure retailer: the Silverstone programme and selective price rises.
- Store expansion delivered four of the six points of 2025 growth.
- A planned 2026 platinum launch aims to reduce silver dependency.
Headwinds into 2026
- Guidance assumes silver at USD 82/oz with tariffs held flat.
- Like-for-like growth guided at −3% to 0%, weaker than 2025.
- Pandora Moments, the Core segment at 74% of revenue, already declined 2% last year.
Best margins in the group, weakest on leverage
I compared Pandora with Signet Jewelers and Lovisa Holdings, the closer peer since it is also vertically integrated and store-growth led. Fiscal years don't line up perfectly, so treat the numbers as indicative.
| Ratio | Pandora A/S | Signet Jewelers | Lovisa Holdings |
|---|---|---|---|
| Gross margin | 79.1% | 39.2% | 82.0% |
| Operating margin | 23.9% | 1.7% | 17.4% |
| Net margin | 16.1% | 0.9% | 10.8% |
| Current ratio | 0.91x | 1.48x | 0.82x |
| Equity ratio | 17.8% | 32.3% | 11.3% |
| Inventory days | 262.0 | 173.4 | ~206 |
Pandora's margin advantage holds even against a strong peer. Signet runs a pure retail model with thin margins by design. Lovisa is structurally closer, yet Pandora still delivers a much higher EBIT margin (23.9% vs 17.4%). Gearing at 2.84x versus Signet's 0.64x is the clear outlier. Lovisa's equity ratio is thinner still, but because it funds store expansion through leases rather than returning capital to shareholders.
Two Key Audit Matters from EY, and one I would add
Restated in my own words, with the procedures I would propose.
KAM 1 Revenue recognition and expected sales returns
Pandora records revenue net of expected returns. That requires a judgement on the returns rate and refund liability before actual returns are known. If the assumptions are off, revenue can be misstated.
- Hindsight test. Compare the 31 December 2024 returns provision with returns actually received in 2025, by channel and market. A consistent over- or under-estimate points to management bias.
- Full-population analytics. Match every 2025 sale to its return to get rates and lags by channel, then recompute the provision from those rates.
- Year-end sell-in. With like-for-like growth guided at −3% to 0% for 2026, there is pressure to ship into partners in December. Receivables absorbed DKK 775m of cash in Q4 alone, so test January–February 2026 credit notes against December shipments.
KAM 2 Inventory valuation
Inventory is carried at the lower of cost and net realisable value. For a jewellery manufacturer that means judgement on slow-moving stock, precious-metal values and internal profit elimination, on a large, estimate-heavy balance of DKK 4,883m.
- The platinum decision as evidence on NRV. On 4 February 2026, before the accounts were signed, Pandora said it will move at least half of its relevant silver assortment to platinum plating in 2027. Test whether lines due to be phased out need a write-down at 31 December 2025, and whether the decision is evidence about year-end conditions under IAS 10.
- Margin squeeze on slow lines. Silver rose about 150% in 2025. For aged and discontinued lines, compare unit cost after hedging with recent selling prices net of discounts.
- Tariffs in inventory cost. Under IAS 2, import tariffs belong in US stock cost. Check they were capitalised consistently, and in FY2026 how the IEEPA refund is split between unsold stock and the income statement.
- Intra-group profit elimination. Recompute unrealised profit in stock held by sales companies at current manufacturing margins.
Added Commodity hedge accounting
Unrealised hedge gains added about 530bp to Pandora's working capital ratio at end-2025, roughly DKK 1.7bn. Under IFRS 9 cash flow hedge accounting they sit in equity until the hedged metal reaches cost of sales, 5 to 10 months later. The platinum switch also means Pandora will buy less silver than it used to plan for.
- Valuation. Revalue a sample of open contracts against independent forward prices at 31 December 2025.
- Recycling. Check that gains move into inventory cost and then cost of sales in the period the hedged metal is used.
- Highly probable test. Are the hedged silver purchases still highly probable after the platinum decision? Any portion that is not must leave hedge accounting, and its gain goes to profit.
How much rides on the 2026 guidance
Management guides 2026 EBIT margin to 21–22%, down from 23.9%, and pins most of the decline on a 250–350bps commodity headwind. The guidance assumes silver at USD 82/oz and current tariffs staying in place. Pick a scenario or move the sliders to build your own.
| Scenario | Revenue (DKKm) | EBIT margin | Implied EBIT (DKKm) |
|---|---|---|---|
| Bear case (low revenue × low margin) | 31,600 | 21.0% | 6,636 |
| Company-guided midpoint | 32,100 | 21.5% | 6,902 |
| Bull case (high revenue × high margin) | 32,600 | 22.0% | 7,172 |
| If 2025 margin held (no headwind) | 32,600 | 23.9% | 7,791 |
Guided range: revenue DKK 31,600–32,600m, margin 21.0–22.0%.
The bear-to-bull range swings EBIT by roughly DKK 536m (about 8%). Holding last year's margin on guided revenue implies a number well above even the bull case, which shows how much of the guided decline is pinned on this one external risk.
2026 holds up; 2027 is where silver bites
My base case is 2026 EBIT of about DKK 7.4bn (22.5% margin), then about DKK 5.0bn (15%) in 2027. Pandora hedges, so 2026 costs reflect silver bought at about USD 32/oz, while 2027 is already hedged at about USD 65/oz.
In H1 2026 revenue was DKK 14,328m (organic +2%, like-for-like 0%) with a 20.6% EBIT margin, against 20.3% a year earlier. In August Pandora raised 2026 guidance to 0–3% organic growth and a 22–23% margin, but about 100bp of that is a one-off refund of US IEEPA tariffs. Underlying, guidance is still 21–22%.
Starts from a 21.5% underlying 2026 margin on DKK 32,712m revenue, with silver in 2026 cost of sales at about USD 33/oz.
| Case | 2026 revenue | 2026 margin | 2026 EBIT | 2027 margin | 2027 EBIT |
|---|---|---|---|---|---|
| Bear | 32,224 (−1%) | 21.5% | 6,928 | 13.0% | 4,205 |
| Base | 32,712 (+0.5%) | 22.5% | 7,360 | 15.0% | 4,962 |
| Bull | 33,200 (+2%) | 23.0% | 7,636 | 16.9% | 5,796 |
Each 2027 case starts from its own 2026 margin without the one-off refund, takes off about 6.8pp for silver at the hedged USD 65, then adds an offset: −0.5pp in the bear case for transition costs, +0.3pp in the base and +1.5pp in the bull for faster platinum and pricing.
| Silver in cost of sales | Change | At DKK 57m per $1 | At DKK 70m | At DKK 80m | Margin at 70m |
|---|---|---|---|---|---|
| USD 50/oz | +17 | −968 | −1,190 | −1,366 | −3.6pp |
| USD 65/oz (hedged for 2027) | +32 | −1,823 | −2,240 | −2,572 | −6.8pp |
| USD 82/oz (February spot assumption) | +49 | −2,791 | −3,430 | −3,939 | −10.5pp |
Pandora does not publish its silver volumes, so I estimated the sensitivity two independent ways. From the 2026 guidance (a 150bp, DKK 490m headwind as silver in cost of sales steps up USD 4–6/oz) it is DKK 57–122m per USD 1/oz. From the hedge book (DKK 1,688m of derivative gains at end-2025, silver at USD 72 against hedges at roughly USD 32–45, about 70% of a year hedged) it is DKK 42–80m. The ranges overlap at DKK 57–80m and the central estimates average DKK 71m, so I use DKK 70m, about 9m oz of silver a year. At USD 82 that takes the underlying margin to about 11% before offsets, close to Pandora's February outlook of at least 12% for 2027. US tariffs are now about 100bp, roughly DKK 330m.
Cheap on last year, full on 2027
At DKK 836 a share, Pandora trades on 12x trailing earnings but about 22x my base-case 2027 earnings. The price only works if margins recover to management's mid-term target of above 21%.
| Multiple | Pandora | Signet | Lovisa |
|---|---|---|---|
| P/E, trailing 12 months | 12.1x | 11.6x | – |
| P/E, my 2026 base | 13.4x | – | – |
| P/E, my 2027 base | 21.6x | – | – |
| P/E, forward consensus | – | – | 22.2x |
| EV/EBITDA, trailing | 7.5x | – | 10.9x |
| EV/EBIT, my 2027 base | 15.8x | – | – |
Leverage moves with earnings. If net debt holds at DKK 13.7bn, base-case 2027 EBITDA of about DKK 7.5bn (EBIT plus 2025 depreciation) puts NIBD/EBITDA at about 1.8x, against 1.3x at end-2025. That helps explain why buybacks are on hold.
What to watch on 4 November 2026
Pandora's strategic update will give a high-level direction for the 2027 EBIT margin, the number this view depends on most. Four disclosures would change it.
| Disclosure | My base case | What it would mean |
|---|---|---|
| 2027 EBIT margin direction | About 15% | Clearly above 15%: toward the bull case. Below 13%: the bear case. |
| Share of silver assortment moving to platinum in 2027 | At least 50%, as in February | A faster switch lifts the offset; a slower one leaves more silver at USD 65. |
| Transition costs and capex | Bear case carries one-offs; capex DKK 600m in total | Higher costs lower 2027 but not the mid-term target. |
| Buybacks and leverage | Paused; about 1.3x NIBD/EBITDA at end-2026 | An early restart would push 2027 leverage toward 2x on my numbers. |
After the update, the workbook's Scenarios sheet takes the new figures and recalculates every number in the last three sections.
The number to watch is on the balance sheet
Margins remain high and, until 2025, were remarkably stable. The leverage was a choice: Pandora returned 118% of its 2025 free cash flow, and the DKK 4.4bn buyback alone explains why debt-to-equity reached 2.84x rather than about 1.1x.
The real test is 2027, when silver hedged at about USD 65/oz reaches cost of sales and could take roughly 7pp off the margin. Management has responded sensibly by pausing buybacks and moving to platinum. At about 22x my 2027 earnings, the shares already price in a successful return to margins above 21%, and the balance sheet has less room than at any point in five years to absorb a slower one.