July 19, 2018 / 8:47 AM / a year ago

Jeweller Pandora cuts China prices to fight grey market, shares drop

COPENHAGEN (Reuters) - Shares in Pandora fell as much as 7 percent on Thursday after the Danish jeweller said it would lower retail prices in China by an average 15 percent to combat a rise in grey market sales.

China is a key growth market for affordable luxury jewellery makers like Pandora due to a growing middle class willing to spend at a time when mall shopping in other big markets like the U.S. and UK is declining.

The world’s largest jewellery maker by production volume, known for its charm bracelets, warned in May of a surprise slowdown in China, which accounted for 12 percent of the company’s total sales in the first quarter.

Pandora said at the time it would try to limit the grey market in China where increasing numbers of jewellery pieces are imported from other markets and sold online.

“Pandora jewellery is highly sought after, and the demand has seen a rise in the grey market trade within China. The price reduction aims to limit this, as well as balance the retail price difference in the mainland Chinese market and other markets,” the company said in a statement.

Pandora shares traded down as much as 7 percent after the announcement, but later rebounded to trade down 2.5 percent at 0925 after the company clarified that the move would not hit margins.

The price cuts would not have any “significant impact” on the EBITDA margin and the firm sees limited impact on revenues because lower prices are expected to be offset by higher volumes, a Pandora spokesman said in an emailed statement.

The grey market trading is primarily done via larger online sites where Pandora does not sell its products and the parallel imports come from both Pandora wholesalers and Chinese residents in other markets where the prices are lower, the company said.

Prices were around 30 percent higher in China than in Europe before the price change, the spokesman said.

Reporting by Jacob Gronholt-Pedersen and Stine Jacobsen; editing by Emelia Sithole-Matarise

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