Copenhagen: Shares in Pandora A/S sank in Copenhagen after the jewellery maker cut its forecast for organic growth and warned investors it will only reach the lower end of its target for operating profit this year.

The announcement, which marks Chief Executive Officer Alexander Lacik’s first profit warning since he took on the job in April, drove Pandora shares down as much as 11 per cent as trading started on Tuesday.

The Copenhagen-based company cut its EBIT-margin guidance to a range of 26-27 per cent from as high as 28 per cent previously. It now sees negative organic growth in the range of 7-9 per cent, compared with the 3-7 per cent decline predicted earlier. At the same time, Pandora is stepping up plans to cut costs.

“Pandora is in the middle of a turnaround and in such a phase, not all key figures are equally charming,” Per Hansen, an investment economist at Nordnet, said in a note. “Cleaning up costs money.” He also said it still remains “too early to claim that the turnaround is a success.”

“We continue to believe that we will see an improvement in like-for-like in the fourth quarter, although the exact magnitude is clearly subject to uncertainty,” Lacik said. Third-quarter “financial results were marked by our deliberate Commercial Reset, and we will continue to make any necessary decisions that support the long-term health of Pandora.”

Pandora has introduced a cost-cutting plan and is trying to revive interest for its charms and bracelets by changing its brand and simplifying its product range. The company said third-quarter organic growth declined 14 per cent, due to a change of payment terms in Italy and the continued clean-up of wholesale inventory through inventory reduction. Pandora also said the positive sales effect from new store openings was lower than expected.

What Bloomberg Intelligence Says —

While not a quick fix, Pandora’s rebranding strategy will likely rekindle desirability for the name in 2020, in our view. New CEO Alexander Lacik is so far embracing the plan, with an added emphasis on investment in brand relevance. New designs, collaborations and fewer promotions will aid its jewellery charms offer. A store and product realignment includes a smaller retail footprint and inventory buy-backs.--Deborah Aitken, Senior Analyst for Luxury Goods, HPC & Food, at Bloomberg Intelligence

Lacik, whose predecessor was fired last year, has made tidying up Pandora his main goal. Before Tuesday, he was on track to deliver an almost 30 per cent share-price gain in 2019, which would end two years of stock-market losses for Pandora.