Pandora's Resilient Growth Amid Margin Pressures: Is the Jewelry Giant Still a Buy?

In a world where macroeconomic headwinds test the mettle of even the most established brands, Pandora Jewelry has emerged as a case study in strategic resilience. The Danish jewelry giant's Q2 2025 results—8% organic revenue growth to DKK 7,075 million, driven by 3% like-for-like (LFL) sales and 5% from store expansion—highlight its ability to navigate a volatile landscape. Yet, beneath the surface of these numbers lies a complex interplay of margin pressures, pricing discipline, and long-term strategic bets. For investors, the question remains: Is Pandora still a compelling buy in 2025?

Navigating the Storm: Operational Resilience in Action

Pandora's resilience stems from a multifaceted strategy that addresses both immediate challenges and long-term sustainability. The company has recalibrated its pricing model, implementing a 5% price increase in late 2024 and a 4% hike in April 2025. These adjustments offset DKK 700 million in annualized costs from U.S. tariffs and currency fluctuations. Complementing this, Pandora has rerouted production to Canada and Latin America, saving DKK 250 million annually by 2026 and reducing exposure to U.S.-China trade tensions.

Product innovation is another pillar of Pandora's strategy. The launch of the Talisman and Minis collections, alongside lab-grown diamonds (LGDs) priced 30–40% lower than mined diamonds, caters to Gen Z and millennial consumers prioritizing affordability and ethical sourcing. By 2024, Pandora had sold 113 million pieces made from 100% recycled materials, aligning with a global shift toward sustainable luxury.

Geographic diversification further insulates Pandora from regional volatility. While the U.S. remains its core market (8% LFL growth in Q2 2025), the company is expanding into high-growth regions like Latin America and Southeast Asia. Double-digit growth in Spain, Portugal, and Poland underscores its ability to adapt to shifting consumer dynamics.

Margin Pressures and the Path to Recovery

Despite these efforts, Pandora's margins face headwinds. Gross margin dipped to 79.3% in Q2 2025, down 170 basis points from 80.2% in 2024, due to tariffs, foreign exchange, and commodity costs. EBIT margin fell to 18.2%, a 160-basis-point decline year-over-year. However, the company's full-year guidance—7–8% organic growth and a 24% EBIT margin—remains intact, factoring in a 60-basis-point tariff headwind. For 2026, Pandora projects a 25% EBIT margin (excluding tariffs), signaling confidence in margin recovery.

The key to this recovery lies in Pandora's ability to execute its Phoenix strategy, which includes digital transformation (15% e-commerce growth in 2025) and the “BE LOVE” marketing campaign. These initiatives not only drive customer engagement but also enhance operational efficiency. Meanwhile, a DKK 4.0 billion share buyback program and a conservative leverage ratio (NIBD/EBITDA of 1.4x) provide financial flexibility.

Valuation and Risk Considerations

Pandora's valuation appears undervalued relative to historical averages. A trailing P/E of 15.50 is 8.8% below its 10-year average, while its EV/EBITDA of 8.90 and P/B of 2.68 suggest compelling value. Strong returns on equity (137.62%) and invested capital (27.70%) further underscore its efficiency. However, risks persist: a potential 37% “reciprocal” tariff on Thai imports could add DKK 900 million in annual costs, and gold price volatility remains a wildcard.

Is Pandora Still a Buy?

For investors, Pandora presents a nuanced opportunity. The company's strategic agility—pricing discipline, product innovation, and geographic diversification—positions it to weather macroeconomic turbulence. Its focus on affordable ethical luxury aligns with enduring consumer trends, while its financial discipline (low leverage, robust ROE) provides a safety net.

However, caution is warranted. The U.S. market's softening demand for luxury goods and potential tariff reinstatements could delay margin recovery. Investors should monitor Pandora's ability to execute its 2026 EBIT margin target and the impact of its new collections on customer retention.

Conclusion

Pandora's Q2 2025 results demonstrate that resilience is not just a buzzword—it's a calculated strategy. While margin pressures persist, the company's proactive approach to cost mitigation, innovation, and diversification offers a clear path to long-term recovery. For investors with a medium-term horizon and a tolerance for macroeconomic risks, Pandora remains a compelling buy, particularly at its current valuation. The jewelry giant's ability to adapt to a changing world may yet prove its most enduring charm.