Pandora doubles down on lab-grown diamonds in latest sustainability push
While lab-made stones accounted for less than 1 per cent of revenue in the first half, it was Pandora’s fastest-growing segment, despite their limited distribution
Pandora raised its revenue forecast on strong demand as the Danish jewellery chain expands sales of lab-grown diamonds, aiming to popularise the cheaper alternatives to mined gems.
Full-year sales should increase as much as 5 per cent, the company said Tuesday, reporting second-quarter earnings that beat analysts’ estimates. The stock rose as much as 3.8 per cent and later traded little changed.
Pandora will start selling synthetic diamonds in Mexico, Brazil and Australia later this year, the company said. Pandora already sells them in the US, the UK and Canada, with price tags going as high as $4,450 (€4,073) for a two-carat synthetic diamond ring.
The jeweller dropped natural diamonds in 2021 after reports of human rights abuses at mines and factories and due to their high carbon footprint. With a starting price of $290 (€265), the lab-made stones are significantly cheaper, matching the company’s focus on affordable jewellery.
Growth prospects are also better. The $6.6 billion (€6 billion) global market for lab-made diamond jewellery is set to grow 8.4 per cent a year, faster than the 5.6 per cent annual growth in the mined-diamond market, according to a 2021 report by Stats & Research. Still, the size of the synthetic diamond market is only a fraction as big.
Demand for synthetic diamond jewellery has been high, according to Pandora, which sells more pieces of jewellery than any other company in the world. While lab-made stones accounted for less than 1 per cent of revenue in the first half, it was Pandora’s fastest-growing segment, despite their limited distribution.
The current collection can only be bought in the UK, US and Canada. First-half sales of the products reached 66 million kroner (€9.2 million). Chief Executive Officer Alexander Lacik said the company has big ambitions with lab-grown diamonds, planning to expand them into its 20 largest markets.
Normally it takes a few years for a new product to reach 5 per cent of total revenue, Lacik said, declining to give a specific forecast for synthetic gems.
Pandora uses renewable energy to produce the stones, resulting in a carbon footprint about one-twentieth of a similar-size mined gem. Pandora is setting the lab-grown stones in pieces using recycled silver and gold.
The new collections will be available in 700 stores at the end of the month, in markets including Australia. Pandora will start selling some collections in Mexico and Brazil in October, with a full roll-out in those markets at the start of next year.
Real diamonds were never a big part of Pandora’s business. Before it banned mined stones, it sold about 50,000 pieces of diamond jewellery a year, compared with its annual total of some 100 million pieces.
“Pandora’s upgraded 2023 organic-growth outlook to between two to five per cent could still be cautious given its second quarter revenue beat and accelerated trading in its third quarter to date: consensus is already at the upper end of previous guidance of negative two to three per cent. Ebit margin confirmed at 25 per cent suggests more investments in the new store and design roll-out for a more-pronounced sales pick-up in the second half of the year, especially in China.”
