Pandora's $1 Billion Share Plunge Starts Fingerpointing at CEO

(Bloomberg) -- The last time the shares in Pandora A/S fell as much as they did on Tuesday, the jewelry maker fired its chief executive officer. So it’s no surprise that question marks are now growing next to the name of the current CEO, Anders Colding Friis.

Against the backdrop of a slowdown in the company’s global expansion, the shares closed 24 percent lower in Copenhagen after Colding Friis lowered a financial target that he had described as "realistic" as recently as January. Investors had already been hammered in May, when the company’s first-quarter earnings failed to live up to expectations.

Pandora’s board declined to comment on the CEO’s position and the company gave few details on what caused the profit warning. Colding Friis, 54, will speak to investors, analysts and the press on Thursday, at the second-quarter earnings presentation, spokesman Johan Melchior said by phone.

After cutting the revenue and profit outlook and then announcing almost 400 jobs cuts in a subsequent release, the CEO said in a statement that Pandora is “on the right long-term direction.”

The warning will “put the continuity of the management team and the board in question,” said Zuzanna Pusz, an analyst at Berenberg, while RBC analyst Piral Dadhania said that the management’s “ability to deliver is now under close scrutiny.” Soren Lontoft Hansen, an analyst at Sydbank, said that “trust in the communication from management has suffered yet another blow.”

Investors were more muted, though many delivered the ultimate verdict by selling their shares. Denmark’s biggest pension fund, which held 2.74 million Pandora shares at the end of 2017, is “very disappointed” with the jewelry maker, Claus Wiinblad, head of equities at ATP, said by phone.

He declined to say if he still trusts Colding Friis to lead the company. “We have an ongoing dialog with the management. We’re not commenting on personnel matters.”

At least three analysts cut their recommendations as the share plunge wiped more than $1 billion off Pandora’s market value. Tuesday’s drop was the biggest since Aug. 2, 2011. Back on that day, Pandora plunged 65 percent after a surprise profit warning that was accompanied by the firing of CEO Mikkel Vendelin Olesen.

Pandora’s time as a listed company has been a roller-coaster ride. The 2011 drop came just 10 months after the firm had successfully listed on the stock exchange. After the 2011 decline, Pandora shares rose through 2016, jumping almost 20-fold as it repositioned itself in the so-called affordable luxury segment.

Colding Friis joined Pandora in March 2015, enjoying the tail-end of the golden period before retail weakness in the U.S., hedge funds building short positions and problems with a gray market in China started to dominate the agenda and depress the stock. He was previously CEO of Scandinavian Tobacco Group.

Pandora has let a number of key managers go recently. Chief Financial Officer Peter Vekslund was fired earlier this year and at least two senior people at the communications department have been replaced over the last 12 months.

The trust in the current management “is gone, completely gone,” Per Hansen, an investment economist at Nordnet, said in a note. There’s pressure to replace Colding Friis, “who has provided too many negative surprises and at the same time maintained a distant facade, which you’re only allowed to have if you have the qualities of a Zlatan Ibrahimovic.”

Whether Colding Friis has a future at Pandora or not, he did secure another job this week. Danish high-end stereo maker Bang & Olufsen A/S on Tuesday said it will propose electing him to its board, citing his “experience and knowledge within sales, marketing, retail, supply chain and online sales.”

To contact the reporter on this story: Christian Wienberg in Copenhagen at cwienberg@bloomberg.net

To contact the editors responsible for this story: Jonas Bergman at jbergman@bloomberg.net, Nick Rigillo

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