Pandora Lifts Outlook as Jeweler Pushes Lab-Grown Diamonds

Pandora A/S raised its revenue forecast on strong demand as the Danish jewelry chain expands sales of lab-grown diamonds, aiming to popularize the cheaper alternatives to mined gems.

(Bloomberg) — Pandora A/S raised its revenue forecast on strong demand as the Danish jewelry chain expands sales of lab-grown diamonds, aiming to popularize the cheaper alternatives to mined gems.

Full-year sales should increase as much as 5%, the company said Tuesday, reporting second-quarter earnings that beat analysts’ estimates. The stock rose as much as 3.8% 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 for a 2-carat synthetic diamond ring.

The jeweler 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, the lab-made stones are significantly cheaper, matching the company’s focus on affordable jewelry.

Growth prospects are also better. The $6.6 billion global market for lab-made diamond jewelry is set to grow 8.4% a year, faster than the 5.6% 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 jewelry has been high, according to Pandora, which sells more pieces of jewelry than any other company in the world. While lab-made stones accounted for less than 1% 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 ($10 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% 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 rollout 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 jewelry a year, compared with its annual total of some 100 million pieces.

What Bloomberg Intelligence Says:

“Pandora’s upgraded 2023 organic-growth outlook to 2-5% could still be cautious given its 2Q revenue beat and accelerated trading in 3Q to date: consensus is already at the upper end of previous guidance of negative 2-3%. Ebit margin confirmed at 25% suggests more investments in the new store and design rollout for a more-pronounced sales pick-up in 2H, especially in China.”