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Welcome to the Pandora interim financial report. [Operator Instructions]Today, I'm pleased to present Head of Investor Relations John Beckem (sic) [ John Backman ]. Please begin your meeting.
Good morning, everyone, and welcome to the extended conference call for Pandora's Q1 results and the announcement of our new strategy.I am John Backman from the investor relations team. I'm here with our CEO, Alexander Lacik; and our CFO, Anders Boyer; and the rest of the IR team, Kristoffer Malmgren and Mikkel Johansen.Slide 2, please. Please pay notice to the disclaimer on Slide 2.Alexander, please go ahead.
Thank you, John. And welcome, everyone, for joining us in this extended call today.Today's call will be split in 2 parts. First, we'll go through the Q1 results, and there will be a 30-minute Q&A session for that part. [Operator Instructions] Then in the second part, we will present our new strategy, and there will be a Q&A session following that as well.Next slide, please. Go to the following slide. Today is a big day for us as we release our new strategy, Phoenix, a new chapter of sustainable and profitable growth for Pandora. The turnaround has been successfully completed. The top line has been stabilized and we have a much stronger organization. We're now ready to share the highlights of our new strategy, which will lead Pandora into chapter of sustainable and profitable growth, but more on that later. Let's first start with the Q1 numbers.As already announced in the March trading update, we've had a strong start to '21 with a continued strong momentum. Our strong online growth continued and was up over 200% versus 2019. The U.S. growth was very strong, up more than 50% versus 2019. Overall sell-out growth in the quarter was only down 5% versus '19 despite that 30% of the stores were closed in the quarter. We are pleased with the start of the year.Next slide, please. On top of announcing the new strategy today, we have 3 other important announcements to make. First of all, based on the strong performance so far and our expectations for the rest of the year, we upgrade our guidance for the year to now expect organic growth above 12% and EBIT margin above 22%. Secondly, we also reinitiate cash distributions to the shareholders by doing a combination of extraordinary dividend and share buybacks. And finally, today, our new sustainability report is also released, where we disclosed strong results achieved so far and our ambitious goals for the future.Slide 7, please. Our underlying performance is best viewed versus 2019, when there was no impact from COVID-19. Using Q1 '19 as the comparison, in Q1 '21, we saw solid performance across most key markets despite lockdowns. U.K., which is our second largest market, was only down 16% versus 2019 despite all the stores being closed in the quarter. Our stores in the U.K. are now fully opened again. The performance in our largest market, U.S., really stands out, with sell-out growth 52% higher than the same quarter in 2019. Australia, which was almost fully opened, also delivered positive growth versus '19. As expected, China is still underperforming in the quarter. We're now getting ready to take the first and significant steps in the China transformation and increase our investments to strengthen and reposition our brand and reduce promotions during the second half of the year.Next slide, please. As said already, we think our underlying performance is best viewed versus '19. The sell-out growth of minus 5% versus '19 is impacted by opposing factors. We talked about these in Q4 as well, and they are still all very relevant: first, lost revenue from closed stores, which is partly offset by revenue picked up online instead; secondly, as we have talked about before, a shift in general consumer demand away from traveling and services, for instance, and towards, among others, gifting and jewelry. In the U.S., this has been fueled further by the stimulus packages. Net-net and trying to cut through all of this noise, our assessment is that the underlying Q1 performance confirms that this top line is stabilizing.Next slide, please. It's clear that we're maintaining our industry-leading brand position. However, with lockdowns and closed stores, we have adjusted the spend pattern more towards digital, especially in markets where physical retail has been closed. So a little bit less of top-funnel spending, which impacts the unaided brand awareness. More than 1/3 of all Google searches for branded jewelry globally was for Pandora in the quarter, while the 2 closest competitors had around 10% share of searches. On global unaided brand awareness, we were #1 in 5 out of 7 key markets in the quarter and ranked second highest in the U.S.Next slide, please. Let's have a look at our digital results in Q1. Online growth continued, and revenue more than doubled versus 2020 and was up over 200% versus 2019. Our online conversion rate was up over 80% year-on-year, and the conversion improved for most of the steps during the consumer acquisition funnel from traffic to sales. The click-and-collect concept in the U.S. continued the strong traction and made up around 10% of online sales in U.S. in the quarter. Digital plays a key role in our new strategy that we will cover later in this call, both as a foundation for the strategy and as a growth driver.Next slide, please. Today, we launched our new sustainability report with increased disclosure. Sustainability is close to our hearts, and we're working towards becoming a low-carbon circular and inclusive business. In 2020, we lowered our CO2 footprint and switched to 100% renewable energy in our manufacturing facilities in Thailand. We're supporting a circular economy and have established a road map towards achieving our target of using only recycled silver and gold by 2025. Our recent refinancing also links part of our borrowing costs to our sustainability goals to be carbon neutral and use recycled metals only by '25. It integrates sustainability into our capital structure and creates a transparent further incentive for us to reach our goals.I will now hand over to Anders to take us through the financial performance.Anders, please go ahead.
Thank you, Alexander.Let's go to Slide 13 and where we can have a short look at the financial performance in the first quarter. As Alexander already said, the first quarter performance was strong given that 30% of the stores were closed. The EBIT margin was up 5 points -- 5 percentage points compared to last year and mainly driven by the robust operating leverage that we see in our business. In the Q4 announcement from back in February this year, we said that the cash conversion in the quarter will be affected by both a last -- larger reduction in payable as well as a deliberate increase in our inventories. And as you can see on the cash conversion here, that is quite visible in that KPI in the quarter, but despite this negative cash conversion, the net working capital continues to be low and was still negative by the end of the first quarter.And then I would also just mention the significant increase in earnings per share that you can see in the last row of the table here and just noting that earnings per share is obviously also supported by the fact that we have no restructuring costs now that Programme NOW is behind us.And go to the next slide, 14, please. On the revenue development here on Slide 14, we have provided both a bridge versus '19 and versus '20. And I know it's quite a lot of data, but we hope it's useful for you.I think the bridges are mostly self-explanatory, so I won't go through them, but there's one unusual building block in the bridge versus 2020 in the lower part of the slide. And that's the negative -- 6% negative impact from calendar shift, as we call it. And it's somewhat technical, but it relates to the fact that different calendars are used for sell-out growth and organic growth. And the organic growth is calculated on the calendar month, obviously, I will say, but the sell-out is based on weeks and the so-called 4-4-5 retail calendar. And sell-out in Q1 therefore covers weeks 1 to 13, which is January 4 to April 4 of '21. That means that the sell-out KPI includes 4 trading days in April where we are comping very limited revenue in 2020, and therefore sell-out ends up being higher than organic growth. And that's -- it's pure timing, of course, and we will see the reverse effect here in the second quarter.So next slide, please. The only thing I want to say about the EBIT margin is that we are pleased with the performance and that we are pleased to see the positive operating leverage in the quarter when revenue goes up. And the rest should be quite self-explanatory, so in order to move us forward to the Q&A, I suggest that we go to Slide 17 and the guidance.Based on the strong start to the year, combined with our updated expectations for the rest of the year, we have upgraded our guidance for both organic growth and the EBIT margin, as Alexander said. So there's 2 comments I would like to give to the guidance. First and obviously, the guidance is associated with significantly higher uncertainty than normal due to the pandemic. And secondly, the guidance still provides a floor for what we expect, and we deliberately leave the guidance open aided -- open ended and based on a -- certain specific COVID-19 assumptions. And I'll comment a bit more on this on the next slide, 18.On Slide 18, I have 3 comments to the organic growth guidance that we are showing here. First of all, we have still included a 6 percentage points impact of the pandemic on the full year revenue. The -- and that's the same as in the original guidance. The only difference is that we now expect it to be spread across all 4 quarters of the year and not just the first 2 quarters as in the original guidance. Secondly, I will call out that this 6% revenue impact from the pandemic only includes the net impact of closed stores and online picked up from those closed stores. It doesn't include the tailwind from the stimulus packages in the U.S., which also needs to be taken into account if you want to reflect on the implicit underlying performance in the guidance.And finally, the guidance corresponds to a sell-out growth versus '19 of around, let's say, minus 2%. And given that we have delivered minus 5% sell-out growth in the first quarter versus '19, then the implicit rest-of-year sell-out growth guidance or the guidance floor is therefore around minus 1% versus '19. We just wanted to give you that data point as well. So around minus 1% for the rest of the year on sell-out growth. And when we look at the current trading for the second quarter, so that's April, we are doing better than that implicit guidance for the rest of the year. As you'll probably seen in the company announcement already, we'll expect April to end with the sell-out growth being mid-single-digit positive versus '19. And it continues to be driven by the U.S., where performance in April is actually even stronger than in the first quarter. And as you heard just before, sell-out growth in the U.S. in the first quarter was plus 52%, but April is above that level. And you'll see the details when we send out a trading update for April in just a few days.On that note, I would like to stress that we hope and expect to stop sending out monthly trading updates soon. When the number of closed stores due to the pandemic gets below, let's say, 15%, then we plan to revert to normal quarterly reporting.So on the next slide, the EBIT margin guidance. We have upgraded the EBIT margin guidance by 1.1 percentage points. And on the one hand, that's supported by the operating leverage. And we've also -- it's also supported by a bit higher cost reductions than what we had guided previously. On the other hand, we will be investing in supporting the strengthening of our brand in China. And initially, this will be a drag on the bottom line both in absolute terms and not least in terms of the margin as well.Then going to Slide 20. During the last year, we've taken quite a prudent approach to our cash distribution due to the pandemic, but now based on another quarter of good performance, our low leverage and our strong liquidity, we are reinitiating cash distribution. And as an extraordinary measure due to the pandemic, the cash distribution will follow what we have been calling "pay as you go" approach. So we're initially paying out DKK 1 billion during the second quarter of the year, and assuming that the pandemic situation improves, then we will expect to continue the quarterly distribution in the third and fourth quarter of the year.And with that, I'll hand it back to Alexander.
Thank you, Anders.So our performance in Q1 shows strong underlying performance in most key markets. As Anders mentioned, U.S. and online are the key drivers of our growth. And based on the strong performance and our expectations for the rest of year, we -- and as Anders just went through, we will upgrade the financial guidance as well as reinitiate distributions to our shareholders, so a good day all around, I would say.And with those remarks, we're ready for the Q&A session regarding our results. [Operator Instructions] When we are done with this, we will get into the Phoenix session. And we'll also be joined by our Chief Marketing Officer, Carla Liuni, but before that, let's get into the Q&A. Operator, please go ahead.
Now that we have finished the quarter 1 announcement, we would like to lift our sights and discuss what lies ahead of Pandora in the years to come.I have 2 pieces of good news. On one hand, we declared the end of Programme NOW. On the other hand, we're excited to introduce our new strategy which we call Phoenix. Given the relatively limited time we have today, the intent is to give you a high-level overview of the key components in our go-forward strategy. I fully realize it might be challenging to assess these from a numeric standpoint, as we will not disclose any figures yet, but there should be meaningful value to discuss the direction of our company and the key choices we have made. We have included a deeper dive into one of the growth pillars such that we can demonstrate a more concrete output of this new plan. Our ambition is to hold a Capital Markets Day in September where we will be able to share more details across the full suite.We're excited to share with you the third chapter of Pandora's journey. In the first chapter, the founder successfully introduced the Moments platform. In the second chapter, Pandora quickly established a strong and profitable global retail network. We will continue to improve on these, as they are critical to our success. In the upcoming third chapter, we will seek to unfold the true potential of Pandora by putting the brand and our customers at the center of everything we do. The strategy we're launching today is focused on further developing our existing core business, where we see significant opportunities to generate growth. The strategy is, on one hand, built on leveraging some of the unique advantages we possess like our manufacturing capability, global distribution network and well-known brand. On the other hand, we have drawn useful learnings from Programme NOW. These ingredients, together with our view of what it will take to win on the global stage in the future, have shaped the new strategy.As we have said before and to manage expectations, we will not provide any numbers or financial targets today. Our turnaround efforts have clearly improved the foundation of Pandora, but the COVID-19 situation continues to blur the picture, so it's still a bit early to disclose numbers. As I just said, we will cover this and much more in the upcoming Capital Markets Day. Although we won't be sharing any financial targets, we can safely say that we will expect to deliver a balanced top and bottom line growth.We do operate in a healthy market segment that in the last 10 years has been ahead of GDP growth. Our initial ambition is to be in line with the market growth. The key value driver is growth within our core business. We don't need to pursue completely new business areas to create growth, as we see plenty of opportunities closer to home. It's also important to stress that we do not need to succeed with all growth opportunities in Phoenix in order to deliver on our growth ambitions. In the mid- to long term, we are -- we see interesting opportunities for Pandora within M&A, new product segments and select geographic expansion. It is a deliberate choice to deselect those for now in order to stay laser-focused on our plan.Before we begin the actual presentation, I would like to remind ourselves why Pandora plays such a unique role in people's lives. We said that the third chapter is all about the brand and our customers, so let's see what they have to say.[Presentation]
What these customers are saying is really the essence of what Pandora is all about. We have built the brand on the idea of people being able to express themselves in a very unique and personal way. Throughout history, humankind has shared feelings of happiness, love, pride and belonging. This need for self-expression lies at the heart of connecting with our partners, friends, family and many others; and it is the essence of our brand. That is why Pandora is a story about touching the lives of hundreds of millions. Every day, people express who they are and what matters to them with their Pandora jewelry. Whether it's a display of friendship or romance of any kind; or a love of art, gardening or our planet, our jewelry is a way to express these loves. That is our purpose. We give a voice to people's loves.Pandora pursues this purpose by creating affordable hand-finished jewelry for the many rather than the few, jewelry that can be personalized to reflect the many facets we all have and express who we are. Our purpose is also about celebrating and empowering people in becoming who they wish to be. And it's about caring for our shared planet by crafting our jewelry with respect for resources, environment and people, leading our industry towards a more sustainable future.Before talking about the future, we want to pay tribute to the turnaround journey we have been through in the past 2 years. When initiating Programme NOW, we said that we would stabilize the top line while retaining strong profit margins. Due to COVID-19, it is difficult to compare year-on-year development exactly, but when looking at the underlying factors, the net effect is that we believe the last 3 quarters are showing positive growth. We achieved this by focusing on, first, driving heat back into the Pandora brand; secondly, improving access to the brand; and finally, to structurally reset our cost base. Let's quickly take a closer look on some of these achievements, as they are partly foundational of the new strategy.From a growth point of view, we can highlight 3 areas where NOW has delivered and placed us in a much stronger position. We have revitalized the brand by developing communication based on much stronger understanding of our customers. We have invested significantly more in driving awareness behind a multipronged media model. The payoff in increased customer engagement and like-for-like sales has been very clear. We have step-changed our digital capabilities. Our investment in the e-commerce business has paid off, as we record stronger traffic and conversion rates than ever before, COVID-19 notwithstanding. We have embarked on new omnichannel solutions to broaden the access and services to our customers. We have also made strong progress in digital marketing.Our product portfolio has been restructured and slimmed down, leading to much higher productivity. We have applied a more data-based and analytical approach to our merchandising efforts, which amongst other things materially improved product availability. Furthermore, a renewed focus in our assortment affordability and collectibility has been critical to improve sales performance. Finally and certainly by no means least important is the organizational restructure we implemented last year. We have created a customer-centric organization that operates faster and connects our markets closer to Copenhagen. This allows us not only to be agile but also to draw on our global scale. We can move business insights across our global network lightning fast. This is most definitely a new competitive advantage.With a strong foundation and a clear direction, we are now excited to let you in on the plans of our future journey. Let's kick this off with a small video.[Presentation]
With Phoenix, we are changing our mindset from turnaround to growth, from fixing a lot of problems to more positive and forward-looking plan. The purpose and the idea behind Pandora is still the same, but we now have a new ambition, a new objective for the company and where we see Pandora.With the purpose in mind, we have set an ambitious plan for our company. We want Pandora to become the largest and most desirable brand in the affordable jewelry market. This will be accomplished by continuing to deliver high-quality jewelry to our customers around the globe and by staying true to our fundamentals: affordability, personalization and collectability. Why do we call it Phoenix? The phoenix bird resembles rebirth, as at the end of its life cycle, it will burst into fire and be reborn from the ashes. A new, magnificent bird emerges, more powerful and more desirable for every time. Associated with the sun, the phoenix is seen as a symbol of immortality and transformation, all elements that span across Pandora's journey as we move from turnaround and into growth. We consider the new strategy to be an evolution rather than revolution. Now let's have a closer look.At the heart of Phoenix, we keep the reason why we exist, which is our purpose. As I said, Phoenix is fundamentally about driving balanced profitable growth. We have a very good understanding of our drivers and have picked 4 growth pillars to focus on. They are fueling our brand desirability and reach, creating consumer-centric designs, personalizing the customer experience and growing our core markets. Today, we will give you a snapshot view of 3 pillars; and a somewhat deeper dive into the design pillar, where we will show you some of the early outputs that will hit the market already this year. It goes without saying that you need a solid foundation to stand on. We have put in place a good foundation in all critical areas during the last 2 years. This means we have a strong starting point. We have done a thorough assessment across 5 areas, as can be seen in the foundational layer. We have defined desired end states and developed multiyear road maps on how to get there. We're also launching a new set of core values that have been codeveloped with our employees and designed to support our growth strategy.I wanted to briefly highlight 3 major aspects of our foundation before diving into the growth pillars. Our most important asset is the 26,000 employees and partners that are located in all corners of the world. The second point I want to touch upon is our sustainability agenda. And thirdly, I want to highlight the transformation from a traditional analog business to a modern company with an aggressive digital agenda.First, let's look at some aspects of our people agenda. We have simplified the organization by removing the regional layer and built 10 market clusters with clear accountabilities. We have refreshed 5 of the general managers to drive growth and stronger leadership. We have rebuilt the executive team, which now boasts world-class talent in each position. Our global operating model has been flattened and simplified based on 2 global product categories. This is an organization which is rooted in being close to our core markets and local customers. This new operating model makes Pandora more responsive to customer preferences. Our ambition is to become much faster from idea to execution.We have invested in critical capabilities in marketing, merchandising, digital and supply chain in order to create more capacity for growth. This has led to over 1,000 white collar hires in the last 12 months across the entire global organization. We now have capacity and capability to support growth in our core markets. We have reset our performance culture to dial-up focus on ambition, courage and execution. We're driving high-performing teams development in our top 20 teams across the company. We have realigned how we manage performance so we can carry the strategy from launch to execution. We have identified a global scorecard of 27 KPIs, which we will use to track performance. There is a clear link between our performance and pay, a model which we continuously keep refining. We have defined performance leadership at Pandora for the first time and have started to assess all senior leaders to identify strengths as well as gaps for attention. This will roll through the next 2 years.Sustainability is and has always been an integral part of our business. We lead our industry by being a low-carbon, circular and inclusive and fair business. We have previously announced some very ambitious ESG targets. We will be carbon neutral in our own operations and only use 100% recycled silver and gold by 2025. Furthermore, we have joined the science-based target initiative. Specific targets will be announced later this year when the studies are concluded. Lastly, we're developing a strategy for inclusion and diversity to advance equality. For more information about our programs, you can find a comprehensive overview in the sustainability report that we released this morning. Given our size and reach, our ambition is to be both a thought leader as well as a catalyst of change towards a more sustainable future.The third foundational element I want to highlight today is digitalization. As I mentioned earlier, we have progressed with pace in the last 2 years. Our ambition is to become the leading direct-to-consumer brand in the jewelry industry. We believe that successful brands of tomorrow will need to excel in creating personalized shopping journeys. In our case, we also need to do this at scale.In the digital strategy, we have identified 3 key areas which will enable us to deliver on that ambition. Those are organization, technology and data analytics (sic) [ data and analytics ]. We have built a new digital powerhouse in Copenhagen. There are more than 400 colleagues dedicated to deliver digital and technology solutions that are driving growth. The Digital Hub is the place for our data, digital and tech experts to innovate and work together to transform our customer experience online as well as in store. We will continue to strengthen our digital organizations as we are setting the bar high to become the leading global direct-to-consumer jewelry brand. We have recently announced that we are merging our IT, digital and data organizations into one new global digital and technology function. This new setup will ensure full alignment in delivering on our growth plans as well as empowering our amazing employees through improving their daily work with technological touch points.The second key area we are further strengthening and standardizing is our technology foundation. We are working on cleaning up fragmented legacy systems that, to a degree, have been slowing us down. For example, rollout of omnichannel features like click-and-collect have been slow due to incompatible systems. Good work has been done on taking cost out of our technology platforms through the IT transformation work. The next phase is about reducing complexity, increasing speed and enhancing return on investments. The final key focus area in our digital strategy is data and analytics. The #1 priority is to focus on the changes that drive growth. A key priority is to significantly ramp up our efforts to capture more data. We will create more value for customers to share their data with us in stores and in our marketing channels.In 2020, we had over 650 million customer contacts in our own channels. This generated close to 40 million transactions. Historically, Pandora didn't capture any meaningful customer data. There was also no structured effort to mine even the transactional data that we have. We plan to increase the amount of data we capture dramatically over the coming years. This will be done in a systematic way through, for instance, online sales, everyday contacts in the physical stores, introduction of a new loyalty program, new services and incentivizing customers to share richer data with us. Capturing the data, however, is not enough. The key to create value is being able to analyze, uncover insights; and important, leverage those by personalizing the customer shopping journey. We've made a start with our global marketing customer view platform and customer segmentation, dynamically driving our digital media spend, meaning more relevant ads tailored to customer [ interests ] in real time.Going forward, you'll see much more personalized experiences; each of us seeing a slightly different version of pandora.net, different e-mails based on our interests and history and with clienteling technology conversations in stores as well. This is a program designed to support our growth. It's an area in which we'll continue to lean forward in terms of investment since we believe it will be a competitive advantage.This concludes a brief view into 3 of the foundational elements. During the Capital Markets Day, we'll have more time to cover this and the other ones in much greater detail.Now let's turn the focus to the 4 growth pillars.First, we will look at how we intend to further drive the desire for our brand. Pandora is a global brand with a very high level of awareness and a distinct positioning. We are playing in a discretionary category where it's fundamental to continuously invest in the brand experience. In order to develop the brand, we must drive desirability and do this for many people.We will focus on 3 distinct aspects in our brand-building efforts. The first objective is to constantly be relevant for our audiences. We apply an outside-in approach where we generate deep insights about their needs and wants. We turn those insights into commercial initiatives. A key priority is therefore to invest even more in learning about our customers. This is done both via traditional market research as well as increasingly mining our own customer data. We use these insights to create engaging, authentic and culturally relevant brand experiences, for example, in advertising, visual merchandising and product design. We have also introduced a more quant-based approach to estimate the value of our commercial initiatives to ensure that we pick the winners as well as provide them with sufficient support levels. Simply put, we're combining arts and science to deliver relevant brand experiences.Pandora is a brand for everyone, but as we will present later today, we have changed our collection structure, which will ensure that we are better equipped to target different needs. One of the key target groups we will focus on is winning with Gen Z and millennials. These 2 generations are the key growth drivers in the affordable luxury market. Forecasts suggest that they will represent more than 50% of personal luxury goods consumption by 2025. We already enjoy a fairly strong position amongst women aged 18 to 34, as they represent 44% of Pandora owners today. We believe there is more we can do to make our brand even more relevant for them.We will retain the core values of Pandora such as self-expression, affordability and collectibility. This will ensure that the brand positions remains very clear. Under this umbrella, we will, however, allow to stretch the brand to ensure it's relevant and in sync with the audiences and usage occasions we are targeting. Later in the presentation, Carla Liuni, our Chief Marketing Officer, will show you how we are applying this to 2 new initiatives we're bringing to market this year.When I grew up, the job of a marketeer was much easier. The number of media channels were few, typically TV and print. The retail landscape was more focused. Today, we live in a world where the path to purchase is far less linear; and has multiple touch points ranging from social media, influencers, traditional advertising, through to in-store communication. The number of platforms where we consume media just keeps on increasing. On one hand, we have changed consumer behavior; and on the other, a significantly more fragmented media landscape. Going forward, consumers will meet the Pandora brand in a much more personalized way across more channels. We are paying far more attention to ensuring we know who we speak to, what they might be interested in and how they actually respond to our efforts. It is important to point out that we include traditional media channels, digital channels as well as our stores and store staff when we drive out holistic messaging. It all needs to sync up for maximum impact.In this fragmented landscape, we have raised the media investment significantly in the last 2 years to a far more competitive level. Going forward, we will turn our attention to getting the most out of this investment. We are building a sharper analytical capability to evaluate the impact of our media investments. We are, for instance, pioneering digital media in terms of new attribution models. Most companies use last-click attribution to analyze the optimal media mix. We are building a next-generation model that will give us the ability to better understand the more true impact of various digital channel choices. This can be modeled live and provide an immediate impact on the media tactics that optimize return on investment. For good order, I should also mention that this modeling doesn't rely on cookies or tracking of individuals. This is in line with GDPR and privacy legislation, and therefore we believe it's future proofed. As you can see, we are merging arts with science to deliver a desirable brand experience at scale.Let's now move to the second growth pillar, which in a way is linked to what I just spoke about. It's about how we intend to personalize the shopping experience.Pandora is built on the idea of personalization. Our Moments platform offers our customers a unique opportunity to create their jewelry and make it tell their own personal story. A significant part of this experience is the personalized service we offer, in particular in our stores. This is typically where the co-creation takes place. By being a direct-to-consumer brand, we have a unique position to interact directly with our customers. Today, more than 75% of all transactions are done direct. We want to take this to the next level by using our digital capabilities to create the most personalized shopping journey.The customer journey has evolved quickly in the last few years, especially among our young customers who now move fluidly across different channels. They might discover Pandora through a store in a shopping mall, [ export a brand ] on Instagram, buy online and then pick it up in store. This creates a need for us to offer a true omnichannel journey and for our different channels to reinforce each other. At the same time, the demand for personal shopping experiences is increasing. We've massively strengthened the core digital experience at Pandora. You might call this the vanilla experience, where we all see the same version of Pandora. Heading forwards, we'll wrap the Pandora experience around each customer. In time, this will look like each customer seeing different creative that in a way follows them from what they see on Instagram on to pandora.net based on what we know they like; your local store manager reaching out to you with new releases, special events or offers because they know you're a Pandora fan. By the way, this is already happening in our China stores right now with the power of WeChat. And then personalizing the actual selling ritual, using augmented reality with things like virtual try-on and giving personal recommendations on our 3D bracelet builder platform.We're making the ways you can receive your Pandora products more personal to you too. We continue to roll out click-and-collect as a same-day option in major markets. We introduced curbside collection in U.S. And on the future road map, we'll be testing interest in same-day home delivery. Lastly, we're introducing a new loyalty program that will enable us to increase customer lifetime value. The program will drive increased purchase frequency; retain and reward loyal customers; offer access to pre-released products; and much, much more. The program will also be connected with our store staff so that they can provide even more relevant services when you enter the store.The key to all of this personalization agenda is deepening relationships with people who love Pandora, providing an increasingly rich Pandora brand experience, making the best use of advanced analytics and data technology to enable it. Therefore, this is an area which will receive disproportionate attention and resources going forward.The third growth pillar relates to our geographical presence. This also includes our network strategy, which we have discussed earlier this year. In essence, our distribution is sufficient. And we don't foresee any major changes other than what we have previously announced, namely a larger footprint in China and Latin America. We have a somewhat revised view on U.S., which I will touch on briefly today.Today, we sell Pandora to consumers in about 100 countries through almost 7,000 points of sales. Going forward, we still see long-term growth opportunities in geographical expansion. However, in the near to medium term, we will focus on core markets where we still expect to drive higher brand penetration. Our core markets have one important commonality in that we have a very healthy financial structure. Despite many other things being similar, we can still see that the brand development in terms of awareness and penetration differs. This suggests that there is still a strong potential in our core markets to drive brand penetration.In the last 2 years, we have proven that we can drive healthy growth even in the most mature markets like Australia, Italy and U.K. We will continue to have a strong focus here; and expect to continue driving solid, profitable growth. U.S. and China represents more than 50% of the global jewelry market and will continue to increase in importance, with a significant part of the absolute market growth driven by those two. As such, we plan to invest over-proportionally in U.S. and China. We recently developed and started deploying a growth plan in the U.S. We already see strong commercial traction. While part of this has been inflated by the unusual market dynamics, we still believe that our relative outperformance can be partly attributed to this plan that we have labeled [ ignite ]. Examples of levers in the plan are driving awareness via further investment in media; expanding our consumer base, including winning with Gen Z; driving a healthy network expansion. Our concept store penetration in the U.S. is lower than other core markets, and we see meaningful opportunities for expanding our network further here.China remains a top priority and a significant growth opportunity for Pandora. We are currently developing a plan for setting us up for accelerated growth in China to reap the opportunity in market size and growth that it represents. Our plan is focusing on turning-around our performance in China. We have identified 6 key areas to focus on and drive growth, which have been the outcome of a rigorous analysis across consumer, brand, marketing, product, retail and digital insight studies from the best market research companies globally. In brief, they are: brand and communications. This is the primary priority, as our unaided brand awareness in China is only 16%, which is very low compared to our other key markets. And consumers therefore are less familiar with Pandora's key brand attributes such as collectibility, personalization and affordability. To fix this, we will increase our media investment and communicate our brand message clearly across each channel. A first media pilot is just being concluded as we speak.Product assortment. Our main platform, Moments, has not been properly launched in China. And our product range has not been aligned to Chinese consumer preferences and specific key retail events. Going forward, our key focus will be to drive Moments and introduce market-specific products built for the Chinese consumer and its unique trading calendar. The other focus areas are centered on our network size both on- and off-line. There is a clear expansion road map in place. The retail experience both in terms of visual experience as well as the selling ceremony needs to be closely linked to the emotional connection with our unique brand proposition. Our digital setup needs further enhancements to be competitive. And finally, people. We are strengthening and growing our team. We have evaluated each function and the business needs for the future to build a winning team fit for long-term growth. By building a robust strategy derived from comprehensive insights, we are confident we can fix our business in China. More details of the plan will be presented later in the year, at the Capital Markets Day.Finally. We do have a number of potential geo expansion opportunities; for instance, a proper entry into Japan and India. We have decided to put this on the back burner and focus our short- to mid-term attention in our core markets, overdriving U.S. and setting up China for success.Now I will hand over to Carla Liuni, our Chief Marketing Officer, who is with us from Italy, to talk about our strategy of product and design.
Thank you, Alexander. And hello to all.Let's now take a deeper look into our fourth growth pillar, design; and specifically how we're going to drive innovation, consumer-centric innovation.With the mission to create a sustainable growth for Pandora, we have established a very simple framework with 3 clear business priority: first, protect the core. Our core is moment, which represent around 70% of our business. And it goes without saying that we must keep moment relevant to current users while reactivating lapsed users. We will do so by fueling Charms' [ additive power ]; and by creating new growth engine for Moments, new wearable occasion, new colors, new collabs.The #2 priority is [ feel good more ]. Pandora brand cannot just stand on one leg. This is quite intuitive. If we look at key players in the jewelry industry, their brand architecture is made of several collection. Cartier, for example, has LOVE collection, Juste Un Clou collection, Panthère collection. Similar case is for Tiffany, but even if we look at more accessible business like fragrances, Chanel doesn't just stand on Chanel No5. They have Coco Mademoiselle. They have Chanel Chance, Allure and so on and so forth, so beside Moments universe, we will create new growth engine, new brand universe that will target different consumers with different needs.Last but not least, our number three is to ensure we have dedicated support model. Our go-to-market will be fundamentally important to bring alive the strategy. We will mirror key priorities with dedicated communication, media, in store, training and so on and so forth. These will allow us to fuel incremental growth while minimize cannibalization of existing business.With these in mind, we have defined a road map for growth for Pandora. The starting point has been the segmentation of the jewelry market. We segmented the market based on key drivers of consumer choices in the category. We looked at functional and emotional consumer needs, combined with [ desired ] for the future. We then clustered the needs and mapped in the market. As you can see from this chart, we have identified what we call 10 enduring concept platform. Each 1 of these platform or segment answers to why a certain group of consumers buy jewelry. What is the role of the jewelry? And what is the product associated to cover identify needs?For me to make it easier to understand, we'll give you a couple example. If you look at eternal treasure at the top left of this chart, in blue, what you're seeing there is the consumer needs. Jewelry is eternal. It never goes out of fashion and it will always be there. Here we find consumer that buy jewelry because it stands. It never goes out of fashion, and as a consequence, the product [ feature ] expected is somewhat traditional with long-standing design. Conversely, if you go at the bottom of the chart, at the center, you see a platform which is called creative expressions. And what you're reading there is, "Life is too short to wear bad -- boring jewelry." Obviously this consumer buy jewelry to spice up their lives. And they will expect product design which are fun, playful; and allow them to express their style and their personality.After having done the segmentation, we went through each one of these ECPs or segments. And they're all very sizable and globally relevant, but we selected 5 where we know Pandora has the right to win today. These are the 5 we selected. And how we did that: We did that by looking at brand fit, first; material fit, what kind of material was fitting in that platform; affordability, price point; global [ site ]; and so on and so forth. We believe we have today a -- 5 ECP. They will deliver incremental growth for the brand. The result, it's summarized in the following chart. As you can see here, we have Pandora house. And what you see here beyond the purpose, which Alexander explains which is our obviously [ thread ] around, you see collection, existing collection; and new collection. And we have linked [ existing and new one ] to the 5 ECP, to the 5 enduring concept platform or segments so each of our collection, existing or future, has a clear place, a defined target consumer and a universe to refer to.If we start with Moments, for example, you see that it sits into "my story" ECP. Jewelry is like a biography, a story that tells many chapter of my life. And Moments will answer to that need by offering high-quality, affordable jewelry with meaning. This is who we are. Communication will give jewelry a voice by communicating loves, passion, aspiration, desire and milestone in consumer life. We will create for each collection distinctive and honorable proposition. And the [ fine ] things about these is the innovation and communication will be focused around space so we can minimize cannibalization and we can maximize incremental sustainable growth. To bring this to life, I will show you a couple example on what is coming next and how we plan to grow in 2 ECP with 2 distinctive proposition. What you see here, you see 2 example which I'll go through.Under creative expression ECP, life is too boring to wear boring jewelry -- "Life is too short to wear boring jewelry," we have developed Pandora Me global relaunch. Under iconic hallmark, "The brand I wear says everything about me," we will launch Pandora Brilliance, our first sustainably lab-created diamond collection. I will get back to these, but both initiative deliver on our promise to empower self-expression and affordability. They just do in a -- very different ways targeting different consumer group, one more millennials, the other one more on Generation Z; and most importantly, allowing us to generate different proposition and, as a consequence, minimize cannibalization.Let me go a little bit more into the detail and give you a little bit of teaser on Pandora Me. What are we going to do with Pandora Me? Pandora Me relaunch, we will relaunch Pandora Me this fall, in October. And it will be a major relaunch. We have identified 4 key factor to drive success. First and foremost, we target and design the entire proposition for Gen Z. As Alexander said, we have done extensive research to deeply understand Gen Z motivation, aspiration, needs. And we will offer a proposition that has been created for that, that mirror and anticipate their needs; and that will empower self-expression and personalization. We know this is very critical for Generation Z.The second piece, we will offer a full cross-category proposition, a very attractive assortment, shifting category mix to what's most relevant for them. Beyond bracelet and charm, which of course we'll offer, we will have rings, earrings, necklace while we will ensure the right price point and mix in the assortment because we know that for this generation value is very important. The third piece is we have created a 360 digital-first communication. We will be where these people are. We will be where they talk, where they are, in their channel; and communicating with their language, with music as a creative catalyst of the campaign. Lastly, we believe we have a winning proposition because concept, communication, product have all been qualified. And we believe that this is a very different proposition versus Moments while still being rooted into self-expression and collectibility.So let me show now a little video that give you a taste of the new Pandora Me product. Much more to come in September, at the Capital Market Day.[Presentation]
So I hope you enjoyed the video.Beyond Pandora Me, we will also explore a new territory as anticipate before: sustainably lab-created diamond, Pandora Brilliance. This will be introduced in U.K. on May 6, with global rollout in 2022. As you might have seen from the press release this morning, lab-created diamond are basically identical to mined diamond but grown in a laboratory rather than being taken from the mine. They have the same optical, thermal and physical characteristic. And they're graded by the same standard known as the 4C, cut, color, clarity and carat. We think there is an opportunity to make diamond accessible to a broader audience.Okay, so allow me to introduce Pandora Brilliance. Pandora Brilliance collection has been created with this in mind, lab-grown diamonds captured in a pure emblematic design, a reimagined infinite symbol. So why Brilliance? With Brilliance, we want to do 4 simple thing: democratize diamond, making it affordable to a broader group of consumers; tap into the growing DKK 500 billion diamond market; signal our commitment to sustainability by launching our first carbon-neutral product; and finally, develop further our position in the iconic mark -- hallmark ECP. Overall, we've seen a great acceptance of this proposition, but we know in many ways this is a new territory for us. And we will make sure we test and learn in U.K. market before we roll this out in other country.So let me show you now a little video which introduce you the products.[Presentation]
In a nutshell, how the assortment will look like. Pandora Brilliance will launch with what I will define a complete assortment. We have rings, pendants, earrings and bracelet. It's 5 carat in silver, white, gold and yellow gold. And we're going from what is 0.15 carat to 1 carat, 0.15 carat with an entry price for silver at GBP 250 and 1 carat in yellow and gold with an entry price of GBP 1,290. One thing which is important for us to stress: These price points are obviously much higher than that of Pandora collection, but they are very competitive versus the mined diamond market. I want to stress this is not about raising Pandora pricing, but this is about making diamond jewelry affordable and provide consumer with [ real value occasion ], versus the rest of the market, in a sustainable way, which we know it's absolutely critical especially for millennials.If we go to the next chart, we will see, we will talk about what is the concept behind these product. We have created a winning concept behind Brilliance. We didn't want to go into the bridal space. And we certainly didn't want to go into one-off, once-in-a-lifetime consumption, so we created a concept we tested extremely well with consumer, which is about transformational journey. It's highly, highly relevant in today context. It basically capture a diamond in the rough, transforming into a brilliant creation. It create a [ parallelism ] between the product and the concept that you -- the video that you will see in a second. We obviously have a lot of product videos that explain lab-grown diamonds, glorify the product and educate consumer about it, but the main video capture authentic transformation story; and highlight what every woman can become with determination, optimism, resilience. It's all about infinite possibility.We have 2 great talents. We have chosen 2 great talents. They are both incredibly successful women, but they are equally well known for the difficulties they had in life and for how they overcome it: Ashley Graham. Ashley was once bullied for being overweight; and today is a famous model, as you know, and an advocate for body positivity. Rosario grew up [ on the street ] and today is a famous actress. Both of them are authentic and relatable role model with strong values, and we believe they're the best possible ambassador to launch Pandora Brilliance sustainably created diamond. Let me show you our 2 videos which brings the main concept to life.[Presentation]
So it's the end of my session. To sum it up, just few things. We have defined a road map for growth rooted into consumer-centric portfolio architecture. As we go to market, we will protect the core, fuel the brand with more. You've seen Pandora Me. You've seen Pandora Brilliance, and there are many more things in the pipe. And lastly, we will definitely mirror our go-to-market and support model to business priority because we know execution is key.So many exciting things in front of us. I hope you enjoyed, and I thank you.Now I hand it back over to Alexander.
Thank you, Carla.I apologize for the first 3/4 of the presentation which was my boring readout, but if we had had the Capital Markets Day, maybe we would be able to put a bit more spark on it. But I think Carla made a terrific job on showcasing some of the outcomes of this strategy. And the way I'd like to think about this growth strategy is we are fusing art with science at scale. That's the Pandora of the future.And with those words, I will now hand it over to the operator so we can get into the Q&A.
[Operator Instructions] Our first question comes from Elena Mariani from Morgan Stanley.
So I will stick to one question, of course. So maybe just on the guidance. So my question is more about how conservative that is. I know you've put a floor, and so anything could happen, but can I try to better understand what the assumption of your floor base is? Because you've, of course, delivered a better performance in Q1. Your April trends are very encouraging, so why are you so conservative in giving the floor? What is it assuming? Is it assuming that there are further lockdowns? But the question is more about, if things progress in the way we believe, and so the reopenings will be progressively happening through the rest of the year. And what could be a sort of range that we should expect? I hope you understood my question.
Yes. Thank you, Elena. It's Anders here. We obviously provide the guidance because we think it's a good reflection on how we think about how the year could play out, but had we been in a more normal year, if that, well, ever exist, then we will probably have, put a more concrete range in and not leaving it open ended. But we are leaving it open ended because we see a wider range than normal during this year. So -- but we are expecting that we will continue to see some kind of impact from the pandemic during the rest of the year. So we have -- in the guidance, we implicitly assume that 5% to 10% of the stores will be closed during the second half. So much less than what we have seen in Q1 but still the lockdowns impacting our performance here and there. So that's one important assumption. And then I think another thing to call out will be that the -- we obviously also expect that the impact from the stimulus packages that we've seen in the U.S. will sort of fade out as the year goes by and that we will be in a more normal stage and -- in the second half of the year and therefore have much less sort of tailwind on a group level from the U.S. growth.
And sorry, well, just to clarify on this point. Because in your slide you're talking about the U.S. stimulus package both when you're moving from your guidance from above 8% to above 12% and also as a compensating factor versus the store closures. So it's not very clear to me what exactly you are factoring in for the U.S. because you include that effect in both the 2 bars. I'm talking about Slide 18.
Yes. It's actually the explanation that we're having on the slide, I'm just going to that one, on the implicit guidance on slide, let me see, 8, that what we are trying to say, that if you're thinking about the underlying performance in Q1 -- so what would the minus 5% sell-out growth versus '19 have been had we -- not been for the pandemic and the stimulus packs. That's what we're trying to call out on that slide. And in that context, obviously there is sort of extraordinary support from the stimulus packs in the U.S. How much? I think that will -- we can only guess about, but we just want to make the -- call that out on that slide. So we are expecting that the -- in the back part of '21 that the growth in the U.S. will be a much lower number than what we've seen in Q1. And in that -- on that note, you should remember that we were just around 20% growth in Q3 and Q4 in the U.S. last year. So we will be coming a much tougher base in the U.S. when we get into the second half of '21.
Our next question comes from Michael Rasmussen from Danske Bank.
Yes. And well done, guys. It's great to see Pandora back in great shape, so well done on that. I'll ask into China. I don't know if the timing is right or if I should wait by doing that later, but since you mentioned it in the presentation, I'll put that on that question right now. So on the issues that you have in China right now, is there any way where you can utilize on some of the previous learnings in terms of some of the problematic markets that you've had at Pandora in the past? Anywhere where you can say, okay, this is the same that happens in terms of consumers' behavior, the brand positioning or anything. So will that speed up perhaps the restructuring of the Chinese market, please?
I mean we'll actually cover that in the next section and a little bit more in depth, but I -- as I've been saying in the past, the way the brand was launched into China is different from the way it was launched anywhere else. So the job is -- essentially, if I dumb it down, is to think of it as relaunching the brand in China. Then there are many things that are similar, the store network, the density, the kind of behaviors we see on- and off-line. A lot of these things are kind of similar, but the starting point in China is just different for the brand. It doesn't have that clarity in consumers' minds what's unique and different and interesting about Pandora that we see elsewhere. So that's the brief answer I'll give you today.
Yes, that makes sense. And it certainly doesn't seem like a quick match -- or sorry, quick fix, but I am sure you guys are on top of it.
Our next [ question ] comes from Lars Topholm from Carnegie.
Yes. I would also start by congratulating you for a very strong quarter. I also have a couple of questions regarding the -- or one question, of course, regarding the U.S. So I wonder if you can shed some color on, a, the impact from stopping with Jared. I just wonder if there's any inventory you have taken back; and if you have offset that against revenue; and if you have, how it expects -- how it affects your margins. And then in the presentation you likewise mention that, based on credit card data, you grew faster than the overall U.S. market, so I wonder what growth you refer to, more specifically in the credit card data.
Lars, yes, I can start on the sub question #1, on the U.S., about Jared. We actually -- the revenue impact is very limited even though there's quite a number of point of sales that have been sort of officially closed down. Now the revenue impact is minuscule because it was already at a low point in 2020, but we did do something on the inventory back in -- I'm -- I can't actually even recall whether that was late '19 or early '20, but as...
Not this year.
Not this year, definitely not this year, but it might even have been all the way back in '19 as part of knowing that we were closing down that channel, making sure that we manage the inventory as well, but that's no impact in the Q1 '21 numbers.
Okay, that's very clear. And then on the credit card data and what growth they show.
Yes, yes, yes. It -- the credit card data, this is Bank of America that releases data on that. [ And this picked up ]. And this is basically the only data point that we have on -- in -- sorry, in print on the market growth. And this is the -- sort of the entire jewelry market was in the high 30s, if I remember right, in growth. So still we have -- our growth that we have seen is well above that in the U.S.
So high 30s show -- I should compare it to what number in your report and as just to make sure I get it completely right? I should compare it to the 64% local currency growth over last year or the 81% sell-out growth.
Yes, because I guess, the Bank of America data, that must be sell-out growth data. That will be my logic because, yes, the nature of the underlying data. So I -- yes, that's...
So you're basically growing more than twice as fast as the underlying market, based on those data.
Yes. On the assumption that Bank of America covers 100% or a large proportion of, and that, we don't know. So I think that's why we're being a bit careful of making too big conclusions on that. We can just say that we are significantly ahead of that data point, but I don't think that necessarily they are apples-to-apples comparisons. I would be a bit careful with drawing that conclusion.
Our next question comes from Silky Agarwal from Citi.
Coming back to the U.S., could you just describe what is really brand specific that is driving that stellar growth in the U.S. apart from the things that you've outlined? You mentioned something during the last call that you have launched e-mail marketing in that market. So have we seen any further improvement in terms of all those CRM data capture that you are now leveraging in the U.S.?
Yes. I mean, yes, we have seen a very strong improvement on the impact of e-mail marketing, but you need to put that in context. In -- versus the totality of the business, this is still not the major driver. The -- actually if you -- the performance in the U.S. started after the summer last year. So if you look from August and onwards, we've had a continued improvement in the momentum in the U.S. So it's not like something just happened on January 1. So it's been ongoing. And that -- this has come behind, as we've been speaking about in the past, good basics. So we are investing more in media. I think we're making smarter media choices. We're doing better job on merchandising, on product availability. So it's core basics that are at play.
Our next question comes from Antoine Belge from Exane BNP Paribas.
It's Antoine at Exane BNP Paribas. My question relates to online and more importantly how online evolves when you are reopening stores. So I know it's a bit early but maybe taking the U.K. market as a sort of a [ showcase ]. Yes, how -- I mean, do you see -- what kind of moderation do you see when physical store are reopening?
So that question has many facets because it really depends in which geography we are and, let's say, the adoption of e-commerce as a channel, not Pandora specific. So what we saw, for instance, in Australia, where generally speaking, e-commerce as a percent of trade is a little bit lower than maybe what we experienced in, let's call it, Northern Europe. When the stores reopened, we actually saw a big, big kind of traffic movement back into the stores. So the high levels of share of business that we saw in e-commerce came down quite a lot similar to what we've seen in the Mediterranean countries. So in Italy, for instance, we had the same type of behavior. Then you take a country like U.K. Now I only have the last 2 weeks of stores being reopened, so it's very early in the curve, but there we've seen a strong influx of traffic to the stores, whilst the e-commerce actually has continued to be very strong. So there is not one generic answer to that question. It really depends in which geography we are. So yes.
Okay, so the rule of thumb is that...
Maybe just to put -- sorry. Maybe just to put some more color on it. Because I think the part of your underlying question might be what do we expect when we get back to, let's call it, more of a steady state; or a normal, if that -- any such thing exists. So versus 2019, I think we can safely say that the share of business transacted on online is going to stay at a higher level. There is no doubt, but I don't think it's going to stay at the current high level. Today, we have roughly 1/3 of our global revenue done through online. I think that is going to come down, but to what level? I don't know. And 2019, if I -- memory serves me right, was more like 13%. So it's -- maybe it's going to end up settling somewhere in the middle, but we shall see.
Okay, you preempted by follow-up.
Our next question comes from Magnus Jensen from SEB.
Yes. One goes to the second half of the year. So Signet is out saying that they're planning for guiding for negative growth in the second half of the year. Of course, they're mainly exposed to the U.S., so you cannot make a complete comparison to you guys, but could you give some thoughts on what you think about the second half, especially for the U.S.? Do you also sort of expect negative growth in the second half? That's my question.
Yes. I think -- Magnus, it's Anders here. The -- I think maybe that's a stupid way to start the answer, but it would definitely be growth rates that are below what we are seeing currently both -- for 2 reasons, 1 being the assumed less impact, much less impact, from stimulus packs that we are seeing in Q1 and also here in April; but secondly, that we are facing, if we look at year-over-year, at 20% sell-out growth in Q3 and Q4 for roughly last year. So will -- the comp base will be much tougher when we get into the second half of the year. So we are assuming that the sources of growth, if you like, compared to what we've seen here in the Q1 will be quite different when we get into the latter part of the year with -- from having a Q1 very much driven by the U.S. and dragged down by China and -- not the least, but also Europe due to the pandemic. Then assuming much less pandemic impact in the latter part of the year, we will see Europe going back and probably being part of driving growth but a much less -- hopefully, also a less drag from China and less tailwind from the U.S. So quite an -- some unusual big shift in the sources of growth during the year due to the pandemic, not least when you look at it year-over-year.
Our next question comes from Fredrik Ivarsson from ABG.
One question from me. Alexander, you mentioned the conversion rate up 80%. And I believe it was 30% in Q4, if I remember correctly. And maybe 2 questions related to that: Firstly, what have you done to drive that conversion rate? Is it marketing, imaging, payments, et cetera? And secondly, if you would be open to give us a ballpark number of your current conversion rates and whether you see upside to the current levels.
I mean we haven't done anything materially different in this quarter versus the previous quarters, to be perfectly honest with you. It's we're continuing. Maybe what we've done is, since there's been more stores closed now, we have shifted a bit the -- let's say, the media mix. And we've spent a little bit less on the top-funnel spend and spend it more towards the digital, but it's not materially different from what we've done in the past, so there's really no big magic. I think in some places we've introduced Klarna and Afterpay, which obviously drives a little bit but again doesn't explain the -- let's say, the macro movements on conversion rates. The thing with e-commerce, the way we are running it now, it's a continuum of improvements in terms of features and site speeds. And so this is not like it used to be, when I grew up at least, where you kind of made one change and then you sat and watched it. Every 2 to 3 weeks, we have a new release of some kind that keeps improving the experience online. So that's it. So you can't attribute it to any major change, maybe, as I said, unless we talk about Klarna and Afterpay, but then again that's not being rolled out globally. That's been in some geographies. I think U.K. has done some good stuff there. And parts of the U.S. has also gone into this type of mechanism, but that's probably the only major change that I've foreseen. It's a continuous improvement effort. That's kind of how these teams are organized. They work on 2- to 3-week sprints and then they release new things.
And on the level of the conversion rate, any ballpark figure?
I think we'll keep those numbers relatively close to our chests. You can say that an ambition would be to get -- going to somewhere north of 3%, and we still have some way to go there from a sustainable standpoint. There will be peaks when we go above that. And I am talking about a global number. I have geographies which are lower than that. I have geographies which are quite a bit higher, but the average is there. So that's part of the things that we're going to talk about in the second session today. Conversion rate is one of the keys on how we're going to drive more growth.
[ Check ] on the Slide 10 in the investor deck. We actually show that the conversion rate in the quarter was 3%, but it tends to be sort of positively impacted when stores are closed. But 3% in the quarter, so [indiscernible].
I missed that.
Our next question comes from Frans Hoyer from Handelsbanken.
Yes. A question about the online revenues. Could you give us an idea of the breakdown? Just the top few most important markets. How important are they as a percentage of your total online sales? And also what was the roughly percentage increase in those markets in online year-on-year, please?
Okay. I mean it's a quite detailed question. And so to no surprise, the U.S. and U.K. are the big ones, as you can imagine. And in U.K. the growth was -- this is versus '19, for the quarter was over 400%. And U.S. versus '19 was over 200%. The average was 200%. So then most markets are kind of in -- you can do the math yourself, but the big -- the 2 big ones to watch, for us, always is U.S. and U.K. That is -- yes.
How big is the U.S. as a percentage of Q1 online sales, roughly speaking, and the U.K.?
Roughly, what, 25%, give or take, yes.
[ Yes, that's correct ].
Both of them, or was that the U.S.?
U.S. It's roughly 1/4.
And the U.K.?
You're stretching my math here. It's ...
1/3 of the revenue.
Okay.
1/3 of the online revenue in Q1.
Yes...
And 25% for the U.S.
Give or take, yes.
Yes.
Our next question comes from Klaus Kehl from Nykredit.
Yes. And I was just thinking about something else. Sorry. The question was that we have seen some major movements in the inventories among the franchisees. It was quite a negative movement in March and then we have seen quite a positive movement here in April, so what is driving these changes? And if any specific markets that are, yes, affecting this.
Yes. Maybe, Klaus, I can -- this is Anders here. I can start on that one. So the shipments and sort of the timing of those is purely driven by sort of commercial and logistical circumstances. So the shift that we've seen between March and April is purely sort of what makes sense from an operational and commercial point of view. So we are sort of much more focused on the sell-out growth, but I'll agree that it has been -- when you look at March and April, there has been quite big shifts between those 2 months. But I will say that it's one of the sort of the -- it's always been there. It's not new. The new thing is that we're disclosing monthly numbers, so it suddenly becomes visible for the outside as well that there are these swings between months which then becomes less visible on the -- on a quarterly level.
Okay, but has it anything to do with your production capabilities in Thailand or anything?
No, no, no, absolutely not. We have, I think, [ acted quite ] fine on inventories. We do think that inventories were too low when we entered Q1. So you can also see the inventories were up, what is that, DKK 300 million, DKK 350 million, DKK 400 million during the quarter. So we would like to operate with a bit higher inventory levels, but that was not -- definitely not the reason for the timing between whether we should ship in March and April. That was purely due to both on sort of the receiving end on the partners when they thought that it makes commercial sense for them to get the shipments. [ From a ] merchandising, logistical point of view, we are in a fairly good shape.
[Operator Instructions] Our next question comes from Deborah Aitken from Bloomberg.
I'm trying to work through my EBIT margin expectation and hearing that and a reminder that the second half of 2021 in U.S. will be a slower one going forward for the reasons that's being given. And then I look at the hedging policy in the way that you work and think about a little bit more exposure, maybe 20% to 30% more exposure on your hedging at this stage for the second half. So I'm trying to understand the process and where we think EBIT margin will be weighted through the quarters.
I had a little bit difficulty in hearing the question, Deborah, here, but let me see if I answer it right. But I think, as usual, the Q4 is by far the biggest quarter on the top line and on the bottom line both in absolute terms but also in terms of margin. So typically we -- yes, we see a significant EBIT margin pickup in the fourth quarter. This year, it might be. You can argue it will be a little bit less than what we will see in a standard year, for 2 reasons, 1 being that the -- we will have more silver price headwind in the quarters to come in Q3 and in Q4 based on the silver price increase that we have seen. So that -- as hedges lapses, there will be a bigger drag on silver prices in the second half of the year. And then we will be investing -- start investing, in the back part of the year, on -- in the repositioning of the brand in China as well, but of course, we have guided above 22% EBIT margin. And we were only at 20% in Q1, so there will be -- and that pickup is something that -- that margin pickup from Q1 to the full year guidance or the floor of the full year guidance is a Q4 thing, but that's completely normal seasonality.
Okay. Yes. I was just wondering whether -- as you've said, whether the U.S. would cancel some of that. The other thing is just to try to understand whether -- we saw the exit costs from the end of Programme NOW. Whether there'll be any onboarding costs for the new strategy.
No. There will be costs associated with the new strategy, but it's -- if you're talking about U.S. specifically, it's not margin diluting. It's -- it adds to the bottom line from day one.
And we have...
And that's across [ the group rate ].
Sorry. Can you repeat that? I -- we couldn't get that.
I'm just -- sorry. I -- the question there, sorry, was related to the group. So would -- we wouldn't expect any margin dilution across the group from the onboarding of the new strategy this year.
Not from China. That's it -- otherwise, it adds to the bottom line from day 1.
And we have time for one more question.
Our next question comes from Chiara Battistini from JPMorgan.
Maybe just a follow-up actually on the margin for the year. Your sales and distribution costs in Q1 came in much lower than I was expecting them, so I was just wondering. In terms of sales and distribution costs as percentage of sales for the year, what did you embed in your full year guidance, please?
Yes. The -- we are not sort of guiding on -- specific on the individual OpEx lines, but I think 2 comments, Chiara, on that, that might be helpful. One is that we had DKK 82 million in government support that we received in the markets that were closed down in Q1. And all of that -- and I think it's all of that, but at least close to 100% of that DKK 82 million goes into -- as a negative OpEx in sales and distribution in Q1 because it's compensation for store colleagues that we have onboard. So that's one of the reasons. You'll probably see that sales and distribution costs looks lower in Q1. The other comment I would give is that we have upped the, increased the expectations for the cost reduction program a bit, 0.5 percentage points of revenue [ or ] DKK 100 million in lower costs this year. And a big chunk of that is sales and distribution costs, where we do see further upsides, not least on the level of store leases, store costs, rental costs, that will help keeping sales and distribution costs down as well.
Sorry. Just following up on these 2 points then. In terms of the government support, was this mainly the U.K.? So this is going away in Q2. Or are we factoring some also for the coming quarters for the year?
It's, yes, you're absolutely right that it's mainly the U.K. both given the magnitude of stores being closed there for all of Q1 basically, all of Q1; and the nature of the program in place in the U.K. but also a bit in the -- in Germany and Italy but U.K. in absolute terms being the biggest piece. And then we do assume that we will get a bit as well of support. That is included in the guidance in Q2 and April specifically, but then we assume that at some point in time it will disappear. So even though we have assumed some store closures and lockdowns in the second half of the year, we are not assuming that government support programs will continue forever, so which I think is a prudent approach to it.
Perfect. And on rent reduction, to what extent that what you've seen is we can consider as structural versus something that is also going to normalize in the coming quarters.
Yes, it's -- if I -- the sound is a little bit bad, but if I heard the question right: This is structural reduction. It's not temporary reductions due to the pandemic, the 0.5 percentage points. So margin support from lower cost is permanent lower cost reductions that we're looking at.
And that concludes the first Q&A session, on our Q1 results. We'll now move to the next part of the presentation, which is covering our new strategy, Phoenix. There will be another Q&A session after that as well, but I will now hand it back to Alexander.Please go ahead.
[Operator Instructions] Our first question comes from Frans Hoyer from Handelsbanken.
It's -- it does sound like you are really making some major fundamental changes. And very exciting to see where these will go. I wanted to ask about the issue that Carla raised regarding price points. I also noticed. I think I'm right in saying that you have launched a number of products with more gold in them lately, and of course, the diamonds will take that even further. And how do you think about analyzing the extent to which your core consumers, customers will be receptive and supportive of these types and trusting of these types of price points that you're going into?
Carla, maybe you want to give it a go, first.
Yes, absolutely. So first and foremost, what I want to say, it is clearly the reason why we are going first into U.K. is because we are very conscious about the fact that this is a new territory for us. So we will have in place very strong measurement to understand the acceptance of Pandora Brilliance that we have lots of confidence on but equally understanding how current consumer sees us. We do not have any concern about confusing consumer. We have a strong Pandora Moments business which we'll continue to fuel with innovation. We will also have new innovation coming which are going to be in the same price range, if not more affordable, than Pandora Moments, which is Pandora Me. Pandora Brilliance is a different case, and what I want to stress is a couple of things. First and foremost, conversely than the past, we are not going into high-end luxury. We are actually claiming that we are going to go and make diamonds affordable to our consumer. So our main promise to consumer, which is offering you handcrafted, affordable, high-quality jewelry, it's absolutely the same and remain absolutely the same. Also the Pandora Brilliance is quite a high-value-equation proposition. If you think about the entry price at GBP 250, you will see in -- against a mined diamond, this is half of what a mined diamond would cost. And this is the case for all the carats. What I think is also important is to point out that these diamonds are actually real diamonds. And the reason why we believe we offer a strong value equation to the consumer is because they have been evaluated against the same quality standard that real diamonds would be -- would do, which is these 4C.So in brief. A, we will obviously monitor consumer acceptance, which is the reason why we are going to U.K. first. B, we have together with Brilliance strong programs behind Moments, strong programs behind Me, which remain the most affordable proposition within these. And three, this is not about raising price. This is actually about offering a strong value equation to consumer; and making diamonds affordable, not "one-off in a lifetime" occasion, extend the occasion to what we know it's important, from the tests we did, which is more an everyday usage.
The only thing I could add to that, Frans, is that we've -- the launch has been preceded by deep, deep research both from a cost standpoint but also from a price elasticity standpoint. So we've learned the lesson from the past. And therefore, we've spent an inordinate amount of time to convince ourselves with quant-based methodology that there is a -- high acceptance levels on this type of price points, but as Carla rightfully puts out, one thing is what you do in concept testing. The other one is what happens in real life. And that's what we will experience now going forward in the U.K. launch.
Our next question comes from Elena Mariani from Morgan Stanley.
A couple of questions for me. One is the main one; and the other one, I promise, is a small one. The first one is on demographics. So what is the average age or the range of ages you are targeting? And how do you expect to be able to keep the existing consumers and grow with them but, at the same time, targeting the very young clientele? So do you see a risk that some consumers might be puzzled or confused by some of these launches? And how do you plan to tackle this? Because -- and I've always been wondering exactly right now what's your age distribution. I don't know if you have an answer for this. And maybe, how do you plan to evolve this while you do this transformation?And then a second, very small question. I was very curious to hear: Who do you see as your main competitors? I know that the market is very fragmented, but I was wondering. Just in terms of positioning, which are the brands that you see as more similar to you in terms of client base, demographics and product quality?
Carla, you can give the first one a shot, and I'll try to deal with the second one.
Okay, okay, I'll go with the first one. So the average age of our consumer is 37.8. Obviously this is 38 years old. Obviously this varies by market, where we see in China is younger versus in other market it's slightly older. And we also -- as Alexander said in the beginning, the current owners, which is around 44% if I go by memory, are between 18 and 35 years old. So we actually have quite -- we are actually very widespread because we like to think that Pandora is for everyone, but we also know that it's absolutely critical to promise to a certain target consumer a certain proposition. So we do not see at all a risk of confusing. If you look at key competitors, if you look at also the most affordable fragrance market where gifting is very important, as long as we are true to our promise -- and our promise is about ensuring that we offer consumer a platform for self-expression in an affordable way with our -- with high-quality product. It is absolutely enriching for a brand to demonstrate that we are not just about charms and bracelets. I fundamentally believe that innovation -- even if these 2 initiatives that we just presented are not successful, innovation is something good for the brand. We need to wake up the sleeping beauty. We need to keep our current users happy. And they are because we will continue to offer moment proposition which is true to ourselves with an holistic and consistent communication which is about -- you've seen in the presentation it's about "my story." It's about celebrating life with jewelry with a strong meaning, and that's what moment is. And we will continue to communicate in this way by offering also some product innovation there with new collaboration, with new carriers, with new charms because we know it's important to keep the brand fresh and to keep the moment franchise relevant to them without contradicting who we are.Together with this, on top of these, it's also equally important to stretch the brand a bit. And stretch the brand doesn't mean contradict to who we are. We are about self-expression, but the way in which we talk to a very young consumer, Generation Z, and the offer in term of product and communication has to be customized to them. Otherwise, the risk is they will become older together with our audience, and that's not clearly where we want to go. I hope I answered to your question. Alexander, if you want to build on the second one.
Yes. I mean the simple answer on this one is nobody really or a lot. It depends on what you think about. A large proportion of the volume in our business is gifting, so which means that -- the average gift size or value of the basket is maybe 100 to 150, dollars, euros, pounds, what have you. And of course, there are other options for gifting in that kind of price range. So that's one way to think about it. Now if you narrow the scope and say that the gift is going to be in the jewelry space, globally there is no main competitor.We have different competitors in different geographies. So in the -- if you take the U.S., you would have a company like ALEX AND ANI, for instance. If you go to China, you could possibly look at APM Monaco. I'm consciously not mentioning Swarovski because I think Swarovski, at least the old Swarovski that we knew -- they are also kind of changing now, but the old Swarovski was much more focused on style. And our customer comes to us because we offer them meaning, so the key driver is not style. Of course, they want nice style, but that's not the key driver, whereas in Swarovski's case it's about the style much more than the meaning. So therefore, from a geographic standpoint, you could argue that they are kind of where we are, but I don't see them as a meaningful competitor from that standpoint. So globally there is really nobody today. Locally there are kind of pockets of local competition.
Our next question comes from Antoine Belge from Exane BNP Paribas.
Yes. That's Antoine. I think you mentioned data and analytics. I was under the impression that you already made some progress in the last like 18 months. Have you done some kind of benchmarking against, I don't know, consumer brands or consumer retail companies? And where would you put Pandora in that journey? Do you think that you're already, I will say, above average? Or any sort of perception there?
Antoine, it's a very, very relevant question. So yes, we have done extensive work together with Bain when we defined the whole digital strategy as it were. And in fact, one of the topics there was who do we use as a benchmark. Who do we get inspiration from? Because, of course, Pandora started from a very analog point a few years back, and now moving forward. So if we kind of set the benchmark across a number of criteria, then versus the, let's say, direct competition, if -- other jewelry brands, then probably we are on par or maybe even a little bit ahead, but I'll be humble enough to -- let's assume that we are on par. But if we then -- comparisons with other specialty retailers or other brands -- let's talk about some of the suspects I mentioned before like the Nikes of this world or -- and Sephoras of this world to talk about specialty retailer. Then I think we still have some ways to go to get to where they are.So in our strategy, we've essentially gone through a 360 review of all aspects of digital. And now you can divide that up in essentially a -- revenue-oriented exercises and also cost and efficiency. The focus on our strategy Phoenix is on driving revenue, so in that space we've then gone through a whole slew of benchmarks. And we've established where we currently are; where the jewelry competition is; where, let's say, our gold-class benchmark looks like. And then we made some very specific choices on what to drive first because this can be a very expensive exercise and can also quickly become an unfocused exercise. So we have a very detailed plan. And when we meet you in the Capital Markets Day, I'm happy to go through exactly where we think we stand, what the kind of key points are, but as you can see, as 1 of the 4 key growth pillar, personalization is one that we've picked and we're going to overdrive. What we haven't really spoken about today because we don't have the time is to show exactly what that means, so we'll kind of uncover that and share that with you in September.
Our next question comes from Citi -- Silky Agarwal from Citi.
Yes. I just wanted to follow up on Pandora Brilliance. Maybe could you just guide a little bit on the cost structure and whether this is a -- gross margin dilutive versus your underlying silver business? Any indication just qualitative is fine. I understand you cannot provide any financial numbers to it.
Silky, it's Anders here. I can. I think it's we will not provide a lot of comment on that yet, but obviously we -- when we have been developing the Brilliance concept, we've also been looking at the financial aspects of it. And from that perspective, it's a quite interesting additional play on the infrastructure in the business. The gross margin will depend quite a lot on volume, how -- where that takes us. And I think initially you should expect it to be slightly gross margin diluting but still accretive on the bottom line. I think that's what we can say. And that, accretive from a margin perspective on the bottom line, I should say.
Our next question comes from Chiara Battistini from JPMorgan.
From your presentation, it sounds that you have many different projects going on at the same time, so I was wondering whether there is any priority in terms of, say for example, prioritizing the strengthening of U.S. and China versus expanding Charms beyond Moments and also expanding into the other categories and into Brilliance and Pandora Me; if you have any sort of priorities within all these projects. And then all these projects, especially when it comes to expanding Charms beyond moment and within the other categories as well, is your aim mainly to drive repeat purchase with your existing customers or attracting new customers? Or are you thinking about that? And linked to that, how are you thinking about your marketing budget in this effort to -- especially if you're trying to recruit new consumers?
So maybe I'll start, and then I'll flip it to Carla. So in fact, I think the strategy is extremely focused. We have made some very, very distinct choices. We could have gone into other countries, and that is a big effort in and of itself. We could have expanded into new categories. We could have gone into watches and accessories like many other companies in the jewelry space do, but we haven't done any of that. So we've essentially said we stay focused on the jewelry space. We stay focused on the Pandora brand, and then within that, we put the product strategy in place. And we have a very clear sequence on how we go about expanding the number of ECPs that Carla spoke to. So in fact, it is a very, very focused effort that we are doing and -- yes, and even from a geo standpoint. And so I do believe that we are very, very clear on our priorities going forward. And maybe I'll flip the back half of your question to Carla.
Yes. So just to clarify a little bit. Our #1 priority is obviously to protect our user base, existing user base, our moment business. And this is where you would see and what you've seen already in the last 12, 18 months. We will focus all our energy, all our support, all our innovation, all our media budget behind moment. And the reason behind this is obviously, a, to ensure that we have a strong base to start with; b, to keep the brand relevant; and c, to just obviously wake up the Sleeping Beauty. That's our #1 priority. As we look at the future and as we move from turnaround to ensuring sustainable growth, obviously we need to attract new consumers. We need to attract new users. And the segmentation that I displayed, that I just shared before just show that there is enough space in the market. Pandora has the right to win in this market by offering different propositions to different consumers. So a, we do want to minimize as much as possible cannibalization. B, obviously we want to create incremental business.Incremental business is not just about creating a nice piece of jewelry or a nice piece of communication. Incremental business goes from creation to how we go to market. And I think this links back and try to answer to your question on how do we think about marketing model. Obviously we are going to have a very refined marketing model because it's not that every new innovation will have plenty of media budget. We obviously wants to make sure that, a, we create desirable consumer proposition; b, we have compelling financial for our shareholders. So we are very, very conscious about that, but at the same time, we also know that, for consumer to see that things exist, we need to make sure that we create that level of awareness through different channel, whether it's broad-based TV or [ only-digital ] launch, depending on how the proposition is. Most importantly, we need to make sure that our store in -- and our store ambassador, which are fundamentally -- a fundamental communication element for us, has the ability to sell Moments and at the same time any new collection that will create and will be successful so that, on one side, #1 job is to protect the core. #2 job is to fuel the brand with more across the entire value chain from creation to final execution, to the last store of Pandora.
Our next question comes from Fredrik Ivarsson from ABG.
First, one question on Brilliance; and then one short one as a follow-up. But starting with the Brilliance question. Anders, you said it was margin accretive to the bottom line as well, if I heard you correctly. And I wonder whether that is true for both channels, i.e., the owned and operated concept stores and the e-commerce store.
Fredrik, it -- when I talk about this being margin accretive that -- I think about it as for the group consolidated EBIT margin. There will be no big differences between the channels in terms of margin, et cetera. I think -- I would probably think that there will be more of an O&O and sort of physical store and part of revenue in a price range like this than online. But it's in terms of the EBIT margin for the group when I think about that as EBIT margin accretive.
Excellent. And one short one, if I may, regarding the loyalty programs. Wondering if you're open to share how many loyalty members you have today; and how many you had, like say, a year ago or 2.
I think we'll get into that when we get to September.
Okay. I will wait for that.
Our next question comes from Frans Hoyer from Handelsbanken.
Yes. Just I -- am I not right in thinking that you did mention M&A as a possibility, an element that you might activate going forward? What would be the objective of such action? I mean type, nature. And also, regarding Pandora Brilliance in the stores, I would have thought there must be some significant implications if you want to sell a product that is, I think, quite a lot different from what you have at the moment. It ought to also have a bearing on the way you organize your shops.
Yes. So I'd just like to clarify the M&A point because I see that we receive a fair few questions on that. So if we zoom out a little bit, and I'll come back to the specific point, is -- so when we decided on kind of the profile of the strategy, we were kind of very clear on that it has to be primarily about a balanced growth profile. So with that in mind, then of course, what we did, we examined different avenues of growth. One of them was we have the Pandora brand. You can take the Pandora brand into different categories, as I think I mentioned. You can go into watches and all sorts of adjacent categories. So that could have been one option. The other option could be to add brands to the company, which obviously comes back to the M&A point. What we have said and in the short- to medium-term focus is to stay focused on the Pandora brand, stay in the jewelry space and drive out growth there by expanding the number of ECPs that Carla just touched upon. That is the main idea. Then we zoom out and then we say, okay, who is Pandora? We have a number of things working in our advantage. We have a manufacturing capability and capacity which, bars none, we're the biggest guy in town. We have a global distribution network. So we have assets which arguably you could bolt on other things on and kind of get a good return on, but that is, of course, something which we think is not for now because we have so much opportunity within the core that we actually don't want to get distracted by acquiring other companies. And for those of you that follow statistics, you know that, out of 10 M&As, 5 to 6 typically are shareholder negative. 2 are neutral and 2 are positive. So M&A, whilst it sounds like a nice revenue opportunity, it actually comes with a fair amount of risk attached to it. Pandora has 0 history of making M&A.So where we are now, we've just come out of a turnaround. We want to focus. We want to stabilize the company. We want to ensure that we drive out the growth opportunities that we have in front of us. And then M&A might be an interesting opportunity going forward, is a very fragmented market across the globe. We are one of the big players. We have a strong balance sheet, so there might be an opportunity for us to be part of a consolidation in the future, but it's certainly not something which is in the -- let's say, at least in the near- to mid-term horizon. We want to stay focused on the plan which we have at hand.And then your second question, on reorganizing the shops. Yes, this is going to be a different approach. And I think, as we get into more ECPs, more collections in the store, we will have to learn how to deal with this. So that's one part of the learning journey we are going through now in U.K., but just to put it in perspective: In an average shop, we can showcase something like 1,000 pieces. This range, as Carla showed before, is a quite narrow range. So we're talking about, I don't know, 35 pieces, let's say, to showcase the range. So right now that is not the challenge. It's more how you actually visually merchandise this, the sales narrative and the training that goes in to support our staff so that they can kind of guide you through that shopping experience. And those are all things that we are now uncovering as we go into this Brilliance launch.
[Operator Instructions] Our next question comes from [ Lu from Flower Entre ].
I have a question regarding retail operation. So in the past, Pandora used to have slow-moving SKU [ and it's ] building up in the channel [indiscernible] Programme NOW [ brought back ] inventory. And we focus on the charms and bracelet, right? So with the Pandora Me relaunch and Pandora Brilliance, what I see is that you are doing 2 things at the same time. One, you are extending pricing point both downwards and upwards. And second, you are extending the -- I mean, increasing the product offering outside of charm, such as like earring, rings and necklace. So this will increase the complexity of the retail operation multifold, so in today, how do we make sure that the past mistake of a slow-moving SKU doesn't happen again? How do we control the SKU inventory?
Okay. I mean, Carla, do you want to go?
Yes. I think this is you summarized it pretty well. So first and foremost, this is a constant effort. We constantly work with merchandising to ensure that we have the right assortment. As you rightly said, in the last few years, there's been a lot of focus and effort in making sure that our assortment is as productive as possible. And I think we've made a big, big step forwards in term of simplification while ensuring that we offer the right assortment to our consumer. This is an ongoing effort. We will continue to do so both on existing collection as well as with new launches.And just to give you perspective. It's not that we are talking zillions and zillions and zillions of DVs. Pandora Me, it's about 50 DVs and Pandora Brilliance is about 36 DVs, but obviously this is a fundamental, important piece of our operational discipline. And we are all very, very keen to continue to keep this operational discipline machine going because we know that, on one side, creating new things is absolutely critical for the business, but the operational discipline of ensuring the right assortment in every single store and the most productive assortment, it's something that we do daily. We have a strong merchandising team. We have a strong commercial team, so these, we'll keep doing that, absolutely.
Is there any chance that we can further shorten the supply chain so that we only need to have minimum inventory in the channel? Yes. And whether the e-commerce platform can play a role of reducing the excessive [ inventory that's ] required in our retail business.
I'm not -- okay. I mean it's an interesting question. The inventory position, inventory holding in the shops is, what, 15 weeks roughly. And then we hold a bit more in the [ LCs ]. So in fact, it's not -- it's dramatically been reduced in the last 2 years, I should say on one hand, in absolute, but the second one is also we have a better control of which type of SKUs we promote. So in fact, we have segmented the assortment in deciles, in a way, and we are now focusing much more on the top sellers than maybe we did in the past. So I do think, if I compare to, let's say, 2 years ago, the effectiveness in our supply chain and the inventory holding is significantly improved, in fact to the point where we think we may be on the low side. Because when you're in a high-margin business, the one thing you don't want to do is to be out of stock. Because the cost-benefit analysis is very simple to do. If you lose that sale which is an 80% gross margin in an -- owned stores, you don't make that up for the cost of capital to hold a bit of inventory. So that is actually not a major concern for us today.
Our next question comes from Michael Rasmussen from Danske Bank.
Yes. So just a follow-up question on the Brilliance. So what is your game plan in terms of moving on to other markets after the U.K.? I don't know if I've missed it if you already commented on that. But also if you could kind of comment on what kind of share of group revenues are you guys targeting here once it's fully rolled out. Just in order to [ me ] get a bit of a hand on kind of what kind of meaning for -- all this will have on group revenues. And then finally, how are you going to report? Will it be split into the normal product categories Rings, Earrings, Bracelets and so on?
So let me be the boring guy, on the first one. As we said, today is not about numbers, so you will have to wait a little while before we concluded that. And then maybe I can -- Anders, you can answer the reporting question.
Yes. And it -- that's a good question, Michael, here. If you -- in one of the notes to the company announcement this morning, you will see that, as part of what Carla explained earlier on, on the ECPs and the way that we work with our product portfolio, we will also going forward be changing the way that we report on product categories going -- and aligning with the ECPs because that's how we work with products internally. So it will follow the -- going forward, the GBU structure and the subcategories below that. So moving away from thinking about a Charms category and a bracelet category, et cetera because that's not how we work with our product portfolio going forward. And as -- if and when Brilliance becomes a meaningful part of that, that will be sort of outlined as part of those subcategories in the global business units, the GBUs.
Fully understood, but on the markets, I guess you could comment on kind of the level of markets after the U.K. market.
The game plan is to, first of all, ensure that we can take all the learnings from the U.K. so that -- before we kind of push the button globally. Because I think, as somebody mentioned before, it does require a bit of a difference in the operation in the store, so we need to figure out how we manage that. And on the assumption that all of that somehow is okay, what we are currently planning to do, then mid next year, we would start thinking about rolling out into a few other geographies. For competitive reasons, I will refrain from mentioning which they are today.
Our next question comes from Martin Brenoe from Nordea.
I have 2 questions. The first is that I noticed that the Reflexion platform is not mentioned anywhere. Is that going to be phased out? And then if you could just tell us what -- the platform's share of revenues on the group today, that would be great.
Carla, do you want to take that one?
Yes. So the Reflexion platform will be -- obviously we will actually -- we have quite some plan behind it, and it's included in the Timeless platform. We did an extensive research with both consumer as well as with our product design. And we went through product design future -- features. What are the key motivating factor? So we will create one collection which is Timeless which will incorporate Reflexion. And we have new -- product newness coming for -- in the next -- in the coming future, let's say. So no, we are not going to forget about it. To the contrary, we are going to make it part of a broader proposition, and we have some news coming up.
So -- and do you have the Timeless proportion also today? It's, what, 19%, 20%?
Timeless is around 19% of the business, 19%, 1-9.
19%, yes. So yes. So Reflexions sits inside that 19%. So it's not 19% standalone, just to be clear, but I'd like to just pick up on that because it's a very good question. The way we think about it, this is the whole notion of the platforms, so rather than having lots and small "its and bits" that you cannot support properly, we'll -- we'd rather have fewer of these platforms and then drive them properly. So it's much more of a launch-and-leverage type of thinking rather than launching and leaving, which unfortunately was a little bit the missteps of the past, but we've learned from that and going forward. But that also means that you cannot have 18 different collections. So that's been part of the work we've done in trying to kind of streamline that and put stuff where it makes sense based on this mapping that Carla went through. So some things will fall off. And some things will be relaunched and, let's say, revitalized, and Reflexions is part of this effort.
Our next question comes from Chiara Battistini from JPMorgan.
Just a quick follow-up question on your store concepts. And I was just wondering whether you're also reconsidering your store concept, especially as you'll need to accommodate for a broader and quite different product offering. So where do you stand on that front? And should we expect an update also on that at the [ Capital Markets Day ]?
Carla, do you want to take that?
Shall I take it?
Yes, go ahead.
Yes. So we are in the process of developing a new store concept, obviously. And yes, in the Capital Market Day, we will have an update for you. What I think it's -- however, it's important for us to recognize -- is that this -- the new store concept will obviously bring to life -- refresh, let's say, the brand because the current one -- the current store obviously are a little bit tired. But beyond that, we also know that the dynamic of purchasing are not just about collections. So it's not that we are going to throw away what we have today because actually, operationally, our current store works extremely well and is very efficient, but -- we need to do is to combine the way in which, by category, some of the Moments consumer buy, which is you go in store. And you ask for a charm, which is about family, but at the same time, exploring much more the walls, the display, digital tools that will allow us to have the flexibility to talk collection when consumer want to and, at the same time, to also ensuring that we can also talk category should consumer wants to buy by category. So we are doing lots of work in this to make sure that we have a brilliant store in term of look and feel but an equally brilliant store when it comes to operational -- an operational machine because that has to work.
And I guess, when you say also from an operational point of view, you also think the omnichannel proposition and how to [indiscernible] -- okay, okay, perfect...
Absolutely, absolutely, absolutely. It has to be totally integrated. That said, that's going to be one of -- as Alexander mentioned, we started with click-and-collect, but there is so much more we can do to ensure that this is a truly [ omni ] experience rather than separated off-line versus online. So yes.
Can I just piggyback on that? Because that is maybe a bit, let's say, hidden inside the growth pillars of the strategy. But when we talk about personalization, that really kind of covers all of that. So rather than having this division of talking about the store and talking about e-commerce and talking about the website, whatever, it all sits under the umbrella of personalization because that's the outcomes that we want to achieve, that people feel that we are taking special care of each and every one of you when you're a Pandora customer regardless of where you decide to kind of interact with us, be it just from a marketing standpoint or from a transactional standpoint. So that's where it's encapsuled. I know it's a bit hidden there, but that's -- we will go through that in more detail in the CMD. Now I'm getting a red flag here. We can take one more question and then we'll go to a close.
Thank you. There appears to be no further registered questions, so I will hand back to the speakers.
Okay. So maybe we go to the -- there are 2 slides at the end of the deck.So the quick -- okay. So I mean, in a nutshell, what we wanted to plant with you today was a high-level overview of the growth strategy going forward. We've talking -- talked about 4 growth pillars. We've shared with you a little bit more detail on the design piece, and I'm quite pleased that that's where all your questions were centered on because it was a bit more concrete. I hope we can replicate that across the other 3 pillars, including some of the foundational elements which we'll go through in the Capital Markets Day. And I'll just essentially close on that note.So we have planned it for September 14. We hope you can pencil this into your calendars. And on the assumption that travel restrictions are lifted, we will welcome you to our show in London in September.Thank you very much for attending our session today.