Andrea Felsted is a Bloomberg Gadfly columnist covering the consumer and retail industries. She previously worked at the Financial Times.

Pandora A/S has opened a box of worries, and investors are taking fright.

The Danish charm-maker, which has been a strong performer during the luxury downturn, has warned of a combination of slowing sales growth and lower margins this year. The shares fell as much as 6.9 percent.

Pandora has a habit of recovering after disappointing investors -- sales bounced back in the third quarter after missing analysts' forecasts in the second. The world has turned against it, and with a stronger dollar and the return of competitive pressures in China, Pandora could well struggle to repeat the trick.

The U.S., crucial for the company until it reaches critical scale in China, was weaker than expected. Same-store sales from Pandora-branded shops fell 2 percent in the fourth quarter as online trade picked up and there were fewer visitors to shopping malls.

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Same-store sales slip in U.S. and Brazil weigh on Pandora's performance

Pandora plans to keep up a strong pace of store openings, but after years of expansion, and the increasing shift to internet sales, the risk of cannibalizing the store base is rising. Its old winning formula of boosting growth by opening new outlets may no longer be quite so winning.

In addition, its exposure to U.S. tourist spending means it won't be immune to pain from the strong dollar, that's already has hurt rivals such as Tiffany & Co.

Pandora has benefitted from expansion in China, with same-store sales rising about 25 percent in the fourth quarter as extravagance-averse consumers sought more-reasonable treats. But as my colleague David Fickling has argued, rivals such as Chow Tai Fook Jewellery Group Ltd. are looking to take a bigger share of Pandora's affordable bling. So odds are against it keeping up this strong rate of growth.

If life is getting a bit tougher, at least investors can console themselves that Pandora's high cash generation leaves it room to return capital to shareholders and proceed with the share buy-back program it announced on Tuesday.

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Pandora valuation lags industry peers' as profitability gets squeezed
Source: Bloomberg Intelligence

But it is not just its sales-growth trend that is troubling. Pandora also warned that adverse currency movements and higher commodity costs, particularly gold, would hit Ebitda margins.

Consequently, the shares trade on a forward price earnings ratio of just under 14 times, compared with almost 19 times for the BI luxury peer group. This is probably about right.

Pandora's been an amazing performer -- its 21 percent sales growth last year was likely a luxury standout -- but challenging times are ahead, and those with U.S. exposure seem to be suffering more. It avoided Charmageddon in 2016, but a repeat performance in 2017 isn't likely.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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Andrea Felsted in London at

To contact the editor responsible for this story:
Jennifer Ryan at