So in light of the big news that Pandora—once the darling of jewelers (and investors)—has registered huge sales drops, sacked its CEO, and is calling in the consultants, many are asking: Is its incredible ride over? 

Certainly there is a place for pessimism, especially if you listened to Tuesday’s conference call. Pandora chairman Allan Leighton is an experienced executive, with an amazing resume that includes stints as the non-executive chairman of the British Postal Service. But boy, he seemed awfully cranky during the teleconference, spending most of it energetically bashing his own company. He at one point announced, “I’m not confident today at all.” And while he noted that consumers still liked the product, he declared that was the company’s “one ray of hope.” (One!) He ended the call by saying, “I am aware we have no credibility with investors. Frankly, we don’t deserve any.” It’s no surprise that Pandora’s stock dropped so dramatically this week; you get the feeling that Leighton was first in line to sell.

But on the other hand, when JCK talked to jewelers this week, many told us their Pandora sales were fine. I just spoke to industry analyst Ken Gassman; he’s been hearing the same thing. “Everyone is just scratching their head about this,” he said. 

If there has been a problem, some suspect that Pandora has grown so much, and so fast, that the company has (perhaps inevitably) experienced growing pains. Service has suffered, some say, as have relations with retailers. As one person put it: “When you are very successful and everybody wants you, it is easy to come across as arrogant, whether you are or not.” 

In addition, the funding that came from the IPO seems to have made the company too ambitious, believing that anything with the Pandora name on it (watches! sunglasses! jewelry!) would sell. “When they were selling sunglasses at their booth in Vegas, I thought they just lost it,” a veteran industry observer said. In fact, one nugget of news from Tuesday’s call is that the company is turning its attention back to the businesses that put it on the map. “Charms and bracelets are the fundamental parts of the brand,” Leighton said. “Unless we have consumers buying those products, starting their Pandora experience, we won’t have anything to build on.” 

There is also the “F” word—fad. For a long time, many have warned the whole Pandora craze will eventually burn itself out. Are we at that point? To me, that’s too easy. If the charm trend is a fad, it may have been a fad for jewelers, many of whom eagerly jumped on the bandwagon when nothing else was selling. But that may not survive the downturn; argues Liz Chatelain of MV Marketing: “As soon as the economy starts coming back, the salespeople in the store may not want to take the time to sell a $150 starter bracelet where they can sell a $300 diamond heart pendant.” So in a way it makes sense for Pandora to focus on co-owned boutiques, no matter how much that annoys jewelers. 

Pandora has been a remarkable success story. I believe it will have staying power. “People don’t come into a jewelry store looking for beads,” notes Gassman. “They come looking for Pandora. It’s an incredible brand.” And yet this is also a new world where Pandora’s not the only bracelet in town. “Their product isn’t defensible because they haven’t innovated,” says Christopher Ellis of Consensus Advisors. “And everyone is knocking them off.” But Pandora could still seize some unique territory; Chatelain has a great idea: Celebrity-endorsed charms—maybe Angelina Jolie could design one in honor of a favored cause.

All in all, it’s way too early to start panicking about this category, or this company. “If retailers start getting the whiff that this is a fad and get nervous and put out the 50% off signs, then this is really over,” says Chatelain. “This has more life in it if people just keep their heads.”

Rob Bates

JCK News Director