Deminor, the Belgium-based legal consultancy that is representing the group of 36 investors, stated in a press release that the lawsuit referred to the profit warning released by Pandora on 2 August 2011 when the company “significantly downgraded” its 2011 margins guidance for revenue and earnings before interest, taxes, depreciation and amortisation (EBITDA).
Pandora had originally expected a sales rise of at least 30 per cent and an EBITDA margin of at least 40 per cent; in its profit warning this was revised to a zero increase and an EBITDA margin of 31 per cent to 34 per cent.
According to the Deminor release, Pandora investors were seeking compensation due to the fact that following the profit warning, “the stock price of Pandora lost 65.35 per cent in a single trading day, which resulted in the destruction of DKK 12.5 billion (AU$2.4 b) of market value”.
The shareholders argued that the company should have been more efficient in advising them about the sales drop.
The complaint is backed by the findings of the Copenhagen Stock Exchange’s regulatory commission and the Danish Financial Supervisory Authority, which both concluded the profit warning should have been issued earlier.
At the time of the profit warning, then Pandora chairman – now president and CEO – Allen Leighton explained, “Although our price increases combined with some destocking are significant contributors to our slowdown in sales and profitability, our own inadequate operational sales, and marketing execution is as big a factor.”
Leighton is being sued as well. In addition, the statement announced the sudden resignation of then Pandora CEO Mikkel Vendelin Olesen.
This is not the first time Pandora’s 2011 profit warning has come under fire. The Danish Public Prosecution for Serious Economic Crimes also filed an indictment against Pandora in November last year for failing to inform the market in a timely manner of the fact that it would not be able to meet its 2011 targets.
Pandora said it would plead not guilty and responded with a statement saying it believed it had “acted properly during a swift and unexpected downturn in sales” and that it had “at all times been in full compliance with all relevant rules and regulations for issuers of shares”.
Pandora was founded in 1982 and is headquartered in Copenhagen, Denmark. Its jewellery is sold in more than 80 countries through approximately 10,000 points of sale.
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Pandora revises 2011 targets