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68 • FINANCIAL REVIEW
PANDORA ANNUAL REPORT 2016
COSTS
Total costs for 2016, including depreciation and
amortisation, were DKK 12,877 million, an increase of 18%
compared with DKK 10,923 million in 2015. The increase
primarily reflected increasing sales. Costs corresponded
to 63.5% of revenue for the year compared with 65.3% in
2015.
GROSS PROFIT
Gross profit was DKK 15,223 million in 2016 compared
with DKK 12,193 million in 2015, resulting in a gross
margin of 75.1% in 2016 compared with 72.9% in 2015.
The increase in gross margin was mainly due to lower
prices for silver and gold, with a positive effect of around
1 percentage point as well as a higher share of revenue
for PANDORA owned and operated stores, which have a
higher gross margin compared with wholesale revenue.
This had a positive impact of around 1 percentage point
compared with 2015.
Cost of sales is impacted by commodity hedging.
Excluding hedging and the time lag effect from inventories,
the underlying gross margin would have been around
74% based on the average gold (USD 1,257/oz) and silver
(USD 17.32/oz) market prices in 2016. Based on these
assumptions, a 10% deviation in quarterly average gold and
silver prices would impact PANDORA’s gross margin by
around +/- 1 percentage point. Refer to note 4.4.
OPERATING EXPENSES
Operating expenses in 2016 were DKK 7,819 million
compared with DKK 6,379 million in 2015, representing
38.6% of revenue in 2016 compared with 38.1% in 2015.
Sales and distribution expenses increased to DKK
4,011 million in 2016, an increase of 29% compared with
DKK 3,120 million in 2015 and corresponding to 19.8%
of revenue in 2016 compared with 18.6% in 2015. The
increase in sales and distribution expenses was primarily
driven by increasing sales efforts and an increase in the
number of PANDORA-owned stores (709 stores in 2016
compared with 590 stores in 2015). The higher costs in
owned and operated stores mainly related to property
and staff cost, which had a negative impact of around 2
percentage points on the sales and distribution expenses
ratio compared with 2015.
Marketing expenses in 2016 were 9.0% of revenue,
compared with 9.6% in 2015, and corresponded to DKK
1,827 million in 2016 and DKK 1,602 million in 2015.
INCOME STATEMENT
COST DEVELOPMENT
Share of
Share of
revenue revenue
DKK million
2016
2015 Growth
2016
2015
Cost of sales
-5,058
-4,544
11% -24.9% -27.1%
Gross profit
15,223
12,193
25% 75.1% 72.9%
Sales and distribution expenses
-4,011
-3,120
29% -19.8% -18.6%
Marketing expenses
-1,827
-1,602
14% -9.0% -9.6%
Administrative expenses
-1,981
-1,657
20% -9.8% -9.9%
Total costs
-12,877 -10,923
18% -63.5% -65.3%