FINANCIAL REVIEW• 55
INCOME STATEMENT
COSTDEVELOPMENT
Share of
Share of
revenue revenue
DKKmillion
2014
2013 Growth
2014
2013
Cost of sales
3,519
3,011
16.9% 29.5% 33.4%
Gross profit
8,423
5,999
40.4% 70.5% 66.6%
Sales and distribution expenses
1,957
1,517
29.0% 16.4% 16.8%
Marketing expenses
1,143
880
29.9% 9.6% 9.8%
Administrative expenses
1,251
921
35.8% 10.5% 10.2%
Total costs
7,870
6,329
24.3% 65.9% 70.2%
GROSS PROFIT
Gross profit wasDKK 8,423million in 2014 comparedwith
DKK 5,999million in 2013, resulting in a grossmargin
of 70.5% in2014 comparedwith 66.6% in 2013.The
increase in grossmarginwasmainly due to lower prices
for silver and gold, aswell as a higher share of revenue
for PANDORAowned and operated stores, whichhave a
higher grossmargin comparedwithwholesale revenue.
Cost of sales is impacted by hedging of raw
materials. Excluding hedging and the time lag effect from
inventories, the underlying grossmarginwould have been
approximately 73% basedon the average gold (USD 1,266/
oz) and silver (USD 19.08/oz) market prices in 2014. Based
on these assumptions, a 10% deviation in quarterly average
gold and silver priceswould impact our grossmarginby
approximately +/- 1percentage points. Reference ismade
tonote 4.4.
COST
Total costs for 2014, includingdepreciation and amortisation,
wereDKK7,870million, an increaseof 24.3% compared
with2013.The increasewas primarilydue to increasing
sales. Costs corresponded to65.9%of revenue for the year
comparedwith70.2% in2013.
OPERATING EXPENSES
Operating expenses in 2014wereDKK 4,351million
comparedwithDKK3,318million in2013, representing
36.4%of revenue in 2014 comparedwith36.8% in 2013.
Sales anddistribution expenses increased toDKK
1,957million in2014 fromDKK1,517million in 2013, an
increase of 29.0%, and corresponding to 16.4%of revenue
in2014 comparedwith 16.8% in 2013.The nominal
increase in sales anddistribution expenseswas primarily
driven by increasing sales efforts and an increase in the
number of PANDORA-owned stores (321 stores in2014
comparedwith 206 stores in 2013).
Marketing expenses in2014were 9.6% of revenue
comparedwith 9.8% in 2013.Marketing expenses
increased toDKK 1,143million in 2014 fromDKK 880
million in 2013.The increasewas due tohigher PR and
media activity.
Administrative expenses amounted toDKK 1,251
million in 2014 comparedwithDKK 921million in 2013,
representing 10.5%of revenue, up from 10.2% in 2013.
The increase in administrative expenseswas primarily due
to costs related to relocation of offices, higher IT costs and
increased headcount.
