EU CONSUMER CYCLICALS: Pandora: 2Q results
(PNDORA: Baa2/BBB) (equities -13%)
The margin headwinds on silver and tariffs are as expected. Sales growth is still there (ninth straight quarter of LFL sales growth) but moderating based on July trading (LFL +2%). We have long liked Pandora among retailers; Kering May-30s started the year -35bps inside it, went as close to flat, before reversing back now to -17bps inside. Investors may still be able to find more short term safety in Pandora, particularly with near term Silver exposure fully hedged.
- 2Q sales DKK7.1b (€950m) organic +8% (LFL +3%, network expansion +5%)
- LFL: US +8%, Europe +1%, Rest of World +6% - each makes up 1/3 for group. China -15% but is small 1% of grou
- 2Q gross margin 79.3% (-90bps), EBIT 18.2% (-160bps)
- Silver prices drove gross margin headwind (-80bps) with additional headwinds from FX (-120bps) and tariffs (-30bps).
- 1H FCF (net of interest) was neg -448m vs +530m LY - it is seasonal into 2H and weighed y/y by tax payments and harsher WC swing.
- DKK2b buyback done alongside 1.6b in dividends (total 3.6b). Still guiding to 5.6b in total shareholder pay-outs this year (vs. 5.5b LY).
- Net levered 1.5x vs. 1.4x LY. Targets 0.5-1.5x, was guiding to 1.3x by year-end.
FY Guidance
- Organic +7-8% growth of which 4-5% LFL (unch)
- Not included in above, FX modelled to be a 3.3% headwind for now
- July trading is at LFL +2% - it says weak end of season sale and timing of product launches is weighing on it.
- EBIT margin of "around 24%" (unch) (vs. 25.2% LY)
- tariff headwind revised up from 30bp to 60bps (Thailand 19% tariff, vs. Pandora assuming 10% prev.)
- commodity/silver headwind of 140bps
- FX headwind of 80bps
2026 EBIT margin target of at least 24% (prev. 25% ex. Tariffs, originally 26-27%)
- Mainly revised down on 330bp headwind now from Silver prices
- FY headwind from tariffs is 120bps
Re. silver (30% of COGS):
- 100% hedged for 2025 around $28 (vs. spot $38)
- 70-75% hedged for 2026 around $31
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GILTS: Off Lows As Support Holds & Oil Softens, 50bp BoE Cuts Priced Through Dec
Gilts trade away from lows after support in futures held and with oil prices edging lower. Still, yields are higher across the curve in the wake of this morning’s firmer-than-expected CPI reading.
- Gilt futures last -16 at 91.41 vs. session lows at 91.17. June 2 low (91.16) provides key support.
- Yields 1.5-2.5bp higher, 5s under the most pressure.
- 2s remain rangebound.
- 10s briefly pierced the June 9 high (4.673%).
- STIRs price around ~50bp of cuts through year-end, with over 80% odds of the next cut priced through August. Market priced ~58bp of cuts through year-end at one stage on Monday.
- A reminder that while the UK CPI data was firmer-than-expected it wasn’t too out of line vs. BoE expectations.
- That means that the market remains comfortable with discounting a once per quarter rate cutting cycle through year end, given the softening labour market and still stagnant economic growth.
- What’s more, BoE Governor Bailey’s weekend comments were dovish and centred on the labour market, which increases the importance of tomorrow’s labour market data release.
- The 4.50% Sep-34 gilt PGT saw solid enough demand and pricing metrics but wasn’t quite as well-received as yesterday’s PGT.
- Little of note on the UK calendar for the remainder of the day, leaving focus on U.S. PPI data and any ongoing reaction to the domestic CPI print.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Aug-25 | 4.009 | -20.8 |
Sep-25 | 3.956 | -26.1 |
Nov-25 | 3.794 | -42.3 |
Dec-25 | 3.710 | -50.7 |
Feb-26 | 3.582 | -63.5 |
Mar-26 | 3.549 | -66.8 |
GERMAN AUCTION RESULTS: 30-year Bund results
| 1.25% Aug-48 Bund | 2.90% Aug-56 Bund | |
| ISIN | DE0001102432 | DE000BU2D012 |
| Total sold | E1bln | E1.5bln |
| Allotted | E800mln | E1.129bln |
| Previous | E1.313bln | E4bln |
| Avg yield | 3.13% | 3.22% |
| Previous | 3.09% | 3.03% |
| Bid-to-offer | 3.69x | 1.05x |
| Previous | 3.68x | |
| Bid-to-cover | 4.60x | 1.40x |
| Previous | 4.20x | |
| Avg Price | 69.39 | 93.78 |
| Low Price | 69.38 | 93.76 |
| Pre-auction mid | 69.276 | 93.710 |
| Prev avg price | 69.86 | 97.38 |
| Prev low price | 69.85 | |
| Prev mid-price | 69.810 | |
| Previous date | 14-May-25 | 06-May-25 |
EGBS: Bund Futures Off Session Lows But Bearish Theme Still Dominant
Bund futures are off session lows following a downtick in Brent crude futures, but remain -6 ticks at 129.40. A bearish technical theme remains intact, with initial support the July 14 low at 129.08, clearance of which would expose the key support at 128.97 (May 14 low).
- German yields are off earlier highs, now up to 0.5bps lower across the curve. Germany will sell E1.0bln of the 1.25% Aug-48 Bund alongside E1.5bln of the 2.90% Aug-56 Bund at 1030BST.
- In France, opposition politicians have been lining up to criticise the budget proposals announced by PM Francois Bayrou on 15 July. There is a strong likelihood that, given the gov'ts minority status, Bayrou will have to push the budget through using Article 49.3 of the French constitution in order to avoid a vote.
- The 10-year OAT/Bund spread remains fairly insulated though, currently 0.5bps tighter at 69bps.
- Broader EGB spreads to Bunds are also little changed, with European equity futures off earlier lows.
- The Eurozone May trade surplus was larger than expected at E16.2bln (vs E14.0bln prior).
- Broader global focus will be on the US PPI report at 1330BST following yesterday’s CPI reading, which started to show some tariff impact in core goods categories.
