S&P Global Ratings has moved the outlook on Danish jewelry maker Pandora to negative from stable, though it left the company's BBB credit rating unchanged. The agency identified a temporary increase in leverage driven primarily by higher silver prices and one-time expenses related to the company's plan to shift most of its silver assortment to platinum-plated products.
S&P's base-case scenario anticipates the company's adjusted EBITDA margin will decline over the next two years, falling to 21.7% in 2027 from an expected 29.7% in 2026 and 32.2% in 2025. The primary factor behind the projected margin erosion is the impact of rising silver costs on procurement.
Pandora hedged 90%-100% of its silver requirement for 2026 at about $32 per ounce, compared with roughly $29 per ounce in 2025. For 2027, the company will hedge at much higher and more volatile market levels, with S&P noting a hedge point of $78 per ounce as of Feb. 19, down from roughly $120 per ounce in January.
To reduce exposure to silver price volatility, Pandora plans to convert about 80% of its silver product assortments to platinum-plated finished goods. Approximately half of that conversion is scheduled to be completed by 2027. S&P expects the transition to require additional capital investment of about DKK 600 million across 2026-2027, plus exceptional costs in the range of DKK 600 million to DKK 700 million.
On top-line projections, S&P foresees Pandora's revenue dipping by about 2.0% in 2026 to DKK 31.9 billion and falling a further 1.2% in 2027 to DKK 31.5 billion. The rating agency attributes the weakness to constrained consumer spending limiting discretionary purchases across key European markets, including Italy, the U.K., and France.
Retail performance in the U.S. was modest in late 2025; fourth-quarter results showed like-for-like growth of around 2% in that market, which accounts for roughly 36% of Pandora's total revenue. S&P noted softer in-store traffic over the holiday period. Despite this, the company is targeting 50-75 net new concept store openings in 2026 to grow its U.S. footprint and reinforce its brand presence in Europe.
On leverage, S&P projects its adjusted debt-to-EBITDA metric will temporarily rise toward 1.7x in 2027, up from an expected 1.2x in 2026. That would mark a departure from Pandora's recent track record of maintaining adjusted debt to EBITDA below 1.5x during 2023-2025. To preserve liquidity, Pandora has suspended its share buyback program; S&P expects repurchases to resume in 2028 once adjusted leverage falls below the 1.5x threshold.
Free operating cash flow after leases is also expected to be pressured, declining to about DKK 1.8 billion in 2027 compared with historical average levels of DKK 4.0 billion to DKK 5.0 billion.
S&P outlined potential triggers for a downgrade: a sustained decline in organic revenue, a fall in EBITDA margin from historically stable levels, or adjusted debt to EBITDA remaining above 1.5x for a prolonged period. Conversely, the outlook could be returned to stable if Pandora successfully manages elevated input costs through effective hedging and completes the shift to platinum-plated products, restoring top-line growth and profitability and reducing adjusted debt to EBITDA to well below 1.5x on a sustainable basis.
Sector implications
- Consumer discretionary and retail - weaker discretionary spending in core European markets could pressure sales.
- Commodities and procurement - volatility in silver prices is directly affecting input costs and margins.
- Credit and capital allocation - temporary leverage increase and suspended buybacks alter capital return dynamics.