How Might Pandora’s Warehouse Management System Upgrade Affect Its Inventory Turnover and Days’ Inventory Outstanding?

Pandora A/S (Nasdaq Copenhagen: PNDORA), the Denmark-based company that bills itself as the world’s largest jewelry brand, is rolling out a new warehouse management system (WMS) across its distribution network. The upgraded system, built by Hardis Supply Chain, is being deployed in phases at Pandora’s distribution centers in Thailand, Germany, and the United States. The U.S. rollout is scheduled for July 2026 at a new 107,000-square-foot facility in Anne Arundel, Maryland, which will expand Pandora’s U.S. distribution footprint by close to 80%.

Pandora has said the new WMS will give it real-time visibility into inventory, throughput, and performance, and will help the company, as the press release put it, “cut back on idle inventory” and “improve overall service levels.” In other words, a central goal of the upgrade is to move jewelry through Pandora’s distribution network more quickly and to hold less of it sitting in warehouses at any given time.

If Pandora succeeds at those goals, two common inventory ratios should respond: inventory turnover and days’ inventory outstanding (DIO). Inventory turnover measures how many times a company sells through its average inventory during a year. DIO converts that into the approximate number of days inventory sits on hand before it is sold.

Attached is a condensed and adapted set of Pandora’s financial statements to use for computing these ratios.

Please note that the accounts have been adapted and condensed for educational use and should not be used for investment decisions. Pandora reports in Danish kroner (DKK); figures in the attached file are in DKK millions. Pandora’s complete, unabridged financial statements can be found on its investor relations website.

Note: The condensed financial statements can also be downloaded in Excel format for enhanced readability and accessibility.

View a quick tutorial video about inventory turnover and days’ inventory outstanding and then answer the following questions.

Note to instructors: This post is assignable in Pearson’s MyLab and has questions that are auto-graded.

Discussion Questions

1. Using the condensed financial statements, calculate Pandora’s inventory turnover and days’ inventory outstanding for 2024. What do those ratios tell you about how quickly Pandora is moving its jewelry through inventory?

2. Suppose the new warehouse management system reduces Pandora’s ending inventory by 10% at the next year-end, with no change to cost of sales. How would that affect inventory turnover and days’ inventory outstanding? Would you view that as a positive change for the company, and why?

3. Pandora is a jewelry retailer that sells gold, silver, and diamond pieces. Why might inventory management be especially important for a company that sells products made from precious metals and gemstones? Consider both storage concerns and commodity price risk.

4. A higher inventory turnover is usually considered favorable. Are there any situations where inventory turnover can be too high? What risks might a jewelry retailer take on if it trims inventory too aggressively going into a key selling season like the winter holidays?

5. If Pandora improves its inventory turnover, what other lines on the balance sheet and statement of cash flows might be affected? Which stakeholders would care most about that shift?