Plukka (ASX:PKA) talks designer jewellery, its business model and ambitions

Interviews

by Carolyn Herbert

Plukka Limited (ASX:PKA) Managing Director, Natalia Obolensky Presents at the ASX CEO Sessions in Sydney


Plukka Limited (ASX:PKA) is an international fine jewellery company based in Hong Kong. We’ve got a boutique in Hong Kong, as well as a boutique in London and a global e-commerce platform. What we do is find the most exciting and the most creative jewellery on the market. And we bring that into one place so that our consumers can easily access anything, from a diamond encrusted skull ring to a pearl necklace, depending on their tastes. On the supply side, we provide our designers with a global marketing platform that is essentially a plug and play solution for them, so that they don’t have to trawl through all of the various options online/offline in different regions of the world.

We sell our jewellery worldwide with a focus on the US market and the Hong Kong market and the Asian market from there. We’ve got really two main customers. The first is a one-off jewellery purchaser. This is somebody who is looking for an anniversary present, a birthday present, something like that. They’ll likely buy from us every year, every two years and they’re looking for an aspirational luxury brand that’s got a creative twist to it. And Plukka meets that need.

The second group are the fashion forward women. These are women who are buying $5,000 handbags from Net-a-Porter and $1,000 shoes on a regular basis, probably every season. They can get their shoes and their handbags from somewhere like Net-a-Porter, but they have nowhere to go to buy creative, fashion forward fine jewellery. And Plukka is that solution for them.

There are a couple of big distinctions. The first is that Plukka really sources the most creative and exciting jewellery. This isn’t the things that you’ll find if you go to Cartier, if you go to Van Cleef, or if you go to your local jewellers. It’s really creative fashion forward, cutting edge jewellery and that’s probably the biggest distinction. The second is that because we have a global e-commerce platform, women can shop anywhere, from anywhere in the world and have delivered to most countries the jewellery that we give them. We also provide a quality guarantee so that they can be certain that the jewellery that they’re buying online, is in fact sustainably sourced, or is the quality of diamond or gold that they have bought.

The fine jewellery market is a very exciting space to be playing in, and there are four key characteristics I would draw your attention to. The first is that it’s a large market, $AUD230 billion growing at five to six per cent a year. The second is that it’s incredibly fragmented, with the top ten players representing a mere 12 per cent of the market. The third is that branding is becoming increasingly important. It’s a trend that we saw with apparel over the last 15 to 20 years, but is also playing out in jewellery. And the fourth is that only four per cent of jewellery sales are currently online. But that is widely forecast to go up to 14 per cent by 2020. So there’s a real opportunity in the online fine jewellery space.

Plukka listed on the ASX in December of 2015 and since then, we have had a little bit of pressure on our share price. There are a couple of reasons for this. The first is that the market has been a difficult one, with predominantly the Chinese consumers spending less. Markets such as Hong Kong have been very hard hit. And the e-commerce retail market in Australia has also had some headwind, so that space has come under some scrutiny. However, the Plukka vision and the Plukka opportunity remains strong. And there are a couple of key things that we’re doing, to ensure that we are able to deliver strong shareholder returns over the next few years.

The first and perhaps the most important from an investor perspective is that we have significantly cut back our overhead costs. In doing so, we’ve given ourselves substantially more runway. We have at least three years of cash with an unallocated $2 million that we can spend on the right marketing opportunity when it comes. So we have time to be able to weather this storm. And we have reacted quite strongly to the fact that, growth hasn’t been as strong as it was initially forecast.

The second big thing we’re doing is really making sure that our business model is very focused, and very specific. We’re taking the same vision that investors invested in, but we’ve just tightened the edges a little bit. For example, we’re really focused on affordable jewellery in the fine jewellery segment. So that’s the $500 to $2,000 range, which is the range that’s really resonating with our customers. We’re also ensuring that our geographic strategy makes sense with our online strategy. So we’re looking at using a bricks and clicks model, but opening less expensive stores that still get us the online traffic we’re looking for, without incurring huge amounts of fixed costs. So we remain confident despite the share price pressure, that we’ll be able to deliver returns over the next few years.

We’re expecting revenues in 2016 to be fairly flat. Now bear in mind that this is against a backdrop where the majority of our competitors, are forecasting a roughly 25 per cent decline. And we’re really using 2016 to set the foundation for growth. We’re expecting that our growth should pick up quite substantially from 2017 and beyond.

Our cash position as at the end of March 2016 was $AUD6.3, which we believe will see us through the next couple of years, with a substantial part of that to be dedicated to marketing and growing the business. I’m hoping that in 12 months time, we’ll have proven to investors, that not only do we have a strong vision and our responding to a clear opportunity in the market, but we have the ability to execute against that plan. We’ve a strong management team in place. We have a lean fixed cost structure and we’ll be able to really deliver results over the next 12 to 24 months.


Ends

 

Carolyn Herbert

Finance News Network
Carolyn joined FNN in August 2015 as the Head of News and also presented the Market at Midday and the Market Wrap. With more than five years of broadcast journalism experience, Carolyn has worked as a finance anchor on the Sky News Business channel and as an anchor and reporter for ABC News. She is also a qualified corporate lawyer specialising in IPOs, takeovers and mergers and acquisitions.