- Like-for-like sales in positive territory
- Third consecutive upgrade in 2024
- Shares trading above Elliott’s top bid
Rebuffing a takeover bid can heap pressure aplenty on a board, so the fact electricals retailer Currys (CURY) has upgraded profit guidance in the wake of batting off foreign interest is helpful to management’s credibility.
Shares in the washing machines-to-smartphones seller sparked up 9.5% to 71.5p after Currys bumped up guidance for the third time this year following a ‘strong finish’ to the year ended 27 April 2024.
Self-help measures under CEO Alex Baldock’s stewardship are paying off for Currys and significantly, the shares are now trading above recent suitor Elliott’s top bid of 67p and the 60.1p at which Shares highlighted the retailer’s recovery attractions in March.
LIKE-FOR-LIKES BACK IN GROWTH
In a short update which charged up the share price, the FTSE 250 tech products purveyor said group like-for-like sales returned to growth in the 16 weeks to 27 April.
As a result, adjusted pre-tax profit for the year to April 2024, stripping out the recently-sold Greece business, is expected to come in between £115 million and £120 million, ahead of previous guidance of ‘at least £105 million’.
The upgrade was driven by improving trading momentum with like-for-like sales in positive territory in the UK & Ireland and also the Nordics, where Currys trades as Elkjøp and adjusted EBIT (earnings before interest and tax) more than doubled year-on-year to come in ahead of the £51 million consensus estimate.
Currys’ balance sheet is also in better shape than expected, with management now guiding to year-end net cash (excluding leases and pension) of around £95 million.
WELL SET UP FOR YEAR AHEAD
‘Our performance is strengthening,’ insisted Baldock, ‘with good momentum in the UK & Ireland, and with the Nordics getting back on track. Sales are now growing again, margins are benefiting from higher customer adoption of solutions and services, and cost discipline is good. All this means improved profits and, with our strong cash position, we’re well set up for the year ahead.’
Liberum Capital, which is bullish on Currys with a 135p price target, upgraded its full-year 2024 pre-tax profit forecast by 11%, from £106 million to £117 million.
The broker said the move into positive like-for-like territory in both the UK & Ireland and Nordics in recent weeks is ‘good news. While this admittedly comes against weaker comparatives in full-year 2023, there are signs that the macro pictures in the group’s core territories are turning a corner.’
AJ Bell investment director Russ Mould observed that Currys is showing ‘real signs’ of recovery, with the recent momentum in its UK and Ireland business finally being matched by a Nordics arm being turned around by a new leadership team.
‘After benefiting from the pull-forward of spend on TVs, laptops, printers and household appliances engendered by the pandemic, the post-Covid backdrop has been tougher for Currys,’ explained Mould.
‘Persistent inflation and rising rates have put the squeeze on consumers’ discretionary spending, and the Scandinavian business, a previously reliable contributor, going wrong only compounded matters.’
Mould continued: ‘Currys deserves some credit for digging itself out of this hole and is really playing into its role as a provider of accompanying services alongside the sale of consumer electronics. This is logical as many people are not hugely tech savvy and if Currys can make itself a trusted provider of expertise and support it could drive customer loyalty and useful ancillary revenue.
‘The company still remains at the whim of consumer demand but with the sale of its Greek operations helping to put it in a net cash position, Currys is well positioned for anything the economy might throw at it.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Steven Frazer) own shares in AJ Bell.
