- Electricals retailer reiterates full-year guidance
- UK & Ireland arm delivers better-than-feared profits
- CEO concedes overseas trading ‘remains tough’
Shares in retailer Currys (CURY) sparked up 9% to 65.5p after the white goods-to-electronics seller maintained recently-lowered earnings guidance for the year to April 2023 after a stronger-than-expected Christmas profit performance in the UK offset a worsening performance in the Nordics.
Before Christmas, the technology products retailer had downgraded 2023 profit guidance from a £125 million-to-£145 million range to between £100 million and £125 million after international markets were temporarily disrupted by competitors selling heavily-discounted excess stock.
HOW DID CURRYS FARE OVER CHRISTMAS?
For the 10 weeks to 7 January 2023, like-for-like sales at the UK & Ireland arm fell 5%, but better-than-forecast profits were delivered through gross margin gains and cost savings coming through.
While Currys saw strength in domestic appliances, driven by a desire for households to invest in energy efficient white goods, consumer electronics and computing sales were weaker as a lot of spend was pulled forward during the pandemic.
Currys’ robust domestic Christmas performance offset a 7% like-for-like sales slide and profits disappointment in the international business caused by a sharp slowdown in the Nordics and continued margin pressure.
Thanks to the continued strengthening of the UK & Ireland business, Currys remains confident of delivering adjusted pre-tax profit in the £100 million to £125 million range, ‘assuming no further unexpected macro deterioration’.
Currys, which expects to finish the current year with less than £100 million of net debt, is also targeting adjusted earnings before interest margins of ‘at least’ 3% by 2024/25, which it aims to ‘continue to improve’ thereafter.
WHAT IS THE CEO SAYING?
CEO Alex Baldock commented: ‘This peak has again shown Currys to be the number one choice for all things tech, helping customers shop however they want - online, in-store or a mix of both - through our winning omnichannel model.’
He insisted Currys had delivered ‘a strong peak performance in the UK and Ireland, growing profits again through resilient sales, increasing gross margins (not least through record services adoption) and strong cost discipline. Our transformation is visibly succeeding.
‘Internationally, it remains tough and we continue to face into intense, but temporary, market pressures. We’re not simply waiting for the external environment to improve. We’ve already reduced stock levels and stepped up our measures to increase margins and reduce costs.’
EXPERT VIEWS
Julie Palmer, partner at Begbies Traynor, said Currys’ Christmas trading update ‘again highlights the pressure retailers are under’.
Palmer explained the statement is ‘a reminder that people are looking to preserve household budgets while improving their home in different ways, whether in the short-term by taking up credit from the company or repairing products to squeeze more life out of them. And looking to the future, many customers are buying energy-efficient domestic appliances to cut their power bills.
‘It remains to be seen whether this is a temporary softening, or if customers have grown weary of a technology cycle where the latest and greatest products quickly become obsolete and are instead holding on to products longer.’
Broker Numis, which has a ‘sell’ rating on Currys, warned that while ‘UK momentum encourages, the longevity of the current benign competitive environment is unclear and looks increasingly important with a recovery in the Nordics likely to take longer than had been hoped.’
Liberum Capital, which has a ‘buy’ rating on the stock, said Currys’ strategic initiatives are driving ongoing UK improvements, setting the performance apart from peers. ‘International remains challenging, having somewhat worsened, but there are good reasons to support this being temporary. As underlying markets turn more favourable, alongside further self-help, this will make for a very positive outlook.’
