Shares in electricals retailer Currys (CURY) cheapened 5.2% to 106.6p after the smart TVs-to-laptops seller lowered its full year pre-tax profit guidance from £160 million to £155 million after what it described as a ‘challenging Christmas with uneven customer demand and supply disruption’.

Over the 10 weeks to 8 January 2022, the group posted a 5% fall in group like-for-like sales compared with 2020 due to a 6% drop in UK & Ireland revenues, as technology product sales remained subdued, although sales of games and virtual reality gear were a bright spot.

WARNING FORESHADOWED

The profit downgrade shouldn’t come as a surprise, as Currys had previously warned it was seeing weaker demand in the run-up to Christmas and that ongoing supply chain issues were impacting availability.

In its latest update, Currys’ CEO Alex Baldock conceded the technology market had proved ‘challenging’ over Christmas. Against this backdrop, his charge had ‘gained market share, improved customer satisfaction, traded profitably, and can look ahead with confidence’, insisted Baldock, whilst highlighting that customer demand for some technology products was strong.

‘This was a gamers’ Christmas, the year that virtual reality broke into the mainstream, and when consoles flew off the shelves,’ he explained. ‘Oculus Quest 2 and PS5 were stars. Appliances large and small also enjoyed strong sales, as consumers continued to kit out their homes. Still, the overall UK tech market was down 10% compared to last year’s Peak period.’

UNCERTAIN OUTLOOK

Currys characterised its festive performance as ‘resilient’, though the FTSE 250 retailer warned the outlook assumes no further significant disruption from Covid-19.

‘We’ve exited Peak with stock in a good position although we are continuing to face into uncertain demand and supply chain disruption which means there are some areas where availability remains challenged’, said the company.

Russ Mould, investment director at AJ Bell, commented: ‘The nation loading up on laptops and phones throughout 2020 set the bar high for 2021 in terms of Christmas technology sales to beat. While there was still a steady trickle of purchases in recent months, there just wasn’t enough festive demand to beat the year-on-year comparative figures for Currys.

‘Only game-related items were noteworthy, meaning that Currys has fallen short of its guidance set only a month ago.’

Mould said Currys is ‘one of the few retailers to issue a turkey of a festive update. While we live in a world now dominated by technology, it doesn’t necessarily mean that people keep needing to spend money on new kit. Laptops and phones can comfortably last for many years without the need to upgrade, so Currys needs to find extra ways for customers to spend money with it.’

Reiterating its ‘buy’ rating with a 200p price target, Liberum Capital argued Currys had delivered ‘solid peak trading against a tough comparator and in a softer market’.

The broker explained: ‘Whilst PBT guidance is a nudge down, our forecasts were already there so we make no changes. This is a resilient performance after the strong H1 results in mid-December reflecting that the group’s market leading position and scale has continued to position it well to weather the ongoing industry-wide supply chain challenges and outperform in its market.’

Disclaimer: The author and editor of this story both own shares in AJ Bell, owner and publisher of Shares

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Issue Date: 14 Jan 2022