Currys colleague helps out a customer
Self-help measures are paying off and Currys could be in for a better year than previously thought / Image source: Currys
  • Solid Christmas performance
  • Full-year profits to beat expectations
  • Year-end net cash position predicted

Technology products purveyor Currys (CURY) proved the FTSE 250’s big winner on Thursday, the lowly-rated shares rallying 9% to 49.5p after the electronics retailer delivered a profit guidance upgrade off the back of solid Christmas sales.

Group adjusted pre-tax profit for the year to April 2024 is now expected to be in the £105 million to £115 million range.

That’s ahead of the £104 million previously called for by consensus, demonstrating that self-help measures are paying off for the washing machines, TVs and laptops purveyor.

NORDIC IMPROVEMENT PLEASES

For the 10 weeks ended 6 January 2024, Currys’ UK & Ireland like-for-like sales were down 3% year-on-year, continuing the first-half trend, although strong sales of mobiles and higher-margin services offset weaker TV and computing trends.

And Currys’ core business delivered a robust profit performance thanks to stable gross margins and the benefits of continued cost savings.

In the intensely competitive Nordics region, like-for-like sales were down 2% year-on-year. However, this marked an improvement on the 6% drop seen in the first half, with Currys calling out sales growth in Norway and ‘good’ domestic appliance sales, which offset by weaker trends in TV.

Investors also welcomed the news that Nordic gross margins were up strongly, reflecting the success of self-help measures at Currys’ Elkjop business, which appears to be on the recovery track.

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WHAT DID BALDOCK SAY?

‘We’ve had a successful peak trading period, for customers who are more satisfied than ever, and for profits and cashflow,’ said chief executive Alex Baldock.

‘Our markets may be no easier, but we now expect full-year profits to be above consensus expectations.

‘In the UK & Ireland, we've kept up our encouraging momentum, in particular selling more of the services that boost margins and build customers for life. We’re also getting the Nordics back on track, after a disciplined peak on margins and costs.’

Baldock expects the disposal of Greek business Kotsovolos to complete in the first quarter of 2024, following which Currys will finish the financial year in a net cash position.

EXPERT VIEWS

Liberum Capital said Currys’ ‘very resilient’ Christmas performance and 6% full-year pre-tax profit upgrade versus consensus ‘sets the group apart as one of only a handful of retailers to have delivered a beat to expectations (4 out of 21 reporting), in what remains a challenging consumer environment.’

AJ Bell investment director Russ Mould noted that Currys is still experiencing a decline in sales, but the increase in earnings guidance reflects how the company’s successful push in services is paying off.

‘There are plenty of places people can buy a TV, laptop, phone or tablet, but where Currys is looking to make itself stand out is by providing support to customers who are not necessarily that tech-savvy,’ said Mould.

‘Currys can offer a range of services including everything from customer credit to installation services, repairs and recycling and the growth in this part of the business suggests there is genuine appetite for this support.’

Mould also explained: ‘This activity is higher margin and also helps make revenue and earnings more predictable, as well as underpinning cash flow generation. This should support a stronger balance sheet with the disposal of the Greek operations expected to pull the company into a net cash position.

‘After benefiting from the pandemic-induced pull-forward of spend on TVs, laptops, printers and household appliances, the post-Covid backdrop has been tougher for Currys. Difficult trading in its previously reliable Nordics business also hasn’t helped. Though the picture is slowly improving here.’

DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Ian Conway) own shares in AJ Bell.

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Issue Date: 18 Jan 2024