Electrical retailer Currys shot to the top of the FTSE 250 leaderboard after it reported better-than-forecast earnings for the first half.
At 49.9p per share the Currys share price was 10.1% higher in Thursday’s session.
The retailer said today that sales dropped 7% during the six months to October, to £4.2 billion. On a like-for-like basis revenues were down 4% year on year.
Currys said that as turnover reversed “as consumer spending remained under pressure from persistent inflation and rising interest rates, coupled with our increased focus on more profitable sales to maximise operating cashflow.”
This meant that the business remained loss-making in the period, though an adjusted pre-tax loss of £16 million was slightly lower than the £17 million recorded last year.
Adjusted earnings before interest and tax (EBIT) of £31 million, however, beat analyst forecasts to rise from the same 2022 period. This was up 7% year on year.
Sales Drop
Sales in its UK and Irish (UK&I) marketplace dropped 3% on a headline and like-for-like basis between May and October. These regions account for 53% of group revenues.
Meanwhile, cumulative sales in its Greek and Nordic territories dropped 11% on a reported basis. Like-for-like sales were down 6% from the same 2022 period.
In November the company struck a £175 million deal with Greek electricity company PPC Group to sell its operations in Greece and Cyprus, where it trades under the Kotsovolos banner.
Positive Assessment
Chief executive Alex Baldock commented that “our priorities this year are simple: to get the Nordics back on track, to keep up the UK&I’s encouraging momentum, while strengthening our balance sheet and liquidity. We’re making good progress on all these in a still challenging economic environment.”
At UK&I, he noted that profits were in line with expectations “as we focus on more profitable sales and growing the services that drive margins and customer lifetime value.”
Baldock added that “there’s still a long way back to healthy Nordics performance, but we’re on the way.”
Adjusted EBIT dropped to £15 million from £25 million in the same 2022 period.
For the Nordics, Baldock commented that “our trusted brands have delivered substantial gross margin gains, which combined with strong cost discipline have resulted in significantly improved profits.”
Adjusted EBIT there quadrupled to £12 million in the first half despite the fresh sales decline. Gross margins were up 190 basis points.
Currys said that trading since the beginning of the second half has been consistent with expectations, prompting it to leave full-year guidance on hold.
Mixed Reception
Analyst Neil Shah of Edison Group said that Currys’ interims “reveal a mixed performance, but ultimately one of resilience in what is a challenging economic environment with inflation and interest rates impacting consumer spending.”
He said that the company had made progress in turning around its Nordics division, maintaining trading in the UK and Ireland, and repairing its financial strength. Free cash outflows narrowed to £10 million in the first half from £86 million a year earlier.
These measures, Shah noted, have “[underscored] an effective strategy in a challenging environment which should place Currys well to navigate any future uncertainty.”
However, in more sobering commentary Mark Crouch, analyst at eToro, said that “Currys is struggling right now.” He noted that “the firm has failed to register growth in any of its key markets, which has contributed to its loss-making position.”
Crouch added that “[while] consumer spending remains relatively robust in the markets Currys operates in… it’s clear that shoppers have been less willing to splash out on big-ticket items.”