Currys like-for-like sales fell 7% last year, with declines in both UK & Ireland and International divisions. In the International division, double-digit improvements in Greece were not enough to fully offset double-digit decreases in the Nordic regions.
Full-year underlying profit before tax is expected to be between £110-£120m, ahead of previous guidance of around £104m. This includes a c.40% increase in the UK & Ireland underling operating profit, following better-than-expected trading.
Net debt is expected to land at around £100m, at the low end of previous guidance for between £100-150m.
More detailed full year results are expected on 6 July 2023.
The shares rose 4.1% following the announcement.
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Our view
Currys has revised its full-year expectations, less than two months after another round of updates. Constantly moving goalposts are never usually a good sign, but we can't knock a better-than-expected display in the UK & Ireland division - with margin improvements and cost efficiencies helping to drive profits higher.
One of the group's main attractions is its omnichannel model. You can enter a store and have access to the entire online shopping range or speak to an in-store expert in the comfort of your own house. These services help Currys attract and retain a customer once they've made contact, and likely due to the more personal touch, stores have been outperforming online.
The group's services channels have also been a beacon of light. There's been growth across the board, including record levels of credit adoption which saw active credit customers grow 4.3% to 1.9m customers. Services typically have higher margins than goods sales, so can help to relieve some of the pressure of the groups falling revenues.
But despite the improved profit outlook, there's still plenty of challenges to contend with.
Like-for-like sales fell by 7% last year, with consumer electronics and computing sales lagging. The bottom line is that consumers are simply struggling to justify as much discretionary spending amidst a cost-of-living crisis.
And in the Nordic regions, which is the second largest segment, trading conditions remain extremely tough. In 2022, low demand left competitors with excess stock, leading rival stores to slash their prices. Currys kept its prices the same, resulting in a painful display and piles of excess stock which it's been working hard to try and shift. Until inventories and demand fully normalise, the Nordics are likely to remain a deadweight on the group's performance.
Thanks to a strong finish to the year, especially in the final two months, the balance sheet's in better shape. Net debt's likely to land at the lower end of the group's £100-150m forecast, and group stock levels are down 10% year-on-year, meaning there's more cash available to utilise elsewhere in the business.
However, with the last set of figures showing operating margins running thin at 0.6%, there's very little wiggle room. We're left wondering how much of next years expected improvement is down to cost cutting and whether there's underlying growth to come as well. These concerns look to be reflected in a valuation that's well below the long-term average.
Currys key facts
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