Currys' like-for-like revenue fell 3% over the 10 weeks to 6 January, with sales declining across all regions. In the UK & Ireland, there was strong growth in all Services, including record credit adoption, which helped to boost margins. In the Nordics region, positive domestic appliance sales were offset by weaker trends in TV.
The sale of its Greek business is still expected to complete by the end of April 2024, and should bring in net cash of around £156mn. The group plans to use this money to pay down debt levels.
Full-year pre-tax profits are expected to land between £105-£115mn, ahead of market expectations. Net debt is also expected to fall from the prior year's £97mn.
The shares rose 5.9% following the announcement.
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Our view
It's no secret that Currys has had a hard time of late. During the peak trading period, sales continued to decline across all regions.
Consumers are simply struggling to justify discretionary spending on TVs, computers and gadgets amidst the current cost-of-living pressures. That's led to record credit adoption in the UK & Ireland, as consumers try to break down the payments for big-ticket items into more manageable chunks. Being able to offer this credit option opens the door to sales that would have otherwise been out of reach for many customers.
In the Nordics region, the second largest segment, the market remains extremely tough. Weaker TV sales are offsetting a better performance in domestic goods, which suggests customers remain very selective about their spending. A recovery here will be key to a shift in market sentiment and profitability.
Last we heard, market share slipped lower as Currys shifted its focus towards more profitable sales, rather than compromising on price to help offload inventory faster. While there are negatives to this, we're supportive of holding firm on this front and it's helped improve gross margins across the business.
Despite all the challenges, there are some bright spots.
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 customers 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. Services typically have higher margins than goods sales, so can help to relieve some of the pressure of the group's falling revenues. Because of this strong services growth, full-year pre-tax profits are now expected to land in the £105-115mn range, ahead of market expectations, but still around £9mn down on the prior year.
And the sale of its Greek electronics retailer, Kotsovolos, should bring in around £156mn of net cash, and allow management to sharpen its focus on the remaining regions. The plan is to use some of the funds to pay down debt levels, strengthening the balance sheet. This brings with it the potential to return any surplus cash to shareholders in the form of a dividend. However, this is not guaranteed and we caution against any expectation of continued payments over the near-to-medium term, given the group's struggling performance and negative free cash flows.
The valuation is well below the long-term average, reflecting the short-term challenges. Management is making some decent strategic progress, but consumer electronics will be a challenging place to be as spending power remains under pressure, leaving plenty of scope for further disappointment. A great deal also hinges on a recovery in the Nordics, and until that happens, group performance is likely to be lacklustre.
Currys key facts
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