Currys today reports falling sales and a £548m bottom-line pre-tax loss after a challenging half-year. But it says it is now a more resilient business that is keeping prices low and giving technology customers the omnichannel service they want – and that makes it well-placed for the future.
Currys today reports group sales of £4.5bn in the half year to October 29 2022. That’s 7% down on the same time last year, and 8% down on a like-for-like (LFL) basis that strips out the effect of store openings and closures. UK and Ireland sales of £2.3bn are 10% down on last time, while international sales – including Nordics (-4%) and Greece (+5%) are also down by an overall 6%.
UK sales are also 19% lower than they were in the same period in pre-pandemic 2019 – although 2% ahead on a like-for-like basis – with international sales 15% ahead (+12% LFL).
At the bottom line, Currys has reported a pre-tax loss of £548m, after one-off costs including a £511m “non-cash impairment of UK&I goodwill that arose at the time of Dixons Carphone merger in 2014” – eight years ago. Full-year pre-tax profits are now expected to come in at between £100m and £125m, lower than previous guidance of between £125m and £145m, “assuming no further unexpected macro deterioration”.
Currys says that while sales and bottom-line profits are down, underlying profitability before one-off costs is improving in the UK and Ireland market, with earnings before interest and tax (EBIT) up by 25% on last year, and ahead of 2019. At the same time, EBIT is down in its international markets, falling by 94% on last year, as “smaller domestic competitors” follow “aggressive growth strategies to gain share in a market that is structurally bigger following the pandemic. These companies, says Currys, “substantially overestimated demand” and are now clearing stock at discounted prices, which Currys is now matching. It predicts that demand will get back to normal levels, excess stock will sell, and “smaller competitors are unlikely to be able to sustain these unprofitable practices.”
Baldock says: “Of course, our customers are feeling real cost of living pressure and our job is to help them get hold of the technology that’s more essential to their lives than ever. We’re doing that, through our price promise, giving customers access to responsible credit, and offering more products that save them money through lower energy costs. Our Go Greener range is flying off the shelves.
“It’s a tough environment, and we are planning for that to continue. Still, we expect to maintain the trajectory of improving UK&I profitability and a robust recovery in International profits. Our ever-improving customer experience and strong services give us confidence in improving margins. And we will continue our excellent progress on cost efficiency.
“We have a strong balance sheet and a strategy that’s working. By focusing on the things we can control, while doing everything we can to support our colleagues and customers, we’ll ride out the current turbulence and emerge an even stronger business well-set for long-term success.”
Omnichannel and services
The retailer is focusing on what Currys group chief executive Alex Baldock describes as its “two big differentiators” of omnichannel and services. Omnichannel, he says, continues to prove itself as “the winning model for customers, with online share of business remaining stable on last year” – at 32% across the group, and 43% in the UK and Ireland.
Services, from offering credit to recycling and repair, have also been important to customers. “Giving longer life to the technology that customers already have (as well as selling them new kit) chimes with customers’ ever-increasing concerns on sustainability, as well as on affordability during a cost of living crisis,” says Baldock in today’s half-year statement. “It’s another reason for customers to prefer Currys – and it’s already profitable for us, with more upside to come.”
Currys says that it is now a more resilient business trading against an “obviously uncertain” economic outlook. It also says that it is improving on the retail fundamentals, widening its range while using its relationships with suppliers to “keep the lid on inflation-driven price rises as far as possible as well as to get preferential access to the most desirable stock.”
The retailer says technology shoppers prefer buying via omnichannel, with two-thirds of its customers preferring to shop in-store – for advice –and around a third online. Across the group, 32% of sales took place online in the first half of the year, while in the UK and Ireland that proportion rose to 43%. Both figures are unchanged on last year.
It says that investments in its UK and Ireland website and its ShopLive function, as well as in its its colleague hub and store mode means its website is now “fast, future proof and provides a richer, seamless, more personalised experience”. In the Nordics, a Next Generation retail project has also concluded. Currys says in today’s half-year statement: “We’ve built on our advantage here. Investments in store colleagues, new online platforms (whose full benefits are still to come) and omnichannel benefits such as 24/7 video shopping (ShopLive), continue to prove their worth with customers. Now, as our improving gross margins show, we are making the omnichannel model work economically too, as we continue to level up profitability between channels.”
In the UK, staff have seen a 16% increase in minimum pay rates over the past 13 months, and a 38% increase over the last five years. The retailer also says it is set to be £4m better off as a result of changes to business rates that come into effect in April following a revaluation of properties. The changes will mean that upwards rates increases will be phased in over time, while retailers will benefit immediately where valuations decline.
Commenting on the figures, Julie Palmer, partner at Begbies Traynor, says: “How hard the cost-of-living crisis is biting is highlighted in electricals retailer Currys’ numbers which show a 10% drop in its UK and Ireland sales, the company’s biggest market, with only slightly smaller falls elsewhere. Diving into the results – which do not include the key run-up to Christmas – shows strained consumers are also looking to ease the pressure on their wallets in the short-term by increasingly taking up credit from the company. Currys said the number of customers buying products on the ‘never never’ was up by a third.
“People are looking to preserve household budgets in other ways. The company’s ‘Go Greener’ range of cookers, fridges and washing machines which use less energy are also ‘flying off the shelves’, according to chief executive Alex Baldock.
“Despite these bright spots, the overall news was bleak. Currys made a whopping £548m loss in the half-year, though almost all of this was down to its 2014 merger with Carphone Warehouse, but the business also cut its full-year profit forecast. Hopefully football fans buying big screens to watch the World Cup will give the company a boost in its full-year results, and customers feeling festive cheer being comfortable enough to splash out on the latest gadgets for Christmas will give Currys a further lift.”