Welcome to HL's reimagined News, Insights and Research experience. Find out more

Share research

Currys - full year guidance unchanged but challenges persist

Currys saw like-for-like sales drop 4% in the 17 weeks to 26 August.

No recommendation - No news or research item is a personal recommendation to deal. All investments can fall as well as rise in value so you could get back less than you invest.

Prices delayed by at least 15 minutes

This article is more than 6 months old

It was correct at the time of publishing. Our views and any references to tax, investment, and pension rules may have changed since then.

Currys saw like-for-like sales drop 4% in the 17 weeks to 26 August. This included a 2% drop in the important UK & Ireland region, and an 8% fall in the Nordics, while Greece rose 3%.

In the UK & Ireland, recent revenue trends have been better than earlier in the year. Sales of domestic and mobile goods are said to be "robust" but this is being offset by weakness elsewhere, especially computing. Currys is continuing with cost saving efforts to help improve margins.

Full year guidance remains unchanged, including a 25% reduction in capital expenditure and more than halving pension contributions.

The shares were unmoved following the announcement.

View the latest Currys share price and how to deal

Our view

Currys is in a difficult spot. The full year dividend was scrapped and it's unclear when shareholder returns will make a comeback.

While the balance sheet health can certainly improve, we'd like to stress that it's not currently at catastrophic levels. But given the uncertain economic outlook, keeping cash in the business rather than doling it out to shareholders makes sense for now. But why the drastic measures in the first place?

Consumers are simply struggling to justify discretionary spending on computers and gadgets amidst a cost-of-living crisis. This is offsetting a better performance in domestic goods, which suggests customers, although still spending, are becoming more selective. This is something that will need to be monitored as we head into the festive trading season.

In the Nordics region, the second largest segment, the group's long track record of success was brought to an abrupt halt. The market here is extremely tough and overstocked. Currys has had to slash prices to clear inventory piles. That, combined with inflated costs has ultimately hurt the bottom line.

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 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. Services typically have higher margins than goods sales, so can help to relieve some of the pressure of the group's falling revenues.

The cost-saving programme is progressing well too, with a further £110m in savings expected to be achieved over the current financial year. That should provide some relief to the underlying operating margin which is running thin at 2.3%.

The capital expenditure budget's also on the chopping block, which should help prop up free cash flow. While scrimping and saving isn't a bad method, it can't continue for ever. Capital expenditure can't be this low forever without risking important investment for future growth and maintenance. At some point sales will need to pick up the slack to rejuvenate profits.

Net debt landed in at £97m at the last count, towards the lower end of the group's guidance.

The valuation is well below the long-term average, reflecting the short-term challenges. A great deal hinges on a recovery in the Nordics, but until that happens, group performance is likely to be lacklustre. Investors may need to be patient and for now that won't be rewarded with a dividend.

Currys key facts

All ratios are sourced from Refinitiv. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn't be looked at on their own - it's important to understand the big picture.

This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Refinitiv. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research disclosure for more information.

Latest from Share research
Weekly newsletter
Sign up for editors choice. The week's top investment stories, free in your inbox every Saturday.
Written by
Sophie Lund-Yates
Sophie Lund-Yates
Lead Equity Analyst

Sophie is a lead on our Equity Research team, providing research and regular articles on a selection of individual companies and wider sectors. Sophie's specialities are Retail, Fast Moving Consumer Goods (FMCG), Aerospace & Defence as well as a few of the big tech names including Facebook and Apple.

Our content review process
The aim of Hargreaves Lansdown's financial content review process is to ensure accuracy, clarity, and comprehensiveness of all published materials
Article history
Published: 7th September 2023