ii view: AI laptops boost optimism at Currys

First-quarter trading update, 17 weeks to 24 August

• UK & Ireland like-for-like revenue up 5%
• Nordics like-for-like revenue down 2%
• Overall group wide like-for-like sales up 2% 

Guidance:

• Continues to expect full-year profit and free cash flow growth
• Expects balance sheet to remain in healthy net cash position

Chief Executive Alex Baldock commented:

"Trading is going well, strengthening our confidence in growing profit and free cash flow again this year.

New AI-enabled computers are bringing excitement and innovation to customers, who are coming to our stores to learn more about the technology, helping us take almost 50% share of the total laptop market.

Along with Mobile and B2B, AI product launches have contributed to an encouraging start to the year in the UK&I, as we gain market share in an improving consumer environment.

The Nordic consumer remains subdued, although we're pleased to be outperforming the market while improving gross margins and controlling costs well.

Across the Group, we're continuing to target growth in high margin, recurring revenue services and solutions. Currys is well set for our important Peak trading period and beyond."

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ii round-up:

Currys (LSE:CURY) trades across 719 stores and several websites in six countries including the UK.  

The FTSE 250 index constituent trades under the Currys and Mobile iD brands in the UK and Ireland and Elkjøp in the Nordics. It previously agreed the sale of its Kotsovolos electrical business in Greece.  

For a round-up of this latest update announced on 5 September, please click here.

ii view:

Formerly Dixons Carphone, Currys today employs around 24,000 people. Geographically, the UK & Ireland made most of its adjusted profits during the group’s last financial year at 70%, with Nordics the balance. Away from its store outlets, operations include Europe's largest technology repair facility in the UK, a product sourcing office in Hong Kong, as well as a wide distribution network for both home and store product deliveries.

For investors, like-for-like (LFL), or same store sales in its Nordics region remain in negative territory. The broad backdrop for its customers continues to be tough given elevated borrowing and housing rental costs. The previous sale of its Greek business has reduced geographical diversity. Competitors such as AO World (LSE:AO.) are not standing still, while the dividend payment, at least for now, remains suspended.

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To the upside, 5% growth in UK & Ireland LFL sales is up from a 2% retreat over the last financial year and aided by market share gains. Increased service sales for the Nordics business have helped improve profit margins. Encouraging customer demand for artificial intelligence (AI) related products such as laptops is being seen. A store portfolio offers consumers the opportunity to test products before buying, while net cash held should underpin the eventual return of a dividend payment. 

In all, and given both previously rejected takeover approaches and a consensus analyst fair value estimate above 95p, investors are likely to remain optimistic about potential at this specialist retailer.

Positives

• Focus on costs
• Net cash held of £96 million as of late April

Negatives

• Tough economic backdrop
• Suspended dividend payment

The average rating of stock market analysts:

Buy