ii view: Currys has bright future under new boss

AGM trading update for first 17 weeks of financial year

• Group-wide Like-For-Like (LFL) sales up 7%
• UK & Ireland LFL sales up 6%
• Nordic LFL sales up 9%

Guidance:

• Continues to expect annual adjusted profit of around £199 million versus last year’s £191 million
• Now expects year-end net cash well in excess of £100 million

New Chief Executive Fredrik Tønnesen commented:

"Having worked in Currys' Nordic business for more than 20 years, most recently leading it, I have spent my early weeks as Group Chief Executive getting to know more of our UK&I colleagues and customers. I'm impressed by the calibre of the colleagues I've met and pleased by our trading in the early part of the year.

“Currys has maintained its strong momentum. Across the Group we saw growth in both stores and online, with new categories, B2B and Services all growing strongly.

“In the UK&I, we gained share in every category, in a market that was flat even with the help of the World Cup and Summer heatwaves. In the Nordics we gained share in most categories and countries in a market that grew strongly. Throughout, we have kept our focus on margin, cost and cash discipline.”

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ii round-up:

Currys (LSE:CURY) trades across 691 stores and online 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.

For a round-up of this latest trading update announced on 10 September, please click here.

ii view:

Currys was started by Henry Curry in 1884 as a bicycle-building business. It diversified into selling toys, radios and gramophones when it listed on the stock market in 1927. In October 2021, the group’s UK legacy brands Carphone Warehouse, Team Knowhow, Currys PC World and Dixons Carphone were all consolidated into the one UK brand, Currys.

Today the FTSE 250 company employs around 24,000 people. Geographically, the UK & Ireland made most sales over its last financial year at 57%. That was followed by Sweden at 15%, Norway 12%, and other Nordic countries the balance of 16%. Competitors include Amazon.com Inc (NASDAQ:AMZN), Sainsbury (J) (LSE:SBRY)-owned Argos, and partnership retailer John Lewis.

For investors, an uncertain economic outlook and a widely expected rise in UK interest rates now overhangs UK consumers. Employee costs for the retailer’s core UK operations have increased following UK government minimum wage and tax changes. A forecast price/earnings (PE) ratio above the three- and 10-year averages may suggest the shares are not obviously cheap, while concerns about chip shortages pushing component and product prices upwards are not to be ignored.

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On the upside, new AI developments like Meta Platforms Inc Class A (NASDAQ:META)' cloud-based personal assistant Muse, may encourage customers to replace and upgrade existing phones and gadgets. A store portfolio offers consumers the opportunity to test products and lean on the knowledge of staff before buying. The relatively new CEO already has significant experience of managing at Currys, while expected cash held of more than £100 million by the current year-end underpins a forecast dividend yield of around 2.3% and possible new share buybacks.

In all, and given previously rejected takeover approaches and a consensus analyst fair value estimate above 180p per share, this multichannel retailer will likely remain of interest to investors.

Positives

• Stores to test and return products
• Geographical diversity

Negatives

• Tough economic backdrop
• Possible impact from computer chip shortages

The average rating of stock market analysts:

Buy