ii view: might Currys benefit from AI upgrades?

Trading update for the year to 2 May

• Group-wide Like-for-Like (LFL) sales up 4%
• UK & Ireland LFL sales up 3%
• Nordic LFL sales up 6%

Guidance:

• Now expects full-year adjusted profit of around £191 million, up from a previous £180-190 million versus last year’s £162 million
• Now expects year-end net cash of more than £170 million, up from a previous £100 million

Chief Executive Alex Baldock commented:

"We finished a good year well, with strong performance in the UK&I and the Nordics, a region that represents 40% of Group sales and that grew especially strongly.

"Recent trading has been very solid; we've not yet seen an impact from the Middle East conflict, and our energy costs are well hedged for the coming year."

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ii round-up:

Currys (LSE:CURY) trades across 702 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 19 May, 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 25,000 people.

Geographically, the UK & Ireland made most sales over its last financial year at 58%. That was followed by Sweden at 13%, Norway 12%, and other Nordic countries the balance of 17%.

For investors, a change of chief executive now offers some uncertainty, with the departing Alex Baldock credited with much of the group’s recovery. Employee costs for the retailer’s core UK operations have increased following previous 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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More favourably, new and upgraded AI facilities such as Apple Inc (NASDAQ:AAPL)'s new Siri may convince customers to replace and upgrade existing products. Curry’s process to appoint a new CEO is said to be progressing well, with any new head likely to want to rejuvenate the business and stamp their own mark on strategy. A store portfolio offers consumers the opportunity to test products and lean on the knowledge of staff before buying, while increased cash held now supports a forecast dividend yield of around 1.7% and possible new share buybacks going forward. Currys shares have staged a strong recovery since slumping to multi-year lows in 2023, more than tripling in value.

For now, and given previously rejected takeover approaches and a consensus analyst fair value estimate  above 175p per share, fans of this recovering multichannel retailer are likely to remain hopeful about long-term prospects.

Positives

• Reduced staff pension deficit and contributions
• A restart of paying shareholder returns

Negatives

• Tough economic backdrop
• Possible impact from computer chip shortages

The average rating of stock market analysts:

Buy