ii view: Currys shares show some spark post results

Shares for this major store and online electricals retailer are down by more than a third year-to-date. We assess prospects. 

Full-year results to 30 April

• Revenue down 2% to £10.14 billion
• Adjusted pre-tax profit up 19% to £186 million
• Final dividend of 2.15p per share
• Total dividend for the year up 5% to 3.15p per share
• Year-end net cash £44m (2020/21: £169million)

Chief executive Alex Baldock commented:

"These strong results show the vital role that technology plays in millions of lives, and that more and more customers are turning to Currys to help them enjoy that technology to the full.

“Our scale as an international market leader, our grip on costs and our strong relationships with suppliers will allow us to manage inflationary headwinds and keep amazing technology within reach of everyone, even now.”

ii round-up:

UK and overseas electricals retailer Currys (LSE:CURY) today reported annual profit which beat City forecasts but offered cautious guidance for the year ahead given a cost-of-living crisis for consumers. 

Adjusted profit for the year to the end of April rose by just under a fifth to £186 million, surpassing analyst estimates nearer to £155 million. 

Shares for the former Dixons Carphone rose by more 6% in UK trading having come into this latest announcement down around 40% year-to-date. Shares for online rival AO World (LSE:AO.) are down by over 60% during 2022, while shares for online retailing mammoth Amazon (NASDAQ:AMZN) have fallen by close to a third during that time.  

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Currys' sales on an currency adjusted basis were flat year-over-year, although rose 10% on a two-year like-for-like basis. A return to market share growth in the UK and Ireland was achieved, with the group’s international stores also continuing to prove their worth, generating nearly three-fifths of overall adjusted profit. 

Looking ahead, and against the tough backdrop for consumers, management offered a forecast of adjusted full-year profit for the year of between £130 million and £150 million, below the latest outcome of £186 million. 

The group’s Annual General Meeting is scheduled for 8 September. 

ii view:

Currys trades both in the UK and overseas through more than 800 stores and a several websites. Its core brand names have been reduced down to Currys in the UK and Ireland, Elkjøp in the Nordics, Kotsovolos in Greece and ID Mobile replacing the former Carphone Warehouse. It employs over 30,000 people. Its strategic focuses include omnichannel or building sales both in store and online; offering customer credit; and offering services such as product repair and recycling.  

For investors, a cost-of-living crisis and an uncertain economic outlook offer a tough backdrop. Profit guidance for the year ahead is understandably cautious, wider industry supply chain challenges are ongoing, with intense competition across the retail sector. 

On the upside, its brick and click offerings have found favour with consumers, giving an opportunity to try before you buy. Its transformation programme, including reducing its brand names, is now largely complete. A historic and estimated future dividend yield of over 4% also offers attractions for income investors. For now, and when weighing a transformed business against a tough consumer outlook, investors will likely need to remain patient.  

Positives

• Cost reduction programme ongoing
• Attractive dividend (not guaranteed)

Negatives

• Tough outlook for consumers
• Global supply chain challenges hindering product availability

The average rating of stock market analysts:

Hold