Currys reported a jump in sales over the summer as shoppers rushed to buy fans and new TVs during the World Cup and heatwave. The electricals chain continues to defy the gloom that has beset the British high street, as higher fuel prices and inflation fears have dented consumer confidence.
It increased its market share in Britain after reporting a 6 per cent rise in like-for-like sales in the 17 weeks to August 29, while its Nordics business grew 9 per cent. Strong sales of fans and air conditioning units during the heatwaves, and higher demand for electrical goods during the World Cup, supported group sales growth of 7 per cent.
Currys flagged continued momentum in its higher-margin recurring services, with its iD Mobile network passing 2.7 million subscribers, up 16 per cent year-on-year, and take-up of its ‘flexpay’ credit offering rising. The retailer left its annual guidance unchanged and said it was comfortable with market forecasts.
The company is midway through a £50 million share buyback, having completed £23 million so far, and said it expected to end the year with net cash well above its £100 million target. This marks a strong start for new boss Fredrik Tønnesen, who joined on August 3 and is ‘planning confidently for the remainder of the year’.
New CEO Takes Helm
Tønnesen said: ‘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.’ He added: ‘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, Currys 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, the company gained share in most categories and countries in a market that grew strongly. In May, the group upped its annual profit guidance from between £180 million and £190 million to £191 million.
Tønnesen faces challenges, including higher employment and energy costs, as well as business rates as a company with a strong physical presence, facing down competition from Amazon and other online rivals. Richard Hunter, head of markets at Interactive Investor, said: ‘The new CEO’s experience in the Nordic business – where he worked for more than 20 years, most recently leading it – should prove invaluable in laying the previous issues of the unit to rest.’
For the UK business, there will be challenges to come if the consumer retrenches, particularly since electronic gadgetry tends to fall at the higher end of the spend spectrum. As such, Tønnesen may try to double down on the recurring revenues which are less economically sensitive and where Currys is finding increasing profitability. With the group having turned a large debt position into net cash, there is a buffer on which the group could draw should circumstances dictate.
Challenges Ahead Remain
Currys’ ability to adapt to changing consumer behavior and economic conditions is essential to maintaining its momentum. The company’s strong performance in the Nordics and its growing recurring services business are positive indicators, but the UK market remains competitive, and Tønnesen will need to balance investment in these areas with the need to control costs and maintain profitability.
In comparison to similar situations, Currys’ experience is reminiscent of other retailers that have successfully managed periods of economic uncertainty by focusing on recurring revenues and adapting to changing consumer behavior. The company’s emphasis on its higher-margin services business and its efforts to improve operational efficiency are likely to be key factors in its ability to maintain its strong momentum.
Currys shares slipped 0.4 per cent or 0.6p to 151.10p on Thursday morning, having risen more than 12 per cent in the past year. The company’s strong results and positive outlook suggest that it is well-positioned to continue its growth trajectory, despite the challenges it faces in the UK market.
Net cash is expected to be well above the £100 million target.
Thursday morning saw Currys shares at 151.10p.
Leave a Reply