Currys slashes profit outlook as ‘hard-pressed’ customers cut back

Technology retailer Currys has sunk to a loss and downgraded its full-year profit expectations, as shoppers opt for cheaper items and hunt for deals amid cost pressures.

Shares in the company were down more than 7% on Thursday after it said it has had a tough time over the past six months, having suffered significant disruption in its stores across the Nordic countries.

Low demand left competitors with excess stock, leading rival stores to slash prices while Currys kept its prices the same, meaning it made virtually no money across the region.

As a result, Currys saw its profits plunge by £62 million on last year, leaving it with adjusted pre-tax losses totalling £17 million.

It was also hit with a heavy £511 million impairment charge, which it said arose following the Dixons Carphone merger in 2014 and does not reflect its cash levels or performance in any way.

But, as a result of the tougher conditions, the group downgraded its full-year profit expectations to between £100 million and £125 million, whereas previous guidance had estimated profits between £125 million and £145 million.

Meanwhile, revenues in the UK and Ireland sunk by a tenth on last year and were 19% lower than the same period in 2019.

The electricals retailer noted that customer spending behaviour has reflected cost-of-living pressures in recent months.

Chief executive Alex Baldock said: “On the one hand, the customer, obviously, is hard-pressed, they are spending less, and there is some trading down to less expensive items. And they are certainly looking for a deal, as we saw during the Black Friday sales period.

“On the other hand, even in the teeth of a cost-of-living crisis, customers are still spending more than they were pre-pandemic.

“That, we believe, reflects the fact that technology plays a more important role in people’s lives – keeping them connected, productive, healthy, and entertained.

“There is also, actually, some trading up to items that are more expensive but more energy-efficient. This is because people are thinking about the running costs as well as the upfront costs.”

Mr Baldock said energy-efficient products, like washing machines, heat pump tumble dryers, air fryers, microwaves and heated blankets are “flying off the shelves”.

Furthermore, it noted a rise in some customers turning to credit to purchase electrical items, while others are opting to repair tech products to make them last longer.

Currys said its repairs team has never been busier, and serves 14 million customers across the group.

Mr Baldock said there have been no signs of stress in its lending book despite an increase in customers accessing credit.

He added: “We are very careful who we lend to, and how much we lend. We partner with a very cautious bank, and we do this because we don’t want to come within a mile of customers getting into trouble with credit.”

The group also said it is on track to make £300 million in cost savings in the UK and Ireland by 2023-24, which are focused on making its supply chains and IT systems more efficient, and delivering greater automation to its back office.

It confirmed it has no plans to close any stores or lose staff as part of the cost-cutting.

Adjusted earnings also jumped 25% in the UK and Ireland, reaching £25 million in the latest half-year.

Mark Crouch, an analyst at social investing network eToro, said: “Currys has cut costs – and cut hard – in an attempt to keep its head above water during what is perhaps the toughest environment for retailers in living memory.

“It hasn’t managed to do that, with the group making a pre-tax loss in the six months to the end of October largely due to rising costs and intense competition in international markets.

“While the outlook remains tough for Currys and the wider retail sector, its size, market share and the strength of its balance sheet mean it should weather the difficult times better than most.”