15th Dec 2021 14:48
(Alliance News) - A "pretty strong" first half for Currys was unable to stave off the wrath of the market. Shares in the electrical goods seller suffered as it warned of "softer" recent sales on Wednesday.
Currys shares were 8.5% lower at 113.50 pence each in London on Wednesday afternoon, the second worst FTSE 250 performer ahead of only Cineworld Group PLC.
In the half year to October 30, Currys revenue fell 1.5% year-on-year to GBP4.79 billion from GBP4.86 billion.
Pretax profit, meanwhile, rose by 6.7% to GBP48 million from GBP45 million, aided by net finance costs being reduced by 15% to GBP47 million from GBP55 million a year earlier.
"While the results themselves are pretty strong, it is the comments on current trading which have helped short-circuit the share price," AJ Bell analyst Russ Mould commented.
Chief Executive Alex Baldock warned the company's market "has been softer over recent weeks". Currys may also face a further hit from the Omicron variant, Baldock cautioned, a blow during the crucial Christmas period.
"Currys specifically references the new variant, and it may have also seen demand for Christmas gifts brought forward as shoppers looked to get ahead of potential shortages. While it has done a decent job of mitigating them, Currys is not immune from supply chain issues and extra costs itself," Mould added.
Another fear for Currys, the AJ Bell analyst explained, is the possibility that demand is much weaker, after a spell of unusually high sales.
From bread makers to air fryers, there was a rush to buy home appliances during the pandemic as more spent time indoors or were more health conscious. With homes potentially running out of space and consumers already stacked with gadgets, there is a fear that retailers such as Currys could suffer.
"The big danger is that having enjoyed a bumper period after the pandemic hit as people splashed out on lots of consumer electronics, the same level of demand just isn't there any more. While Currys is sticking with its full-year guidance for now, thanks to its strong first half, there is an obvious risk the second half is sufficiently bad to require that guidance to be trimmed or, in the worst case scenario, slashed," Mould added.
"Shareholders can take some comfort from the company's strong balance sheet position and faltering competition which should see Currys hold on to market share gains. Underpinning this is Currys' improved customer service, something which could prove crucial to its fortunes in the longer term."
Another fear for Currys is inflation, as consumers may have to keep a lid on discretionary purchases.
Hargreaves Lansdown analyst Matt Britzman commented: "If inflation remains persistent, consumers will have less disposable income to play with. New TVs and expensive washing machines are likely to be some of the first items to go if spending gets reigned in."
Currys declared an interim payout of 1.00 pence per share, having not paid a first half dividend a year earlier.
The company affirmed it is on track to achieve annual adjusted pretax profit of around GBP160 million, inching up from GBP156 million in financial 2021.
By Eric Cunha; [email protected]
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