Currys issues profit warning as international business nosedives

For the six-month period ending October 29, 2022, Currys reported a group adjusted loss before tax of £17m, down £62m year on year due to lower international profits.

Group statutory losses before tax were £548m due to a one-off, £511m goodwill impairment stemming from Currys merger with Dixons Carphone back in 2014. 

Group like-for-like sales were down 8% to over £4.4bn – with UK and Republic of Ireland sales down 10% to £2.2bn, while international sales slipped 6% to £2.1bn. 

International profit before tax was down 94%, which Currys blamed on “gross margin erosion as some smaller domestic competitors are following aggressive growth strategies to gain share in a market that is structurally bigger following the pandemic”.

This, combined with dwindling demand, led to competitors with too much stock and rampant discounting, which has eroded Currys’ margins. 

Currys finished the period with net debt of £105m and a slight decrease in its pension deficit of £251m.

The electricals giant was brusque about current trading, saying only that the last six weeks had been “in line with its first half”.

As a result, Currys said it expected full-year adjusted profit before tax to be in the range of £100m to £125m, compared with the previous guidance of £125m to £145m on a like-for-like basis.

Capital expenditure is also expected to come in at £120m compared with the previous £135m to £155m range. 

Chief executive Alex Baldock said: “Currys UK and Ireland performance continues to strengthen and is showing real momentum, reflecting good progress in our transformation. International, however, has had a tough period and faces short-term but intense pressures from a disrupted market.

“In the UK and Ireland, our profits are up, from increased gross margins and strong cost discipline. We’re bucking the trend with world-class and increased colleague engagement.

“Our customers are happier, too, and are more likely than ever to recommend us. We are making more of our winning omnichannel model and are building more customers for life with strong services growth.

“Our international business, which has consistently delivered growth in sales and profits over many years, has had a difficult first half with margins sharply down. Lower demand has left domestic competitors with excess stock, which they’re now heavily discounting. This has substantially disrupted the market and required margin investment to keep our sales strong.

“We expect these pressures, intense though they are, to be temporary – demand will normalise, excess stock will wash through and competitors will find unprofitable aggression hard to sustain. We’ve also stepped up our self-help actions on margins and cost.

“Of course, our customers are feeling real cost-of-living pressure and our job is to help them get hold of the technology that’s more essential to their lives than ever. We’re doing that through our price promise, giving customers access to responsible credit and offering more products that save them money through lower energy costs. Our Go Greener range is flying off the shelves.

“It’s a tough environment and we are planning for that to continue. Still, we expect to maintain the trajectory of improving UK and Ireland profitability and a robust recovery in international profits. Our ever-improving customer experience and strong services give us confidence in improving margins. And we will continue our excellent progress on cost-efficiency.

“We have a strong balance sheet and a strategy that’s working. By focusing on the things we can control, while doing everything we can to support our colleagues and customers, we’ll ride out the current turbulence and emerge an even stronger business well-set for long-term success.”

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