Currys cuts revenue steerage as slowdown in Nordic markets takes toll

Currys has minimize its annual revenue expectations for the second time, citing a slowdown in its beforehand profitable Scandinavian markets.

Chief govt Alex Baldock mentioned some rivals in northern Europe “have misjudged demand and are having to aggressively low cost inventory . . . no one is making any cash within the Nordics in the mean time”.

Underlying working revenue in its Nordics division fell to simply £3mn within the six months to the tip of October, from £57mn final yr. Consequently, Currys now expects full-year adjusted pre-tax revenue to be £100mn-£125mn, in opposition to a earlier vary of £125mn-£145mn.

A goal of attaining a 3 per cent working revenue margin has additionally been pushed again from 2024 to 2025, having already been diminished from 4 per cent earlier this yr.

Baldock mentioned the discounting didn’t seem “everlasting or structural” and that Sweden, Denmark, Norway and Finland remained “wholesome, rich markets”. The corporate thought-about floating its Nordics enterprise individually final yr.

Currys additionally took a £511mn non-cash impairment cost in opposition to the goodwill arising from the 2014 merger of Dixons and Carphone Warehouse that created the present firm.

It’s the second such cost, having additionally booked a £225mn hit in 2018. However chief monetary officer Bruce Marsh mentioned nearly all of the most recent cost was right down to adjustments within the accounting variables used.

“The overview coincided with the turmoil within the gilt markets in September, when the risk-free price spiked from 1.9 per cent to 4.4 per cent,” he mentioned. Gilt yields are the principle driver of the low cost charges utilized in goodwill calculations.

The cost resulted in a headline lack of £548mn in opposition to a revenue of £48mn final yr, on gross sales of £2.29bn — down 10 per cent. The underlying lack of £17mn was broadly consistent with market expectations. The corporate makes nearly all of its revenue in its second half, which incorporates Black Friday and Christmas.

Baldock mentioned the UK, the place it’s the market chief, had proved resilient. “Customers are hard-pressed, they’re spending much less and there’s some downgrading to cheaper merchandise,” he mentioned.

“However they’re nonetheless spending extra on know-how than pre-Covid . . . and there’s some buying and selling as much as costlier objects if they’re extra vitality environment friendly,” he added, citing sturdy demand for air fryers and heat-pump tumble driers.

About 17 per cent of gross sales are actually made with a credit score element, placing the corporate forward of a goal set for the tip of the following monetary yr. Baldock mentioned credit score scoring was “super-prudent” and there was no signal of stress within the mortgage e book.

Shares in Currys have been down greater than 6 per cent in early commerce. Nick Coulter, analyst at Citi, mentioned the change to full-year steerage largely introduced the corporate into line with present market expectations and noticed “restricted scope” for additional downgrades.

He additionally mentioned traders would possibly place extra worth “on the structural margin positive factors within the UK relative to the transitory affect of extra stock within the Nordics”. 

The British group additionally disclosed that it offered a mortgage facility to its pension scheme throughout September’s gilt market turmoil, though the power was finally not wanted. Larger market rates of interest have diminished the accounting deficit on its legacy defined-benefit pension scheme, nevertheless.