Currys hit by overseas discounting as energy-efficient products 'fly off' UK shelves: reaction

Currys has dealt a blow to the retail sector’s fortunes after sinking to a loss and downgrading its full-year profit hopes amid a consumer spending squeeze.

Shares in the company came under pressure after the electricals giant had a tough time over the past six months, having been hit by 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 £17m.

The group was also hit with a hefty £511m 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. However, as a result of the tougher economic conditions, the group downgraded its full-year profit expectations to between £100m and £125m, whereas previous guidance had estimated profits between £125m and £145m.

The 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.”

He noted that energy-efficient products, like washing machines, heat pump tumble dryers, air fryers, microwaves and heated blankets were “flying off the shelves”.

The group also said it is on track to make £300m 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.

Richard Hunter, head of markets at investment platform Interactive Investor, said: “Despite Currys having made some progress on its UK operations, there is little dressing up some ugly numbers within the release. The international business, which currently accounts for 49 per cent of overall revenues, is the main culprit. In the Nordics region in particular, new entrants to the space have relied on heavy discounting of goods to announce their arrival.”

Lara Martinez, consumer electronics sector analyst at Third Bridge, noted: “Customers don’t automatically trade down to the cheapest option when selecting consumer electronics. Instead, they typically wait and search for better-value products. Currys must focus on offering competitive finance packages if it is to excite customers into making impulse purchases. Curry’s relationship with suppliers remains strong, yet its last-minute inventory approach is sapping supply loyalty. John Lewis can potentially win market share from Currys because they have a much better in-store experience and a more sophisticated online platform.”