Currys dives £548m into the red as families trade down to cheaper TVs

Currys slumped to a half-year loss of £548million yesterday as it was buffeted by a triple shock from the UK’s cost of living squeeze, the disastrous mini-Budget and pressure from rivals overseas.

The electrical-to-mobile-phones retailer said UK and Ireland sales fell 10 per cent in the six months to the end of October, and shoppers were feeling the pinch this Christmas.

Chief executive Alex Baldock told the Mail: ‘Customers are obviously hard-pressed and they’re spending less overall.’

Falling profits: Curry’s chief exec Alex Baldock (pictured) said customers were ‘feeling the real cost of living pressure’

Shares fell 5.7 per cent, or 3.75p, to 61.55p as Currys warned full-year profits would be lower than previously expected.

That was blamed on a slump in earnings for its business in Scandinavia where aggressive competition forced it to keep a lid on prices. 

On the top of that, Currys took a £511million hit as accounting rules forced it to write down the value of future business amid bond market chaos after the mini-Budget.

Like other retailers, it is under pressure as inflation, at a four-decade high, hits demand, though UK profit margins have been buoyed by people buying on credit.

Baldock said customers were ‘feeling the real cost of living pressure’, adding: ‘They’re still spending more on tech than they were before the pandemic but they’re spending less this Christmas than last.

‘We’re seeing a bit of trading down into less expensive items. And certainly, the customer’s got an eye for a deal.’

However, they are ‘willing to spend more up front to get a device that costs them less over time’. For example, Currys has seen energy-efficient washing machines ‘fly off the shelves’.

Baldock said the cut in profit guidance to £100million to £125million from a previous range of £125million to £145million ‘does not assume that the world gets any nicer’ but that the current ‘doom and gloom’ could pass as inflation eases and if there are no more global shocks.

‘It’s possible that a year from now the outlook for the UK consumer could be significantly brighter than many people expected. That is possible, but we’re not counting on it.’

The retailer was formed eight years ago in a £3.8billion merger between Currys and PC World owner Dixons Retail and mobile phone business Carphone Warehouse – but it is now worth less than a fifth of that, at £736million.

It shut all Carphone Warehouse’s 500 or so stores, leaving empty plots in high streets as it brought the businesses together under the Currys brand. In 2018, it took a £344million hit as it reassessed the value of a stagnating mobile phone market.

Yesterday’s £511million charge related to ‘goodwill’, an intangible asset that seeks to put a value on the company’s future earnings potential. 

Higher interest rates make it less attractive to bet on future earnings, meaning goodwill is not worth as much.

The £511million charge was higher than it would have been because accountants were assessing goodwill just after the mini-Budget when bond yields soared, though they have since come down, the company explained.

Russ Mould, investment director at AJ Bell, said the difficulties abroad ‘detract from what is a solid showing for its UK and Ireland operation’ as it has cut costs and protected profit margins.

‘Currys benefited from people buying laptops and other electronic goods during the pandemic but recent pressures on consumer spending and the fact that much of this earlier spend is unlikely to be repeated in the near-term clouded the outlook.’

This post first appeared on Dailymail.co.uk