Currys interim profits up, but warns of softer markets

UK electricals retailer Currys on Wednesday reported higher first-half profits but warned its market has been softer over recent weeks and it could face more headwinds from the Omicron Covid variant.

Adjusted pre-tax profits came in at £48m in the six months to October 30 against £40m a year earlier. Group revenue fell 2% to £4.78bn.

The company said it was still on track for annual adjusted pre-tax profit of around £160m, although it may face into further headwinds from Omicron and associated restrictions.

“During the last few months, well-publicised global supply chain challenges have affected the industry. We have coped with these challenges well, mitigating the impact for our customers by making the most of the strength of our supplier relationships to maintain market leading product availability,” Currys said.

“Nevertheless, there are costs associated with some of these mitigations, and there has been some impact on our product availability and on sales of some in-demand products," it added, with chief executive Alex Baldock saying this had affected gaming consoles as well as some computing and mobile phone offerings.

Analysts as Numis marked the shares a 'sell' and noted that the consensus for pre-tax profits had "drifted" around 5 to 6% higher than the company's £160m estimate meaning a rebasing was likely.

"Whilst in line with consensus, in our opinion the gross margin and cost shape across the first half makes management mid-term ambitions look challenging, with the emergence of a softer demand environment caps upward momentum on near-term forecasts. Together, this supports our caution, as iterated in our recent note – a bridge too far," they said.

Russ Mould, investment director at AJ Bell said Currys faced a potential drop off in demand for its goods "having enjoyed a bumper period after the pandemic hit as people splashed out on lots of consumer electronics".

“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," he said.