Currys boosted by Nordics improvement

Currys' (CURY) shares were marked up by more than 10 per cent after the electrical retailer reported a 190 basis point gross margin increase in its troubled Nordics market, which has caused a persistent headache for the business due to intense competition with other white goods retailers there in the aftermath of Russia's invasion of Ukraine. 

Continuing consumer spending headwinds drove sales down across the board, though. Revenue fell 3 per cent in the UK and Ireland, 12 per cent in the Nordics and 1 per cent in Greece.

Mobile performance was the standout, boosted by iD mobile's (the company's mobile network service offering through Three) subscription growth of 24 per cent in the UK and Ireland and a "resilient" showing in the Nordics. Consumer electronics and computing sales were both down by around a quarter from the tough comparatives of two years ago in the domestic market, however, with shoppers squeezed by inflation and interest rate pressures.  

Analysts at Investec think the UK and Ireland business "is now primed for a top line recovery on a much reduced cost base". Operating costs fell year on year on the back of property, marketing and IT efficiencies. 

The significant narrowing in statutory pre-tax losses was due to the £511mn non-cash impairment charge put through last year on the back of soaring gilt rates, rather than a hugely improved underlying performance. 

After the period end, the company made a deal to sell its Greek business for net proceeds of £156mn. The disposal, a good strategic and financial move, is expected to complete in the first quarter of 2024, and the cash will be used to pay down debt. 

The shares change hands at just five times forward consensus earnings, an attractive rating given the recovery potential at Currys, especially when compared with a five-year average of eight times. While full-year guidance was maintained, dividends have not yet resumed. Hold. 

Last IC view: Hold, 47p, 06 Jul 2023