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

Currys slumped to a half-yearly loss of £548m yesterday as it was pummeled by a triple shock from UK cost-of-living pressures, disastrous mini-budget and pressure from foreign rivals.

The electric-to-mobile phone retailer said sales in the UK and Ireland fell 10 percent in the six months to the end of October, and shoppers felt the pain this Christmas.

Chief executive Alex Baldock told the Mail: “Clients are clearly struggling and are generally spending less.”

Shares fell 5.7 percent, or 3.75 pence, to 61.55 pence, as Currys warned full-year earnings would be lower than previously expected.

That was attributed to a slump in revenue for its business in Scandinavia, where aggressive competition forced it to keep prices in check.

In addition, Currys took a £511 million hit as accounting rules forced it to write off the value of future business amid the post-mini-budget bond market chaos.

Like other retailers, it is under pressure as inflation, at a four-decade high, is hitting demand, although profit margins in the UK have been supported by people buying on credit.

Baldock said customers “felt pressure on the true cost of living,” adding: “They’re still spending more on tech than they did before the pandemic, but they’re spending less this Christmas than last.”

‘We see that there is a bit of trade-in for cheaper items. And certainly, the customer has an eye for a deal.’

However, they are “willing to spend more up front to get a device that will cost them less over time.” For example, Currys has seen energy-efficient washing machines ‘fly out of the store’.

Baldock said the cut in earnings expectations to £100m to £125m from an earlier range of £125m to £145m “doesn’t mean the world is getting any better” but that the current “doom and gloom” is over could go if inflation eases and if there are no more global shocks.

It is possible that the outlook for UK consumers a year from now will be significantly better than many people expected. That’s possible, but we’re not counting on that.’

The retailer was founded eight years ago in a £3.8bn merger between Currys and PC World owner Dixons Retail and mobile phone company Carphone Warehouse – but it’s now worth less than a fifth of that, £736m.

It closed all of Carphone Warehouse’s approximately 500 stores, leaving empty lots on high streets while bringing the companies together under the Currys brand. In 2018, it took a hit of £344 million when it reassessed the value of a stagnant mobile phone market.

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

Higher interest rates make it less attractive to bet on future income, depreciating goodwill.

The cost of £511 million was higher than it would have been because accountants were assessing goodwill just after the mini budget when bond yields soared, although they have since fallen, the company explained.

Russ Mould, investment director at AJ Bell, said the difficulties abroad are “detracting from what has been a solid performance for the UK and Ireland business” as it has reduced 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 past spending is unlikely to be repeated any time soon has clouded the outlook.”