Currys boss ‘wary’ of economic optimism as overall profits fall
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Electronics retail giant Currys has warned of reduced consumer spending as inflation and interest rates hit shoppers – as it revealed a dip in sales and profits.
“Looking ahead, we’re wary of optimism about consumer spending power,” its chief executive said in the company’s end of year results.
Consumer sentiment has been high despite high price rises and increasing borrowing costs due to interest rate hikes.
A closely watched index of shopper sentiment said consumer confidence in June was at its strongest in 17 months and grew for the fifth month in a row.
Latest retail sales figures also showed growth when contraction was expected, illustrating the resilience of the UK economy.
Despite this, and unemployment hovering near a record low, the Currys boss, Alex Baldock, said the chain is being “prudent” in its financial planning and strengthening its balance sheet.
“We may be cautious in our promises for the short-term, but our confidence is undimmed as we build a stronger and more resilient business that is fit to prosper in the longer term,” he said.
The UK and Ireland arm of the business performed well with profits before interest and tax of £170m, up 45% on last year. Cost savings in the business increased margins and offset falling sales, the results said.
Operating costs fell and those savings also “more than offset inflationary cost pressures and increased business rates tax”.
UK and Ireland staff were praised for their work. Mr Baldock said their “great work shone through in world class engagement scores; in another year of record customer satisfaction; in maintaining number one market share”.
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But across the company overall like-for-like sales fell 7% due to a fall in consumer spending, which Currys has attributed to persistent inflation and rising interest rates.
At the same time it said spending on technology had normalised after strong growth during the pandemic.
“Our market has been tough everywhere, with depressed demand, high inflation and unforgiving competition,” Mr Baldock said.
Performance in the Nordics, where about 40% of Currys revenue is generated, is behind the drop in pre-tax profit, down from £186m last year to £119m this year. The profit is at the top end of guidance that had been issued after two profit warnings.
No full-year dividend will be paid to shareholders as a result of the uncertain backdrop.
“We’ve had a very mixed year,” said Mr Baldock.
