Currys has reported improved sales as customers in Britain increasingly turn to loans to pay for energy-saving items such as air fryers and heat-pump tumble dryers amid the cost of living crisis.
The UK’s biggest electrical retailer said cost cuts and a focus on promoting the sale of more profitable goods and services had improved its margins.
However, it added that price inflation was causing further uncertainty for its future earnings and said it expects to report a decline in full-year profits when it releases its annual results in July.
The company’s chief executive said Currys had benefited from a higher take-up of consumer credit that allows customers to pay off their purchases over a longer period of time, as well as repair and trade-in services, as households seek to stretch their budgets.
“We’re seeing consumers lean more on credit to afford the technology that they need,” Alex Baldock told analysts and investors on Monday morning.
He said Currys customers “are certainly chasing a deal and they’re looking for help with the affordability of their tech, with mechanics like trading. Consumers are concerned to see their expensive technology last longer, which is where our big repair business has had another strong year.”
Baldock attributed the trends to rampant inflation, which stands at 10.1%. “The big picture on the UK consumer is that they remain hard-pressed by the cost of living crisis,” he said.
“That’s playing through into relatively depressed demand for discretionary and big ticket products, and that’s placed downward pressure on the technology market. And that hasn’t changed.”
The retailer said sales in the UK and Ireland had improved over the past two months, but from a very low base. In March and April, customers bought more energy-saving items including air fryers, microwaves and heat-pump tumble dryers. There was also an uptick in sales of consumer electronics such as headphones, as well as upmarket coffee makers and coffee bean roasting machines.
“We’re not saying that consumers open their wallets in a carefree way at all, which is one of the reasons that we’re remaining cautious in our outlook,” Baldock said. Instead, Currys expects the tech market in the UK to “continue to go backwards” over the next 12 months amid the cost of living crisis, which has seen the cost of consumer goods soar as companies try to compensate for their own rising bills.
“Consumer confidence may be up on where it was a couple of months ago, but it’s still at historically, pretty low levels.”
Some of the biggest lag in consumer spending was around the “squeezed middle”, Baldock added. For example, while the sale of large screen TVs worth more than £1,200 and entry-level models worth less than £500 were “relatively healthy”, mid-market models worth between £500 and £1,000 had been “tougher” to shift.
The chief executive said Currys had managed to increase its market share, despite putting fewer items on sale. Along with efforts to cut costs across its supply chain, it helped the retailer raise its full-year profit guidance, which is now expected to reach between £110m and £120m for the year to April, up from previous estimates of £104m. However, that is still down from £186m last year.
Like-for-like sales are forecast to be down by 7% compared with a year earlier.
“It’s a story of self help in a tough environment in the UK, which is encouraging because it leaves us in good shape to benefit from any recovery in the [macro-economic environment]. Not that we’re counting on one,” Baldock said.
