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Currys: levelling up proves elusive goal for electrical retailer

It is not just politicians who want to level up. Currys’ boss Alex Baldock hopes to raise the online margins of Britain’s largest electrical retailer to match those of its stores. But, as with politics, the flagging enthusiasm of the British public will make it harder to turn aspirations into reality.

Conditions are getting tougher. On Friday, Currys reported a 6 per cent fall in UK sales over Christmas, reflecting both product shortages and consumer worries about falling real incomes. Profit before tax is now expected to be £5m lower at £155m for the year ending in May.

At least the legacy of a troublesome mobile phone division is fading, reflected in last October’s change of company name from Dixons Carphone. Mobile phones — one half of the two businesses that merged in 2014 — suffered from restrictive network contracts and longer handset upgrade cycles. This year should be the last of three consecutive years of losses for the mobile product category.

On the face of it, that could be a cue for the share price to break out of the narrow band in which it has traded for the past three years. The shares are priced at less than eight times next year’s earnings. That could be viewed as cheap for a retailer controlling over a quarter of the UK market, especially as it gained some market share over the Christmas period.

Yet there is a risk that Currys does little more than run to stand still. During the pandemic, there has been a shift towards online sales, where rivalry is tougher. That, and the closure of profitable airport stores, has hit gross margins.

Currys’ long-term goal is to nearly double its operating profit margin to 4 per cent. The chances of achieving that are narrowed by stiff competition, a likely softening of post-pandemic demand and the tailing off of its cost-cutting programme. As Currys’ lengthy self-help programme winds down, its success will be more dependent than ever on its appeal to the whims of UK consumers.

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