Hargreaves Lansdown View..."thrive"3 Feb 2022 19:18
Currys, previously Dixons Carphone, has been quite the shapeshifter throughout the pandemic. The group’s in a tough spot as e-commerce behemoths like Amazon encroach on its territory selling appliances and electronics. But it’s managed to hold its own against the onslaught after sharpening its value proposition over the course of the pandemic.
Currys’ defining feature is its knowledgeable staff, on-hand to help customers make decisions that will work for their needs. This is something online only retailers don’t tend to offer, and big-box discounters lack. It puts Currys in a unique position, but one that was all-but lost during lockdowns.
The group moved the service aspect of its business online, offering its instore experience to customers through a screen. Plus, the group’s closed its Carphone Warehouse locations to bring all of its products together under one roof. This should increase cross-selling opportunities, while also lowering the overall cost base.
It’s an exciting way to merge online and in-store, and it also means Currys is prepared if we’re heading for any more restrictions.
On paper, Currys looks well prepared to emerge victorious in the new retail landscape, but there are a few niggles. Top of the list for us is operating margins – which are thin at just 2%. Online sales are less profitable than those in-store. So, if we’re on track for a shift toward majority e-commerce, Currys will have to find a way to boost profitability.
Inflation also presents a problem. Consumers are likely to be more conscious about what they’re spending. And with the rapid rise in prices, they might put off the big-ticket purchases Currys specialises in.
So far, the group’s strategy is paying dividends. At the half-year, it was sitting on £250m in net cash, an enviable position in the retail space. This means the group’s been able to restart dividend payments, though this is variable and not guaranteed.
Currys is a unique player in the retail space. If the group continues to build out its online platform in a way that supports profits, we see the business continuing to thrive.
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