Currys PLC (LSE:CURY) took a battering today after some cautious comments about the Christmas outlook accompanied decent looking half-year figures.
Shares were down 8% at 114p at lunchtime, which looked harsh treatment to judge from the comments from analysts in the sector but reflects market jitters over the potential impact of Omicron and rising inflation on consumer confidence.
Broker Liberum noted interim profits of £48mln were well ahead of the consensus forecast of £39mln, especially as last year had some helpful business rate relief.
Free cash flow of £185mln was another strong result with cash at the end of the half-year of £250mln.
On current trading, Liberum noted the comments about costs associated with supply chain issues and softening demand in the run-up to Christmas but the year-end profit target of £160m was maintained.
“Currys has delivered a very solid H1, with an underlying PBT beat and demonstrating that its market-leading position and scale places it well to continue weathering industry-wide supply chain challenges.
Currys continues to entrench its market-leading position and the shares are “far too cheap - however one cuts the valuation.”
Matt Britzman, at Hargreaves Lansdown, echoed the sentiments.
“Markets have reacted unfavourably to Currys' half-year results today given the headwinds the group is facing.
“We understand the immediate reaction. Currys omnichannel offering has been a glowing selling point for the business since the pandemic hit and its store sales boast higher margins.
“On that basis, any restrictions on people being allowed to visit stores will be a hit to performance.
“That said, looking longer term, online sales making up 33% of total sales mean the group’s in a decent place to weather any restrictions. The foundations still look strong and the longer-term prospects are promising.”
Russ Mould at AJ Bell was more cautious but still encouraged by the performance and longer-term opportunity.
“The big danger is that having enjoyed a bumper period after the pandemic hit as people splashed out on lots of consumer electronics, the same level of demand just isn’t there anymore.
“While Currys is sticking with its full-year guidance for now, thanks to its strong first half, there is an obvious risk the second half is sufficiently bad to require that guidance to be trimmed or, in the worst-case scenario, slashed.
“Shareholders can take some comfort from the company’s strong balance sheet position and faltering competition which should see Currys hold on to market share gains.
“Underpinning this is Currys’ improved customer service, something which could prove crucial to its fortunes in the longer term.”