Currys PLC shares value market-leading UK business at zero, says

On Jan 16, 2022

“Currys has reached the magical moment when an online order is as profitable as an in-store purchase,” analyst Adam Tomlinson said

At Currys PLC’s (LSE:CURY) current market valuation it is trading at less than the value of its Nordics business, broker Liberum noted, leaving the £5bn-annual-sales UK business “in for free”.

Ahead of a Christmas update is due on Friday for what is the number-one electronics outlet in the UK, Scandinavia and Greece, Liberum selected the shares as one of its top picks for 2022.

This follows an improvement in the business since Alex Baldock’s appointment as CEO in 2018, with the positive results now “starting to show”, but the shares “dragged down in the generic weakness of consumer stocks and are now far too cheap”.

Online sales have grown from 27% of total group sales in 2020 to almost 50% at last look, with Currys taking 6% market share online from their competition during lockdown, cementing their dominant number-one market position.

“Currys has reached the magical moment when an online order is as profitable as an in-store purchase,” Liberum said, noting that store numbers have been slashed 77% since 2014 to around 300 stores.

“That is very significant and puts to bed the persistent criticism that Currys is just a bricks and mortar retailer. It isn’t. It is a business that has the perfect complementary balance of stores and online presence.”

In their half year statement on 15 December, boss Alex Baldock highlighted that the market had been “softer over recent weeks”, which clearly put the willies up short-term investors.

However, says Liberum analyst Adam Tomlinson, with Currys having grown their market by 20% since COVID, “not only is it unsurprising if there is a slight market slowdown, I suspect that the replacement cycle is now likely to be coming off a higher installed base… even if it doesn’t manifest for another 2-3 years.”

Tomlinson said the consensus view seemed to be “that consumer stocks are dead forever. I don’t agree”, citing recent research examining 50 years of history that highlighted how consumer stocks outperform in year-three post a recession.

“Employment stability and £200bn of excess cash in the UK add weight to this argument this time round. That augurs very well for next year,” he concluded.