In March 2015, Sebastian James, the former chief executive of Dixons Carphone, predicted that the rise of connected devices (the internet of things) would cause an “asteroid strike” for some retailers.
James had spent 12 months completing the £3.7 billion merger between Dixons Retail and Carphone Warehouse in an attempt to ready his business for the IoT revolution. “This new shift — just 15 years after the last [the internet] — is going to bump off as many retailers as the last one,” he told a retail conference.
Little was he to know that, five years later, Dixons Carphone was to slash almost 3,000 jobs and close all 531 of its standalone Carphone Warehouse stores. The company had been hit with its own asteroid. It blamed the closures on consumers taking longer to upgrade their mobile phones, leaving its smaller shops somewhat surplus to requirements.
Today, Dixons Carphone is called Currys, after rebranding last year, and is led by Alex Baldock. It has 829 shops and 35,000 employees, selling everything from washing machines to laptops. Earlier this month, it said sales growth over Christmas had slowed because of supply-chain disruption and concerns over inflation — prompting the company to cut its profit guidance for the year. Like-for-like sales fell by 5 per cent over the ten-week trading period to January.
Part of the sales decline is down to Currys having had a good 2020, when locked-down families splashed out on home entertainment. In more recent months, bright spots have been gaming, where Currys reported its strongest growth, and Dyson hair gadgets.
It is debatable whether spending habits will be maintained now that restrictions have ended. On a two-year basis, stripping out the Covid bump, sales at Currys were up 4 per cent. Numis, the City broker, highlights a school of thought that the demand curve is “flattening” in the sector.
Attention is now turning to Currys’ store estate. Despite its slimmed-down portfolio, Panmure Gordon says there is an “elephant in the room”: Currys is yet to acknowledge a need to reduce its bricks-and-mortar presence amid soaring online sales. “The issue here is that trade does not have to be that apocalyptic to force restructuring,” the bank said, putting an 80p target price on the shares.
The retailer closed on Friday at 99.2p, marking a 16 per cent fall so far this year and valuing the company at £1.2 billion. If a further restructuring is on the cards, there could be more pain to come. Sell.
