FTSE 250 incumbent Currys (LSE: CURY) has been on a downward trajectory for some time. Recent economic turbulence hasn’t helped the retailer. However, I was surprised to see some good aspects in its latest report.
Could Currys shares be set to rebound and head upwards? Let’s take a closer look!
Currys shares struggle in 2023
It’s worth mentioning Currys isn’t alone in its struggles. Many stocks have suffered due to soaring inflation and rising interest rates.
However, as a retailer of technology and home goods, the current cost-of-living crisis has had a material impact on it and similar businesses.
As I write, Currys shares are trading for 49p. At this time last year, they were trading for 56p, which is a 12% drop over a 12-month period. However, since volatility began to hurt markets, the shares have slipped 39% from 81p in March last year to current levels.
Trading update and ongoing risks to bear in mind
Currys released an interim report for the half-year ended 28 October 2023. At first glance, it didn’t make for great reading. Like-for-like sales dropped by 4% and reported revenue dropped by 7% compared to the same period last year and the business reported a loss overall.
However, digging deeper, the business reported that adjusted earnings before interest and tax (EBIT) increased to £31m, which is a 7% increase compared to last year. Original expectations were for it to fall from last year’s levels. I reckon this was helped by improved sentiment and operations in its Nordic region, which saw EBIT increase nicely. Furthermore, the business managed to boost liquidity by lowering costs, and a lower tax bill also helped in this regard. Increased liquidity is always positive, in my eyes.
I must admit there are still challenges and risks when it comes to Currys shares. Ongoing pressure in the economy may continue to impact sales as the current cost-of-living crisis shows no real signs of slowing down. Consumers are more occupied with paying higher food and energy costs than perhaps looking to replace their TVs. This could continue to hurt Currys.
In addition to this, competitors have taken a huge chunk of Currys’ once-dominant market share away. This is linked to the rise of e-commerce and online-only competitors. These firms can potentially undercut Currys on price as they don’t have to worry about expenditure linked to brick-and-mortar retail outlets, on which Currys relies heavily.
What I’m doing now
I have to admit that Currys shares do look tempting on a price-to-earnings ratio of just over six. Buying the shares now could be a potentially shrewd long-term recovery play.
However, I’m not planning on adding the shares to my holdings anytime soon. For me there’s still too much uncertainty around the economic picture as well as increased competition. These factors make me believe the shares will continue to struggle before any potential recovery could occur, if at all.
I’ll be keeping the shares on my watch list and continue to monitor developments.
