Currys hit by chip shortage and cost of living squeeze
Currys, the electrical consumer goods chain, saw its shares dip 6.85% after it said it had suffered a shortage of goods ranging from PlayStation 5 consoles and Apple products which resulted in a 5% fall in sales over the Christmas period.
Sales were hit by problems including the global chip shortage and a drop in demand as household tighten their budgets amid the cost of living squeeze.
The retailer said it now expected to generate adjusted pre-tax profits of £155 million this financial year, lower than the £160 million guided towards last month.
There is some uncertainty ahead, Alex Baldock, the chief executive said, especially with the cost of living and real wages, which had resulted in “patchy consumer confidence”.
Sales for the overall tech market declined 10%, compared with last year’s peak period, said Mr Baldock, but the group had gained market share and demand for some items remained strong.
“This was a gamers’ Christmas: the year that virtual reality broke into the mainstream and when consoles flew off the shelves,” he said. “Oculus Quest 2 and PS5 were stars.”
The company was created through the £3.7 billion merger of Dixons Retail and Carphone Warehouse in 2014. It has 829 shops and 35,000 employees.
Russ Mould, investment director at AJ Bell, said: “The nation loading up on laptops and phones throughout 2020 set the bar high for 2021 in terms of Christmas technology sales to beat. While there was still a steady trickle of purchases in recent months, there just wasn’t enough festive demand to beat the year-on-year comparative figures for Currys.
“Only game-related items were noteworthy, meaning that Currys has fallen short of its guidance set only a month ago.
“In December, it guided for £160 million full-year pre-tax profit. That figure has now been cut to £155 million which explains the negative share price reaction to the news. It means Currys is one of the few retailers to issue a turkey of a festive update.
“Sainsbury’s gave a hint with its results a few days ago that tech demand might not have been as strong as some people thought, given it was highlighted as an area of weakness in its Argos brand.
“While we live in a world now dominated by technology, it doesn’t necessarily mean that people keep needing to spend money on new kit. Laptops and phones can comfortably last for many years without the need to upgrade, so Currys needs to find extra ways for customers to spend money with it.”