Currys rues impact of budget and warns of hit to consumers

Currys has warned of a drop in consumer sentiment over the past six months, with the chain plotting price rises to help offset the impact of the new Labour government’s first budget.

Alex Baldock, the retailer’s chief executive, told reporters that progress in tackling financial pressures on households had “stalled in recent months”.

He noted that, in the summer, UK consumers were looking at falling inflation, interest rates and rising confidence.

But some price rises were now “inevitable” after the Labour government’s first budget, he added.

Mr Baldock made his remarks ahead of crucial data next week that is tipped to show a rise in the pace of price increases in the economy.

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The Bank of England is also widely expected to keep the cost of borrowing at current levels, citing inflationary pressures, in an interest rate decision.

Mr Baldock was speaking shortly after Currys updated its shareholders with half-year results.

The electricals retailer reported a 2% rise in group like-for-like sales over the six months to 26 October including a 5% rise in the UK and Ireland.

Its Nordics business continued to prove the main drag.

Currys, which fought off takeover interest earlier this year, said it remained on track to grow annual profits in line with previous guidance, adding that trading in the lead up to Christmas was in line with expectations.

That helped its shares rise by more than 8% in early deals.

But that was where the upbeat corporate story largely ended.

Currys warned of “unwelcome” headwinds looming from the budget, which will hit its business from April as part of Chancellor Rachel Reeves’ bid to restore health to the public finances.

The company complained that measures such as increases to employer National Insurance contributions would be felt “materially” and depress investment and hiring.

Like others in the retail space, its main message was that customers faced price rises to help offset the estimated impact.

The company put its budget bill at £32m.

Mr Baldock said of the government’s measures: “These will add cost quickly and materially, depress investment and hiring, boost automation and offshoring, and make some price rises inevitable.”

“Still, there’s plenty we can control, including mitigating much of this headwind,” he added.

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John Moore, senior investment manager at wealth manager RBC Brewin Dolphin, said of the company’s update: “Currys continues to make strong progress, despite the impact of the budget, with sales on the rise, growing market share, and losses narrowing.

“The retailer has taken a range of self-help measures, successfully fought off competition, and enhanced buying margins – all of this is feeding through to an improving bottom line.

“It is also well placed in growing themes, such as AI-powered laptops, which should provide a tailwind going into 2025.

“With a return to the dividend list slated for next year and earnings-per-share heading in a positive direction, Currys is in a good place, which may only result in more interest circling around the company from potential suitors in the months ahead.”