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FTSE 250 headline curries (LSE: CURY) has been on a downward trajectory for some time. Recent economic turmoil hasn't helped the retailer. However, I was surprised to see some good things in his latest report.
Could Currys shares recover and rise? Let's take a closer look!
Currys shares struggle in 2023
It's worth mentioning that Currys is not alone in his struggles. Many stocks have suffered due to rising inflation and rising interest rates.
However, as a technology and home goods retailer, the current cost of living crisis has had a material impact on it and similar businesses.
As I write, Currys shares are trading at 49p. This time last year they were trading at 56p, which is a 12% drop over a 12-month period. However, since volatility began to hit the markets, the shares have fallen 39% from 81p in March last year to current levels.
Business update and current risks to consider
Currys published an interim report for the half year ended 28 October 2023. At first glance, it wasn't a great read. Comparable sales fell 4% and reported revenue fell 7% compared to the same period last year and the company reported an overall loss.
However, digging deeper, the company reported that adjusted earnings before interest and tax (EBIT) increased to £31 million, representing a 7% increase compared to last year. Original expectations were for it to fall from last year's levels. I think this was aided by improved sentiment and trading in its Nordic region, where EBIT increased considerably. Furthermore, the company managed to increase liquidity by reducing costs, and a lower tax bill also helped in this regard. In my opinion, greater liquidity is always positive.
I must admit that there are still challenges and risks when it comes to Currys shares. Continued pressure on the economy may continue to impact sales as the current cost of living crisis shows no real signs of slowing down. Consumers are busier paying higher food and energy costs than perhaps looking to replace their televisions. This could continue to hurt Currys.
On top of this, competitors have taken away a large chunk of Currys' once dominant market share. This is related to the rise of e-commerce and online-only competitors. These companies can potentially undercut Currys' price as they do not have to worry about the expenses associated with traditional retail outlets, which Currys relies heavily on.
what I'm doing now
I have to admit that Currys shares look tempting with a price-to-earnings ratio of just over six. Buying the stock now could be a potentially astute long-term recovery play.
However, I don't plan to add the stock to my holdings anytime soon. In my opinion, there is still too much uncertainty around the economic outlook and also increased competition. These factors lead me to believe that the stock will continue to struggle before a potential recovery occurs, if at all.
I will keep the stock on my watch list and continue to monitor developments.
