Currys 18% Profit Beat|Shares Drop as Memory Chip Shortage Threatens 9bn Retailer

Record Profit, Falling Share Price

Currys posted its strongest annual result in years on 2 July — adjusted profit up 18% to £191 million, revenue up 6% to £9.25 billion, and a second consecutive £50 million share buyback launched on the same morning.

The share price fell 3.3% anyway, touching 159 pence by midday. The stock has risen 36% over the past year, but the market's reaction to the best set of numbers Currys has produced in a decade was to sell.

That is not a perverse response — it is a forward signal. The result told investors where Currys has been. The CEO's own words told them where prices are going.

Chief Executive Alex Baldock described memory chip prices as a genuine supply crunch: AI and data centres were "eating up the world's supply of silicon," leaving "less for the likes of mobile phones and laptops." He said price rises on consumer electronics are "inevitable" later this year.

The provisionality is the issue. Baldock said it was "too early to estimate the scale of the price rises." Currys has secured supply in computing and mobile phones "until at least September," but what happens after September is the open question the result could not close.

RBC Capital Markets upgraded Currys to outperform on the same day, raising its 12-month price target to 180p from 165p and lifting FY27 earnings per share estimates 5% above consensus. The broker called Currys "a likely multiyear compounder."

Yet the stock sat at 159p, 12% below the target the upgrade assigned it. Two professional readings of the same fact set — one bullish on the services transformation, one pricing the chip crunch risk — pulled in opposite directions on the same day.

The Memory Chip Crunch: What the Market Is Pricing

The memory chip shortage is not a Currys-specific problem — it is a global supply constraint whose origin is in AI infrastructure spending.

Data centre operators building out AI compute have absorbed a growing share of DRAM and NAND production. Micron, one of the world's largest memory producers, reported blowout quarterly earnings this week and said it was "more than sold out," with guidance for next-quarter revenue raised to $18.7 billion from $14.2 billion. That confirms the supply tension from the demand side: memory producers cannot meet combined AI and consumer demand simultaneously.

For a consumer electronics retailer, the transmission path is direct. Currys sells laptops, smartphones and televisions — all of which are silicon-dependent. A shortage at the production level becomes a cost-price inflation event at the retail level within one to two stocking cycles.

The question is how much of that inflation Currys can absorb versus how much it passes to consumers. Baldock said Currys' buying scale as UK market leader gives it leverage with manufacturers — "we've made sure that we've bought forward" — but acknowledged the inflation "inevitably will cause availability challenges and some cost price inflation coming through later this year."

Here is the tension the market is sitting with. Currys' UK like-for-like sales rose only 3% despite a strong AI laptop cycle, the Nintendo Switch 2 launch and a World Cup-driven demand spike for large televisions. If chip-induced price rises compress consumer demand at the same time as the cost base rises, that 3% growth figure — already thin — could stall.

The World Cup effect makes this harder to read. Sales of 90-inch and over TVs trebled, home beer pumps and hot tubs sold strongly, and fans were up nearly 3,000% during the June heatwave weekend. These are event-driven spikes, not structural revenue. The underlying consumer demand, outside these tailwinds, remained what Currys itself called a "challenging technology market."

The Services Layer: Buffer or Illusion?

The bull case for Currys rests on a structural argument that the company has been testing for three years: that services revenue is insulating the business from the hardware cycle.

The evidence for this year is concrete. iD Mobile, Currys' own mobile virtual network, grew subscribers 18% to 2.6 million. Credit sales climbed 10% to £1.2 billion. The repair business handled 1.6 million jobs and the warranty book reached 11.9 million active plans. These are recurring revenue streams that generate income whether or not a new laptop is sold.

RBC values iD Mobile alone at approximately £260 million, using £100 per subscriber — a figure that would reduce Currys' effective EV/EBIT multiple from 5.5x to 4.5x. That is the repricing the broker believes the market has not yet made.

But this is where the buried assumption matters. The services hedge works only if services revenue continues to grow faster than product revenue declines. iD Mobile is a mobile virtual network — it does not own spectrum or infrastructure. If the memory chip shortage raises handset prices sharply, new mobile contracts become harder to sell, and subscriber growth at iD Mobile slows directly.

The repair business is partially counter-cyclical — consumers fix rather than replace when prices rise. But warranty plans are sold at point-of-sale on new product purchases. A slowdown in new product sales compresses the warranty renewal pipeline over the following two to three years.

Currys holds 75% of UK market share for AI-enabled laptops, which is cited as a tailwind. That position is worth something only if the AI laptop replacement cycle accelerates enough to offset the chip cost headwind — a condition that is as yet unconfirmed.

September Checkpoint: Entry Setup or Trap

The question that closes the investment case is concrete and time-bound: what happens to Currys' shelf prices and volume after September, when the forward supply cover runs out?

There is a genuine counter-reading to the bearish case. Currys has net cash of more than £170 million, free cash flow of £157 million and a second consecutive £50 million buyback running. At 159p, the shares trade at approximately 5.5 times EV/EBIT — a multiple that assumes no recovery in the product cycle. The market is priced for the chip crunch to bite without the services layer providing any offset.

Susannah Streeter, chief investment strategist at Wealth Club, framed it plainly: much of what Currys sells "has become less of a luxury and more of a household essential." A washing machine failure or a mobile contract renewal cannot be deferred the way a television upgrade can. That inelastic demand component is real — and it is not in the 5.5x multiple.

But the bear read is equally grounded. The outgoing CEO cannot quantify the post-September price rise. The incoming CEO, Fredrik Tønnesen, takes over on 3 August with no prior public earnings record at the group level. A new leader managing an external supply shock in the first quarter of his tenure is a compounding variable the market is not wrong to watch.

For holders, the monitoring variable is the September supply update — specifically whether Currys can announce forward cover beyond September before the next trading statement, and whether iD Mobile subscriber growth sustains above 15% in the first-half numbers.

For those watching from outside, the entry setup becomes real if Currys' Q1 FY27 trading update (due around October) reports stable UK like-for-like growth alongside a quantified and containable chip cost pass-through. That combination would confirm the services hedge is functioning under pressure.

The trap is a Q1 update where UK like-for-like growth stalls below zero as price rises hit consumer demand before the AI replacement cycle can absorb them — at which point the 5.5x multiple offers no floor, and the 159p price is not cheap but early.