Savvy insiders are buying this FTSE 250 stock

Insiders are spending thousands on this FTSE 250 stock. But, perhaps more significantly, another retailer is joining in too. What’s going on?

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Currys (LSE:CURY) is a familiar name in the world of electrical retailing. Like most in the sector, this member of the FTSE 250 struggled during the pandemic, and its share price fell to 62p soon after the country entered lockdown.

To my surprise, the stock is currently changing hands for less — around 53p.

On 6 July 2023, when the company released a disappointing set of results for the year ended 29 April 2023, it lost 8.6% of its market cap, with its shares closing the day below 48p.

Since then the share price has recovered a little, but it’s still 40% lower than its 52-week high of 87p.

Those in the know

This might explain why three insiders — the chair, a non-executive director, and chief financial officer — have recently spent over £150k buying shares. They collectively paid an average price of 47.76p, and each of them is now sitting on a paper profit.

I think they view the stock as something of a bargain.

Confident about its future prospects, they have used their own money to try and profit from a turnaround in its fortunes following a loss of investor confidence.

I like it when a management team demonstrates such faith.

Getting results

The timing of the purchases is interesting. Their transactions all took place on the day that the company’s 2023 results were announced.

Unlike others, they were clearly undeterred by the drop in adjusted earnings before interest and tax of £66m (24%), compared to the previous year.

Although earnings in the UK were £53m higher (45%), profits in the Nordics division fell from £142m to £26m, a drop of 82%.

The company said that, in northern Europe, its competitors were chasing customers at the expense of profit. It believes this isn’t sustainable and, coupled with an economic recovery in the Nordics, its directors are confident that profits will soon return to previous levels.

However, to be cautious, they have decided not to declare a final dividend. Other temporary cash preservation measures include reducing capital expenditure and cutting pension contributions.

Outside interest

But the three board members are not the only ones buying shares.

Between 15 June 2023 and 10 July 2023, Frasers Group built up an 11.06% stake in the company. Having entered into a strategic partnership with AO World, Frasers is seeking to further strengthen its position outside its core markets of fashion and sportswear.

But it’s impossible to predict what its intentions might be.

The owner of Sports Direct now has minor stakes in six companies.

StockOwnership (%)Value of shareholding (£m)
Mulberry Group36.857
AO World18.996
Currys11.168
ASOS10.646
boohoo5.027
Hugo Boss3.9175
Source: regulatory filings

My takeaway

Although I’m tempted to buy shares, I’m not going to at the moment.

I already have a stake in Frasers. And I’m hoping that any significant increase in the share price of Currys will feed through into the value of that shareholding.

But retailing is a tough business and the online threat to physical stores remains. However, the electrical retailer claims that two-thirds of its customers prefer to visit a shop.

However, the strength of any recovery in the Nordics remains unclear. And the suspension of the dividend — although understandable — makes an investment less appealing.

But I take great comfort from the fact that those with a deep knowledge of the retail sector want to own shares in Currys.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

James Beard has positions in Frasers Group Plc. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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