Halfords reports drop in sales, but remains upbeat

Halfords

Redditch-based car and bike parts and accessories retailer Halfords Group has reported a drop in third quarter sales.

The bike and car parts retailer now expects annual adjusted pretax profit for the year ending March 30 to be between £58 million and £62 million. In November, Halfords said it expected profit for the 2019 financial year to be broadly flat on the £71.6 million achieved for the 2018 financial year.

Chief Executive Officer Graham Stapleton said: “This has been a challenging third quarter for the business, driven by exceptionally mild weather and ongoing weak consumer confidence. Together, these factors have led us to reduce our profit expectations.

“Whilst this has been a difficult period, we have managed costs and margin well and our free cash flow remains strong.”

On a like-for-like basis, total sales fell by 1.7%, with retail down 2.2% due to “mild weather and weak consumer confidence” and offsetting a 1.4% increase in Autocentres revenue.

The company blamed the weather for its poor results in retail as motoring sales experienced a decline in weather-related and discretionary products and services.

Halfords is the UK’s leading retailer of motoring, cycling and leisure products and services.

Through Halfords Autocentres, it is also one of the UK’s leading independent operators in vehicle, servicing, maintenance and repairs.

Halfords says it has leading market shares in some areas of the motoring and cycling markets, while seeing significant headroom to grow further. Both markets have good long-term growth prospects, it says, but are increasingly characterised by generalists becoming more sophisticated and encroaching on the space previously occupied by specialists.

The company says there is an increasing demand from customers who want someone to “do it for me”, with customers seeking convenient solutions to fit around increasingly busy schedules.  Large proportions of 25-34 year olds are interested in the prospect of a mobile fitting service. There are also significant opportunities to improve cross-shop (currently only 2% of its Retail customers also shop at Autocentres) and customer retention (for example, 1 in 3 of its known customer haven’t shopped with the retailer for two years).

The company says the dynamics of its markets are changing – cars are becoming more complex and fewer people have the knowledge and capabilities to do work on their cars, especially with the shift towards electric vehicles. “We are also seeing a massive increase in the popularity of e-Bikes, a trend already benefitting the bicycle markets in European countries,” it says.

There are opportunities for scaled, specialist service providers to lead in these changing markets.