Strong performance from Redditch bike and auto retailer Halfords, but supply chain concerns remain

Halfords

Total sales were up more than 18 per cent, at Halfords Group plc, the Redditch-based retailer of motoring and cycling products and services.

In its 20-week trading update released today, while total sales growth is up more than 18 per cent, Graham Stapleton, the company’s CEO, acknowledged considerable disruption to its cycling business due to global supply chain problems.

He said: “The first 20 weeks of FY22 delivered a strong trading performance against a hugely challenging backdrop. Our motoring business now represents 65% of our revenues and continues to go from strength to strength, driven by the increased scale of our Autocentres business, the ongoing demand for our Halfords Mobile Expert Vans, and by recent staycation trends. Although our cycling business is currently impacted by the considerable disruption in the global supply chain, as the UK’s largest cycling retailer we are well positioned to adapt and to serve our customers, and we remain confident in the long-term outlook for the cycling market. The strength of our overall performance is a clear illustration of the relevance of our service-led strategy and gives us the confidence to continue with our investment plans. We remain positive on our prospects for FY22 and beyond.”

Halfords said that given the highly unusual sales patterns in the FY21 comparator period, it has looked at revenue growth on a two-year basis, comparing FY22 revenue to FY20.

Halford’s motoring business grew +6.5 per cent  and +11.2 per cent like for like over two years, driven by share gains in key categories. Maintenance and 3B’s (Blade, Bulbs and Batteries) grew strongly, up +4.3 per cent and +6.9 per cent respectively, whilst Touring products performed particularly well, up a whopping +53.3 per cent, benefitting from staycation trends.

Cycling grew strongly, up +9.9 per cent and 24.2 per cent like for like vs FY20, with electric mobility up +115 per cent. The global cycling supply chain continues to experience considerable capacity constraints, leading to low availability of bikes throughout the period. Whilst Kids and Electric bikes have fared better, availability has been especially low in the Adult Mechanical category, contributing to materially lower growth rates towards the end of the period.

In it’s Autocentres the company saw total revenue growth of +86.2 per cent and +15.5per cent like for like  on a two-year basis, driven by increased scale, improved utilisation, and its focus on B2B.

Its Halfords Mobile Expert Vans grew strongly, up +61.7 per cent on a one-year basis, demonstrating the ongoing customer demand for this proposition.

But recruitment is a problem. The supply of technicians to both garages and its Mobile Expert Vans was impacted by recruitment challenges and Covid-related absences, which had some impact on sales in the period.

However, the company remains optimistic.

Its statement said: “We expect many of the cycling supply chain issues referred to above to continue for some time albeit, as the UK’s largest cycling retailer, we are well positioned to navigate these challenges. Conversely, we are targeting strong growth in our Services and B2B businesses, alongside an improved Retail Motoring performance. We plan to continue investing in the initiatives highlighted in our FY21 Preliminary results on 17 June 2021. These include an investment in Retail Motoring pricing, Project Fusion trials, which seek to deliver a seamless, convenient, and consistent experience to our customers across a town, our Motoring Loyalty scheme, and scaling our network of garages and vans. We continue to target a full year profit before tax of above £75m on a post IFRS-16 basis.”