28 February 2024

Halfords Group plc

Trading Update: Financial Year 2024

Halfords Group plc (“Halfords” or the “Group”), the UK’s leading provider of Motoring and Cycling services and products, today issues the following trading update.

At our Q3 trading update on 25 January 2024 we indicated that we expected Underlying Profit Before Tax1 (“PBT”) for the 52-week period ending 29 March 2024 to be between £48m and £53m, assuming markets did not weaken further in Q4. Since that update, we have seen a further material weakening in three of our four core markets (i.e. Cycling, Retail Motoring and Consumer Tyres), resulting in a significant drop in like-for-like (“LFL”) revenue growth in our Retail business.  

As a result, we now expect PBT to fall in the range of £35-40m. This reduction in profit expectations is driven by two key factors:

1. Both the Cycling and Retail Motoring markets have been impacted by a combination of continued weak customer confidence and unusually mild and very wet weather, which affected footfall into stores and sales of categories such as winter and car cleaning products. Volume in the Retail Motoring market fell year-on-year by 5.1% pts in January (vs an increase year-on -year of +0.2% in Q3); volume in the Cycling market fell year-on-year by 8.0% pts in January (vs a decline of 5.1% pts in Q3); and volume in the Consumer Tyres market fell by 4.3% pts in January (vs a decline of 2.6% pts in Q3).

 

2. The Cycling market has become more challenging and competitive as it continues to consolidate. Promotional participation has increased, and more customers are purchasing on credit, leading to weaker gross margins than previously anticipated.

We continued to deliver good growth in our resilient and strategically important Autocentres business. Although the Consumer Tyres market worsened in January, we saw a strengthening Service, Maintenace and Repair (“SMR”) market and we continue to see good customer demand in this area.

Our FY24 PBT forecast assumes the same challenging market conditions continue for the rest of Q4, including through our peak Easter cycling period in March. We have continued to take decisive action on cost, but in the short period between now and the end of the financial year this will not be sufficient to offset the significant market deterioration we have seen.  

Looking ahead to FY25, we remain cautious on market recovery in the short-term, and the current significant volatility in market conditions means that forecasting accurately is challenging. Notwithstanding this, we anticipate that underlying PBT in FY25 will be broadly in line with that forecast in FY24 assuming that: 1) There is marginal year-on-year growth in our core markets, with trading conditions seen in Q4 proving anomalous; and 2) The Cycling market normalises and margin pressure dissipates through the year. FY25 PBT will be supported by cost savings that more than offset net inflationary headwinds.

Whilst we have reduced our profit guidance as a result of very challenging and exceptional short-term market conditions, we remain confident in our strategy and longer-term growth prospects. When our core markets recover, the platform we have built leaves us exceptionally well-placed to succeed.

 

1. Underlying profit before tax is stated before non-underlying items. Non-underlying items for FY24 will include costs related to the closure of our existing tyre supply operation, as detailed in our recent Q3 Trading Update. We will review the carrying value of our assets in line with our year-end timetable and report the results of this as part of our Preliminary Results Announcement. It is likely that the results of the existing tyre supply operation will be disclosed as Discontinued Operations in the FY24 accounts – our revised guidance for PBT includes the results of the tyre supply operation i.e. it is based on ‘All Operations’.

 

Enquiries:-

Investors & Analysts (Halfords) 

Jo Hartley, Chief Financial Officer 

Neil Ferris, Director of IR and ESG     +44 (0) 7483 457 415

Neil.Ferris@halfords.co.uk                                                   

 

Media (Powerscourt) +44 (0) 20 7250 1446

Rob Greening           halfords@powerscourt-group.com

Nick Hayns

Elizabeth Kittle

 

Notes to Editors

www.halfords.com                             www.tredz.co.uk         www.halfordscompany.com                     

Halfords is the UK's leading provider of motoring and cycling services and products. Customers shop at 386 Halfords stores, 3 Performance Cycling stores (trading as Tredz and Giant), 645 garages (trading as Halfords Autocentres, McConechy’s, Universal, National Tyres and Lodge Tyres) and have access to 266 mobile service vans (trading as Halfords Mobile Expert, Tyres on the Drive and National) and 554 Commercial vans. Customers can also shop at halfords.com and tredz.co.uk for pick up at their local store or direct home delivery, as well as booking garage services online at halfords.com.

Cautionary statement

This report contains certain forward-looking statements with respect to the financial condition, results of operations, and businesses of Halfords Group plc. These statements and forecasts involve risk, uncertainty and assumptions because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements. These forward-looking statements are made only as at the date of this announcement. Nothing in this announcement should be construed as a profit forecast. Except as required by law, Halfords Group plc has no obligation to update the forward-looking statements or to correct any inaccuracies therein.