Shares in retailer Halfords (HFD) jumped 20% to 347.5p after lifting its outlook on annual profit as Britons’ continued love of cycling in lockdown led to stronger than expected performance.
In a trading update for the first seven weeks of its fourth quarter, Halfords said it now expects full-year pre-tax profit to be within a range of £90 million-to-£100 million after the repayment of £10.7 million in furlough support, citing better than expected trading in the first seven weeks of its fourth quarter despite what it called a ‘volatile trading environment’.
Analysts had been anticipating a figure of just over £70 million, according to a company-provided consensus.
Although only six weeks remain of its 2021 financial year, Halfords said the expected profit range remains quite broad as ‘trading patterns continue to be volatile, with sales ahead of Easter particularly difficult to predict whilst the UK remains in lockdown.’
CYCLING BOOM DRIVES GROWTH
For the first seven weeks of its fourth quarter from 2 January to 19 February, Halfords reported group like-for-like sales growth of 6.2%, with retail sales growing 5.1% and Autocentres sales up 13.3%.
A lot of its like-for-like growth was driven by its cycling division, which Halfords said has seen growth rates improve as supply disruption has eased, although it conceded that overall supply ‘remains sub-optimal.’
Like-for-like growth in its cycling division over the period was 43%, with its range of kids and adult mechanical bikes performing well, along with its performance cycling business, Tredz, which saw like-for-like growth of 60% during the period.
EXPERT VIEW
AJ Bell investment director Russ Mould said Halfords seems to have addressed recent supply chain issues which had seen it struggle to keep up with demand, even if supply remains ‘sub-optimal’ in its own words.
Mould added that the nature of the pandemic could mean this cycling boom lasts longer than previous ones, such as after the 2012 Olympics.
He said, ‘There may be a natural saturation point for Halfords when everyone who wanted to buy a bike has bought one, but then people might consider upgrades, kids will get bigger and require new larger models and there is likely to be increased demand for Halfords’ services when it comes to repairing and maintaining cycles.
‘It also has an opportunity to convince more people about the merits of moving to electric bikes. Halfords just needs to ensure it is flexible enough to meet fluctuating demand and remains the cycling retailer of choice.’
