Shares in car parts-to-bicycles seller Halfords (HFD) sped 7.4% higher to 282p on Wednesday after the retailer reported a surge in first half profit powered by strong demand for cycling products and services.
However, Halfords also warned the outlook for the second half remains uncertain given the impact of lockdowns on motoring product sales as well as Brexit-related uncertainty.
PEDAL POWER
For the 26 weeks to 2 October 2020, Halfords’ underlying pre-tax profit rose by an impressive 116.2% to £56 million as revenue grew 9.6% to £639 million.
All product areas and businesses returned to growth towards the end of the half, said the designated essential retailer and services provider.
Like-for-like cycling product sales surged 54.4% higher in the first half, as people shunned public transport and sought to keep fit during the pandemic, although motoring product sales slumped 23.7% as government lockdowns led to fewer car journeys.
‘We have worked hard to capitalise on the cycling market tailwinds by sourcing more stock from existing and new suppliers, as well as launching new products and brands to serve the high level of demand for our cycling products and services,’ explained chief executive Graham Stapleton.
REMAINING CAUTIOUS
Trading for the first five weeks of the second half, to 5 November 2020, ‘continued to be relatively strong, with good growth and increased market share in cycling, alongside resilience in our motoring products and services businesses’, insisted Halfords.
Cycling has continued to grow and Halfords has seen another shift towards its digital and home delivery channels, but sales of motoring products have been impacted by the second national lockdown, ‘with Government data showing car traffic last week at 70% of pre-Covid-19 levels’.
Halfords remains cautious on the impact that national and local lockdowns may have on its second half performance, ‘with fewer vehicles likely to be on the road’.
Given the latest national lockdown and ‘the inherent uncertainty in the current trading environment, including the outcome of Brexit negotiations’, Halfords wasn’t able to provide full year profit guidance, although management argued it is ‘well placed to address potential headwinds we may face and capitalise on tailwinds as they arise, and our balance sheet and liquidity position remain very strong.’
