- Like-for-likes down 0.1%
- Delivering £30 million of savings
- FY 2025 outlook unchanged
Motoring-to-cycling products purveyor Halfords (HFD) reported broadly flat first half sales as cash-strapped consumers continued to cut back on big ticket, discretionary purchases.
Yet the performance was actually better than it first appeared, when you consider the car batteries and bikes seller was lapping demanding prior year comparatives.
And the fact the business managed to stand still rather than go into reverse was viewed as a win by investors, who bid the shares up more than 5% to 149.5p.
CYCLING TOUGH COMPS
Group like-for-like sales softened 0.1% in the half ended 27 September 2024 as the Worcestershire-based company lapped a strong comparative from the prior year, having delivered 8.3% like-for-like growth.
Retail like-for-likes fell 0.7% as wet UK weather put a dampener on cycling sales, while Halfords’ Autocentres segment, which has grown to represent 40% of group revenue, felt the effects of price-conscious customers trading down into budget ranges, with like-for-like growth grinding down from 18% to just 0.8% year-on-year.
Despite pockets of improving consumer sentiment, Halfords said the short-term outlook remains uncertain, ‘particularly for big ticket, discretionary purchases’.
Nevertheless, with gross margins expanding through ‘price optimisation’ and sourcing gains as currency headwinds abate and the company on track to deliver £30 million of inflation-offsetting savings, Halfords felt confident enough to leave its full year 2025 outlook unchanged.
CAUTION AHEAD OF BUDGET
CEO Graham Stapleton remarked that while consumers remain cautious in their discretionary spending, compounded by uncertainty around Labour’s upcoming Budget, Halfords has ‘continued to focus on controlling the controllables and I am pleased with our performance in the first half of full year 2025.’
He added: ‘Our services and B2B-led strategy has supported Halfords’ growth despite two of our core markets remaining significantly below pre-Covid levels, enabling us to absorb more than £130 million of inflation since full year 2020 while maintaining a strong balance sheet.’
EXPERT VIEWS
AJ Bell investment director Russ Mould observed that Halfords is increasingly leaning on its motoring services arm to drive earnings, since that is where the future of the business lies.
‘Despite this being more defensive in terms of people needing help regardless the state of the economy, it still comes with its own challenges,’ said Mould.
‘For example, wage inflation is high among qualified technicians and Halfords has no choice but to stomach these extra costs if it wants to ensure there are the right people in the business to do the work. Life is never easy for Halfords but the trading update implies it is keeping its head above water. The hard part is growing and it still has a lot more work to do.’
Julie Palmer, partner at Begbies Traynor (BEG:AIM), said that after the wettest summer since 1986, ‘the poor weather was certainly one of the factors behind Halford’s weak performance, but that never sits well with investors as an excuse.
‘External conditions should not distract from the fact Halfords needs to find a way to get back on track. It is unlikely to experience a boon like it did during the Covid pandemic in the near future, however the retailer is a compelling brand which should be able to benefit from a market recovery if it can build some momentum.’
Palmer added that ‘a focus on cost savings and Halford’s plan to “control the controllables” are prudent actions in tricky conditions. Meanwhile, the company’s significant expansion of its “premium” bikes range is also a smart move to capitalise on one of the fastest-growing parts of the cycling industry, but in the short-term the landscape could remain tricky for Halfords.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Martin Gamble) own shares in AJ Bell.
