Bicycle sales put retailer Halfords back on track

Retailer Halfords said sales of motoring products declined in the Christmas quarter, but cycling-related sales receovered to put it on track to meet its full-year profit forecast.

The company said cost savings had also contributed to the performance in the 15 weeks to January 15th.

In November, the bikes to car parts retailer had reported a near 6 per cent fall in first-half profit, blaming a sharp drop-off in bicycle sales over the summer.

But it said on Thursday underlying cycling-related sales had returned to growth in its fiscal third quarter, and chief executive Jill McDonald told reporters the firm had won market share.

Halfords said overall retail sales at stores open more than a year were flat in the third quarter, an improvement on a second-quarter fall of 0.6 per cent.

Like-for-like sales of motoring products fell 0.6 per cent, while cycling-related sales were up 1.1 per cent.

“We are pleased with the group’s performance, given the unprecedented weather conditions,” said Ms McDonald, who joined from fast-food chain McDonald’s in May.

She said motoring product sales suffered from December being the warmest since records began, given a clear correlation between temperature and demand for winter related products, such as de-icer, screenwash and batteries.

However, she remained optimistic on prospects for the UK motoring market, noting a record 2.6 million new car registrations in 2015 and favourable trends such as more miles being driven, lower oil prices, the increasing complexity of car parts and the move away from “do-it-yourself” to “do-it-for-me”.

At the company’s smaller car repair unit Autocentres, like-for-like sales increased 1.9 per cent, a ninth straight quarter of underlying growth.

Halfords expects to make a pretax profit in the current year of between £78 million and £82 million, down from £84.1 million last year.

It kept its retail gross margin forecast for a drop of 0.25 to 0.75 percentage points but cut its retail operating cost growth forecast to 1 to 2 percent from 2.5 to 3.5 per cent.

Shares in Halfords, down a quarter in the three months preceding Thursday’s update, were up 31 pence at 355.4 pence at 1025 GMT, valuing the business at £707 million.

"Valuation does not reflect Halfords' cash generation and the fact it may start returning surplus cash in FY16," said Investec analyst Kate Calvert, who has a 'buy' rating on the stock.

Reuters