Halfords flags possible profit hit from weaker pound

Retailer Halfords could face a bigger hit to profit from sterling's depreciation against the dollar than previously indicated due to the currency impact of Britons' vote to leave the EU.

The pound has tumbled to 31-year lows against the dollar since the vote on June 23rd and Halfords said if the pound continues to be weaker than $1.45 it may have a small further impact on the company’s profit, depending on the extent to which it can be mitigated.

In June it outlined a net impact of £3 million on profit for its 2016-17 financial year at a pound:dollar rate of 1.45.

On Thursday it said that more than 75 per cent of its dollar purchases were hedged at around 1.45. The pound was trading at $1.32.

“While the recent decision to leave the EU does create uncertainty, we are well-positioned as a business and focused on delivering sustainable long-term growth,” said chief executive Jill McDonald, who joined Halfords from fast-food chain McDonald’s last year.

In an update of its first quarter trading, Halfords said all other financial guidance was unchanged.

Overall retail sales at stores open more than a year fell 0.2 per cent in the 13 weeks to July 1, its fiscal first quarter, adjusted for the timing of Easter, it said.

That compares with growth of 1.1 per cent in the fourth quarter of its 2015-16 year.

Sales of bikes fell 4 per cent on a like-for-like basis, affected by poor weather in April and late June, but its car maintenance business saw growth in sales of bulbs, blades and batteries and service-related sales, it said.

Like-for-like sales rose 1.7 per cent at its Autocentres garage business, again adjusted for the fall of Easter and marking an 11th straight quarter of growth.

Shares in Halfords, which have lost 39 per cent of their value over the last year, were down 1.3 per cent in early trade on Thursday.

Reuters