Halfords slashes profits guidance as wet weather drags on sales

28 February 2024, 11:44

A Halfords store and Mobile Expert van
Halfords financials. Picture: PA

The motoring and cycling retail group said on Wednesday that it expects to deliver pre-tax profits of between £35m and £40m for the year.

Halfords has slashed its profits guidance for the current financial year after a “further material weakening” across most of its key markets.

It said “weak customer confidence and unusually mild and very wet weather” were partly to blame, weighing on demand for both cycling and motoring products.

Shares plummeted by as much as 25% in early trading as result.

The retail group said on Wednesday that it expects to deliver pre-tax profits of between £35 million and £40 million for the year to March 29.

In its previous update in January, it had pointed towards a pre-tax profit of between £48 million and £53 million.

Halfords Xchange
Halfords said more customers are purchasing cycling products on credit (Matt Alexander/PA)

It said it cut the guidance after weakness in its cycling, retail motoring and consumer tyres operations caused a “significant drop” in retail revenues.

Halfords said cycling and retail motoring were weak as lower confidence among customers and mild, wet weather affected footfall into stores but also reduced demand for some products, such as winter car accessories and car cleaning products.

The cycling market has also “become more challenging and competitive” amid consolidation in the sector, resulting in higher levels of promotions to drive sales.

Halfords said more customers are also purchasing cycling products on credit, affecting the firm’s margins.

Nevertheless, the firm said it has seen “good growth” continue across its autocentres business.

The company said: “Whilst we have reduced our profit guidance as a result of very challenging and exceptional short-term market conditions, we remain confident in our strategy and longer-term growth prospects.

“When our core markets recover, the platform we have built leaves us exceptionally well-placed to succeed.”

Analysts at Liberum said: “This is clearly another disappointing update and we expect the shares to suffer today.

“The negative earnings momentum continues to reinforce our long-held view that the group’s medium-term pre-tax profit target of £90 million to £110 million is very stretching.

“In the near term, we also note that inventory levels stand some 30%-50% higher than pre-Covid levels, which may bring further earnings pressure through the need to clear inventory.”

By Press Association