Halfords warns of profit fall despite cycling boom
Halfords today said booming demand for cycling products had boosted revenue during the coronavirus outbreak but warned of a fall in profit for the second half of the year.
The car parts retailer reported a five per cent rise in like-for-like revenue in the 20-weeks to 21 August.
This was driven by a sharp rise in cycling sales, which jumped nearly 60 per cent over the period as Brits turned to alternative forms of transport during the lockdown.
Halfords forecast pre-tax profit of between £35m and £40m in the first half of the year based on expected demand in September.
But the retailer warned that sales in the second half of the year could be “significantly lower” due to the impact of Covid-19 alongside the standard dip in sales during the winter months.
The company also saw a sharp decline in its motoring retail sales, falling 28.6 per cent in the same period.
Shares in Halfords were down almost 3.5 per cent this morning, before recovering to a drop of just over two per cent shortly after midday.
Despite the Covid hit, Halfords said it was “pleased to have delivered a strong trading performance during the period”, citing a rise of 160 per cent in overall online sales.
Chief executive Graham Stapleton said: “Looking further ahead, we are confident in the long-term strategy of our business and in the growth prospects of the cycling and motoring markets in which we operate.”
Halfords said it was pressing on with plans to close 80 stores this year — equivalent to roughly 10 per cent of its store portfolio — in a bid to cut costs.
Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said: “While the airlines have been desperate for UK holidaymakers to get back in the sky, Halfords has been reaping the rewards of a nation taking to the roads in search of a getaway.
But she warned cycling was not as profitable for the company as other parts of the business.
“So while it’s great to see the group capitalising on new consumer trends, it’s not immediately going to be perfect news for the bottom line.”