Halfords warned of a long uphill slog to recovery yesterday as profits tumbled by 22 per cent and its dividend was slashed by a third to pay for a £100m revamp of the struggling car parts and cycling retailer.
New chief executive Matt Davies pledged to refresh tired-looking stores and improve customer service over the next three years but warned that earnings were unlikely to recover until 2016.
The former Pets at Home boss, appointed last year, outlined his plans to turn around the business yesterday as it announced annual pre-tax profits were down in line with forecasts from £92.2m to £72m.
Despite the fall, he insisted that overall store numbers would not be significantly reduced – though it looks likely that some outlets will shrink and others outside London would be closed to make way for a greater presence within the M25.
Mr Davies’s investment programme, named ‘Getting Into Gear 2016’, will be paid for by cutting the dividend for investors this year by 35 per cent, from 14p to 9.1p.
Shares fell 12 per cent, though some analysts said it was an opportunity to pick up the stock after they were reassured by the chief executive’s blueprint for growth.
Mr Davies said his plan was designed to “significantly improve retail customer experience and bring about sustainable and profitable sales-growth momentum”.
He added: “We expect these vital investments will inevitably reduce short-term retail profitability but will deliver long-term revenue and profit growth together with sustainable shareholder value.”
Halfords has 466 stores in the UK and Ireland and 287 Autocentres, employing a total of 12,000 people.
It saw an overall 1 per cent rise in revenue over the full-year to the end of March to £871.3m, with a fall in retail sales offset by a 13.5 per cent rise in income from its Autocentres – though much of this was derived from low-margin tyre sales.
The business experienced a topsy-turvy year as poor weather hit bicycle sales but they were lifted by the ‘Wiggins effect’ of Britain’s Tour de France and Olympics success – while sales of de-icer and screenwash kept tills ringing during the winter.
Mr Davies was hired in October three months after the departure of predecessor David Wild amid a profit warning and a sharp sales decline.