Halfords cautions over weaker big-ticket sales as customers feel pinch
It came as the motoring and cycling retailer revealed a rise in sales and profits for the past half year in an otherwise positive update to shareholders.
However, the company said on Wednesday it has seen “volatile” trading patterns so far this financial year amid uncertainty in the wider economy.
“In the last couple of months we have seen some market softening in our discretionary big-ticket categories, which has been reflected in slower like-for-like sales growth,” the company said.
Halfords said it will continue to focus further on reducing costs in order to offset the slower recovery of sales in some areas.
Graham Stapleton, chief executive officer of Halfords, said: “Despite the challenging and volatile trading environment and slower-than-expected recovery in some of our markets, we have made a good start to the year, with substantial sales and profit growth, and increased market share across the business.
“At the same time, we supported our customers through the ongoing cost-of-living crisis by delivering great value – when they need it most.”
The company said it expects to deliver a pre-tax profit of between £48m and £53m for the current financial year as a result.
Halfords said pre-tax profits improved by 3.3 per cent to £19.3m for the six months to September 29.
It came as strong trading by its autocentres business pushed revenues 13.9 per cent higher to £873.5m for the half year compared with the same period a year earlier.
A 33.9 per cent jump in revenues in the autocentres business helped offset slower growth in its retail business, which saw a like-for-like decline in cycling sales.
Mr Stapleton added: “In the face of continuing economic uncertainty, we remain fully focused on optimising every element of the business and I’m particularly pleased with the very strong performance of autocentres, where we are delivering significantly improved returns.
“In light of this, we are accelerating capital investment in the garage services operating model and customer experience in 10 towns in the balance of this financial year.”
Charlie Huggins, manager of the Quality Shares Portfolio at Wealth Club, commented: "Halfords has seen a good start to the year with strong sales and profit growth, and increased market share across the piste. However, the trading environment remains challenging, and appears to have worsened in the last couple of months. This leaves the outlook for the second half more murky.
“The slower than expected growth in more discretionary higher-priced categories, like cycling suggests consumers are feeling the pinch. This is not a great surprise given the rapid increase in interest rates and on-going cost of living pressures. Halfords has responded by focusing on what it can control, including cutting prices and costs. This has been a smart move, leading to market share gains, without sacrificing operating margins. Overall, it's hard to grumble with Halford's performance given a very tricky consumer backdrop.”