- Halfords now expects annual underlying pre-tax profits of £35m to £40m
- It blamed the downgrade on subdued customer confidence and bad weather
Halfords shares nosedived on Wednesday after the group slashed its annual profit guidance amid continued weak trading across most of its core markets.
Britain’s largest cycling and motor services retailer saw its share price plunge by 23.7 per cent to 153p by midmorning, making it the second- biggest faller on the FTSE All-Share Index behind financial advisory firm St James’s Place.
The company warned investors that it now expects underlying pre-tax profits of between £35million and £40million for the year ending 29 March.
Deep trouble: Halfords shares dived on Wednesday as the group slashed its annual profit guidance amid continued weak trading across a majority of its core markets.
This compared to £43.5million in the previous financial year and prior forecasts of £48million to £53million.
It blamed subdued customer confidence and ‘unusually mild and very wet’ weather across the cycling and retail motoring markets for damaging store footfall and sales of some goods like winter accessories and car cleaning products.
Halfords also said the cycling sector was ‘more challenging and competitive’ due to a rise in promotions and Britons buying goods on credit, which is hitting gross margins more than expected.
Bike purchases in Britain plummeted to their lowest level in nearly four decades last year, according to the Bicycle Association, amid major cost-of-living pressures and a slump in the popularity of cycling.
The drop represents a stark departure from the lockdown era when decreased car usage, a greater reluctance to travel on public transport, and growing environmental concerns led to a biking boom.
However, Halfords’ motoring arm and garages business, Autocentres, has done relatively well since the end of Covid-related restrictions.
In the six months ending 29 September, its Autocentres division saw like-for-like sales expand by 18 per cent and total revenue increase by approximately a third to £356.9million.
Since its last trading update in January, Halfords said the segment has continued to attain ‘good growth’ thanks to strong demand for customer repair services offsetting a weaker consumer tyres market.
The Redditch-based company believes underlying pre-tax profits for the next financial year will broadly align with its 2024 results, although this will partly depend on growth across its core markets and improved margins in its cycling business.
It told investors: ‘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.’
Investec analysts said: ‘Halfords cash generation means it can ride out the current, very challenging, short-term market environment without impacting its strong balance sheet or its future capex plans, and is well-positioned for when markets recover to deliver material profit upside.’
