Profits at Halfords drop amid consumer cutbacks on non-essentials

Retailer Halfords has seen interim profits halve and warned the full-year result will be at the bottom end of its expectations as under-pressure consumers cut back on non-essential spending.

The car parts to bicycle chain reported underlying pre-tax profits of £29 million for the six months to September 30, down from £57.9 million a year ago, with the previous year’s results boosted by £9.2 million of business rates relief.

Revenues rose 10.2% to £765.7 million over the first half but retail like-for-like sales were 6% lower year-on-year as it saw consumers rein in spending on bikes, where sales plunged 12.5% as it came up against strong trading the previous year.

Halfords said it was seeing “resilient trading in the more needs-based categories, but there has been a softening in the more discretionary areas”.

“It remains challenging to predict consumer confidence for the remainder of 2022-23 but we don’t expect the challenges that businesses are facing to dissipate soon,” it added.

The group cautioned it is now expecting full-year underlying pre-tax profits at the lower end of its previous guidance for between £65 million to £75 million, sending shares down more than 6%.

Halfords revealed demand for motoring technology and bikes were among categories hit by the pullback in consumer spending.

It also said supply chain issues and the weaker pound have meant price rises for bike ranges, cautioning there be may “further pressures into 2023-24, particularly with respect to foreign exchange”.

But chief executive Graham Stapleton told the PA news agency there would be “no more price increases on kids bikes in this financial year” and that it is well stocked ahead of Christmas.

He added while there is ongoing pressure on prices, “we’re starting to see some green shoots” that these are easing, with commodity prices settling and supply chains recovering.

The company cheered the success of its car servicing and motoring business, with service-related sales now accounting for 42.6% of all group revenues and expected to rise to more than 50% in its next financial year thanks to its recent acquisition of Lodge Tyre.

The group has also seen car servicing demand boosted by its motoring loyalty club offer, which has attracted nearly a million sign-ups since launch in March.

Halfords – the UK’s largest provider of motoring services with more than 600 garages and nearly 700 vans – said it was launching a recruitment drive to fill 1,000 new automotive technician roles over the next year to boost the burgeoning car servicing business.

The programme – which will cost around £3.5 million – will see it prioritise over-50s, women and disadvantaged young people for the jobs.

Mr Stapleton said: “We are hoping to attract retirees back into the workforce as well as increasing the number of women in technician roles.”