Halfords outguns high street as motor retail overtakes bikes
Halfords reported good sales growth in the first 20 weeks of its financial year as the cycling and car accessories retailer successfully battled the challenging retail environment.
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As well as maintaining guidance for the full year that underlying profit before tax to be "broadly in line" with last year, new chief executive Graham Stapleton confirmed he will provide a strategy update at the FTSE 250 group's capital markets event on 27 September.
Group like-for-like sales grew 2.8% in the 20 weeks to 17 August as retail LFL sales rose 2.6%. Online sales grew 11.3% with 85% of Halfords.com orders collected in store.
Motoring retail sales increased 3.8% thanks to growth in fitting services, car cleaning products, tools, and staycation-related products, while cycling sales rose 0.8% thanks to a good peak summer period offsetting the impact of poor weather at the start of the year.
The Autocentres business increased LFLs 4.0% and, with "continued momentum" on operational improvements, was said to be on track to deliver profit growth for the year.
Broker Liberum felt it was a strong trading update across all areas of the business that "sets Halfords apart from the broader volatility in the retail sector" and deserved an upgrade to a 'buy' rating from its former 'hold'.
Analysts confidence was bolstered that Halfords’ structural position is not easily disintermediated by competitors.
Ahead of Stapleton’s strategy update, Liberum analysts "do not expect anything radical but further progress in developing IT, systems, with a strong customer service overlay, is likely to feature strongly".
Laith Khalaf at Hargreaves Lansdown said achieving almost 3% sales growth in today’s environment "is a decent result by any high street retailer’s standards, but profits are expected to stall at Halfords this year thanks to a weak pound and investment in customer services".
He said motoring overtaking cycling in terms of growth was "positive for Halfords as that’s where the company makes the lion’s share of its profits", with declining UK car sales a tailwind as more older models on the road means a greater need for parts and servicing.