Halfords calms investors’ fears of a slowdown as earnings rise – but sales will remain under pressure
- Halfords shares had a hot year amid broker downgrades
- Brokers fear the firm will struggle with the cost-of-living crisis
- In the 20 weeks ended August 19, it posted 9.2% revenue growth
Shares in Halfords Group rebounded today after the automaker posted 20 weeks of near double-digit sales growth ending August 19.
Total revenue was up 9.2 per cent from the last financial year and Halfords told investors it was on track to post underlying profit before tax of £65m to £75m for the full year, with profit in second half of the year exceeds the first.
Shares of Halford were up 14.7 per cent at 153 pence at midday, providing a rare respite for the company’s shareholders, who have seen the price fall around 57 per cent since the start of the year.
Brokers expect Halford’s to suffer from a slowdown in discretionary spending as the cost of living takes a hit
The group, which has 400 UK branches, has been under pressure mainly due to concerns about its exposure to the cost of living crisis and downgrades from brokers.
Panmure Gordon said last month that the wheel and car maker was “naturally at risk”, cut its share rating to “hold” from “buy” and halved its price target to 150p.
Panmure warned that Halford’s retail division – including sales of bikes, scooters and accessories such as helmets, lights and locks – is now “exposed” to the economic downturn.
It said: “Halfords clearly risks falling into a period of significantly increased pressure on consumer spending in 2022.
‘We support a large part of the current strategy, but we believe that focusing primarily on the auto center business has left the retail division somewhat exposed in the current environment.’
However, in Wednesday’s update, Halfords highlighted the fact that it has shifted its business to motoring, which now accounts for around 70 per cent of the group’s revenue and includes MOT, maintenance and breakdown protection.
This, she argued, should protect her from some aspects of the cost of living crisis.
Boss Graham Stapleton said: ‘The fact that this spending area tends to be needs-based rather than discretionary translates into a very resilient group performance despite the broader macroeconomic uncertainty.’
The company also told investors that it has made “good progress” on its cost-cutting and inflation-mitigating goals, while inventory levels are in line with expectations.
Stapleton said: “We are working very hard to help our customers through the cost of living crisis and have reduced prices on nearly 2,000 auto supplies to ensure products remain accessible and affordable for all.
“Our Motoring Loyalty Club is also proving extremely popular, having already attracted over half a million members since its launch in March, with benefits such as MOT discounts and a free 10-point car health check, saving almost £14m directly will go back into the pockets of the members.’
