Halfords' full-year profits decline: what the analysts say

The cycling retailer reported a 1.2% decline in its pre-tax profits, driven by a 0.9% fall in its comparable cycling sales. Altogether, group and motoring like-for-likes rose 1.5% and 2.5% respectively.

“Halfords continues to struggle against online specialists, often keener on price and with better ranges.”

Andrew Stevens, Verdict

Analysts were unimpressed by the performance of the retailer’s cycling offer, despite sales picking up in its second half:

“Cycling, the category that Halfords was once so certain would be the panacea, lagged the wider performance.

“Cycling actually declined for the full year as Halfords continues to struggle against online specialists, often keener on price and with better ranges.” – Andrew Stevens, Verdict.

“Halfords is also clearly not seeing much strength in the cycle market just now.” – Tony Shiret, Haitong Research.

Motoring on

However, the specialist retailer’s motor division drummed up praise from the City.

“Underlying growth characteristics in the UK motor market remain encouraging.” – Tony Shiret, Haitong Research.

“The standout category this quarter was motoring, driven by a 9.5% like-for-like growth in travel solutions.” – Andrew Stevens, Verdict.

Praise for in-store

Credit was given to the retailer’s in-store investments and acquisitions:

“Embedding service in the culture helped by 60% of colleagues now through Gear 2 training. Service revenues were up 8.5% and net promoter score hit a record high.

”The strategy of moving towards a customer relationship model and away from an individual transaction-driven one continues.”

Tony Shiret, Haitong Research

“Customer data is starting to be merged, helped by e-receipt launch, and the group has started tailoring its email campaign. There is more to come in the next year with the roll-out of new EPoS and labour scheduling system, plus a ‘store of the future’ trial in the second half and Cycle Republic website launch next week.

“No capital return was announced, which doesn’t surprise given the recent Tredz/Wheelies acquisition.” – Kate Calvert, Investec.

“The strategy of moving towards a customer relationship model and away from an individual transaction-driven one continues and will be assisted by the introduction of new EPoS systems in the coming year.

“Much investment has already been made in improving customer service by up-skilling the workforce and this also continues. This is how this type of business, with potential for service and adjacent product-related sales increments, should develop. This said, theory and execution are not always the same.” – Tony Shiret, Haitong Research.

General disappointment

Nevertheless, the general consensus was that Halfords’ results were quietly underwhelming:

“Retail EBITDA down 1% to £81.8m, with weak sales, held back by far-from-ideal weather, offset by better-than-expected cost control.”

Kate Calvert, Investec

“While the retailer will add some colour to the figures at its prelims in June, these numbers will prove disappointing against group revenue growth of 6.9% last year.” – Andrew Stevens, Verdict.

“A solid full-year result, 2% ahead of consensus, despite much activity implementing the ‘Moving Up a Gear’ strategy and unhelpful weather.

“Retail EBITDA down 1% to £81.8m, with weak sales, held back by far-from-ideal weather, offset by better-than-expected cost control.” – Kate Calvert, Investec.