Halfords reports flat like-for-likes over Christmas: What the analysts say

“Halfords has shown pleasing resilience at a time when weather conditions could hardly have been more difficult. It is to be hoped that the (relative) momentum Halfords has generated can be carried into 2016 – certainly there is more work to do on parts, accessories and clothing (PACs) but Wefit growth (6.5% in the third quarter) is encouraging.

“We had expected a little more of a bounce back in cycling, and bikes themselves were satisfactory but again it was PACs that was the problem child. Like-for-like performance is less bad than it was in this part of the category but we still struggle to understand why Halfords is losing market share here when the starting point is low anyway.

“Of all the challenges before Ms McDonald, we would argue that solving the PACs issue was the toughest and most important and we hope to see greater chapter and verse on the subject as the year progresses.

“Management has done well to hold cost growth to 1-2% this year (it was able to rein in labour hours as sales struggled) and with car maintenance holding up reasonably well, gross margin guidance is held. But in many respects this is where the game starts: management now needs to get on the front foot, both with the day job and with the City.

“The route to higher market shares is not especially clear and there are certain obvious weak spots that must be strengthened.” – Jonathan Pritchard, Peel Hunt

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“Halford’s reported third-quarter trading for the 15 weeks to 15 January, in line with our expectations and slightly below consensus.

“In 2016, we need to start to see more of the benefits from the strategic initiatives around improved processes at Halfords, which include data analysis for a customer-centric strategy, a new loyalty card, continued investment in services (gears training), new product ranges (motorbike parts, improved gifting ideas), new premium bike ranges (boardman Elite, opening a performance cycle centre in 2016) and a link up with Orla Kiely.” – Mike Dennis, Cantor Fitzerald

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“Halfords has delivered flat like-for-like retail sales growth in what have been challenging trading conditions for the car maintenance category. This is a better than feared performance, with recent estimates expecting negative like-for-like sales.

“Sales overall were supported by service-driven categories such as bulbs/blades fitting and cycle repair, highlighting the benefit from the group’s continued investment in service.” – Georgina Johanan, JP Morgan

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“Retail like-for-like growth has remained subdued with flat growth, a touch below the whisper range. Following a particularly mild autumn and winter in the UK, we think the market will be unsurprised by the slowing in the car maintenance category.”

We felt management’s new strategy presented at the interims seemed largely credible, particularly with regards to initiatives being implemented in the motoring business where we agree market share opportunities exist.

“However we continue to have some reservations about management’s ability to improve the performance of PACs in the Cycling category.

“While it is encouraging that there appears to be some improvement in premium and adult mainstream bikes, we think the market will need to see further evidence of a sustained improvement in these latter categories across the peak season, to alleviate concerns that the cycling market may have reached saturation.” – Tony Shiret, Haitong Research

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“Halfords has enjoyed the slipstream of a successful cycling market over the past few years, but it must become a part of the all-important renewal cycle as those shoppers purchasing bikes look to upgrade and replace.

“The competition for cycling is stiff online and on the high street, with cyclists with a bigger budget happy to pay more for expertise and service. Halfords must use its large store network to its advantage, and play on its well-rounded, family orientated offer in order to secure continued positive sales uplifts.” - Anusha Couttigane, Verdict Retail

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“Given the weakness reported in the second quarter in cycling, and further weather issues anticipated in the third quarter in car maintenance, today’s update will come under scrutiny.

“Headline like-for-like growth of 0% in retail is a smidge below expectations. However, the margin mix is more favourable than feared after an outstanding performance in car maintenance against unprecedented weather conditions.

“Along with better cost guidance the group is well on track to meet full-year forecasts.” - Matthew McEachran, N1 Singer Research