Halfords has called on the government to urgently reform the apprenticeship levy, as sales and profits trended down in the first half.
For the 26 weeks to September 27, 2024 the cycling and motoring specialist reported a 1.4% decrease in underlying profit before tax to £21m and a 1% dip in total revenues to 864.8m.
On a like-for-like basis, sales dipped 0.1%, with the retailer’s Autocentres delivering a 0.8% increase and being responsible for c.40% of the group’s total sales during the period.
During the period Halfords said it delivered £14.6m of savings, and insisted it was on track to take £30m of costs out of the business to mitigate £14.8m of inflation over the period.
Retail generated underling EBIT of £21.2m, with a 200 basis point improvement in gross margin, which Halfords said in part reflected “price discipline in a better-than-expected Motoring Products market”.
In terms of outlook, Halfords said that it was “comfortable” with the FY2025 consensus, despite the uncertainty following the recent UK Budget.
The retailer said the measures unveiled in the Budget would add c.£23m of direct labour cost, of which c.£9m “was already included in FY26 planning assumptions and fully mitigated”.
However, it added, the effect of the Budget on consumer behaviour and “hence the trajectory of our end-markets is unclear”.
Chief executive Graham Stapleton also called on the government to reform the apprenticeship levy to make it easier for the retailer to offset some of the added costs from the Budget.
“I am really pleased with the progress we have delivered in the first half. Against ongoing headwinds, we have continued to focus on controlling the controllables, with a disciplined approach to cost and margin optimisation. We are particularly excited by the outstanding results we are seeing from our Fusion Motoring Services programme, which creates a stronger connection between our Retail stores and Autocentres in a town to fulfil all our customers’ motoring needs. Now live across 22 locations, these motoring services locations are delivering phenomenal returns with a significant uplift in both sales and profit. Given the strength of these results, we are now targeting 40 Fusion sites this year.
“Critical to our success, and what really stands us apart from the competition, are more than 12,000 fantastic colleagues. We continually prioritise investment in their training – with skills and capability our number one focus. The cost implications from the recent UK Budget are particularly acute for a specialist retailer that provides expert advice and assistance to customers, face to face. While we will work hard to mitigate these costs, we urge the government to consider alternative ways of supporting businesses like ours, including the acceleration of Apprenticeship Levy reform, which would help us to upskill existing colleagues and offset some of the new headwinds.
“Looking ahead, while the short-term outlook remains challenging, we will continue to build on our unique omnichannel platform and focus on what we can control to deliver on our strategy this year and beyond.”
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