Following today’s release of Halford’s figures for the 26 weeks ending 29th September 2023; Jamel Boughedda, retail analyst at GlobalData, a leading data and analytics company, offers his view: “Halfords’ strong sales performance in its H1 FY2023/23 has been overshadowed by a volatile trading environment, which caused the group to tighten its underlying pre-tax profit guidance to within a narrower range of £48m and £53m (previously £48m to £58m.) As a result, Halfords’ share price has fallen 21% this morning, despite revenue growing by 13.9% to £873.5m. Halfords has seen a softening in sales of big-ticket categories, reflected in slower like-for-like (l-f-l) sales growth, with tough trading conditions likely to persist and weigh heavily on less essential markets such as retail and cycling.
“Halfords’ strong sales growth was aided by an exceptional performance in autocentres and a slight uplift in retail, which fell short due to a weaker cycling market. Autocentres was the main driver of growth, with sales rising 33.9% as needs-based categories remain vital, with consumers prioritising repairs in the current cost-of-living crisis. Growth in this category will likely persist despite facing challenging comparatives, with consumers’ finances being stretched and the repair of vehicles being prioritised over buying new. Additionally, Halfords’ initiatives such as its 60-minute click & collect service for car parts and its buy now, pay later financing options will support its autocentres to serve a wide range of customers with varying demands.
“Halfords’ retail segment saw revenue rise 3.2%, although once again, aided by growth in needs-based categories such as maintenance, parts and bulbs, which led to l-f-l sales in motoring growing 8.2%. However, this growth was offset by reduced demand for discretionary categories and another poor performance from cycling. Its cycling division saw l-f-l sales fall 2.8%, troubled by a combination of reduced spending on discretionary items as well as the poorer weather over the summer impacting consumer engagement in this market. Halfords’ efforts in cycling have improved its position in the market, with its Cycle2Work scheme showing resilience, with sales up 15% year-on-year and its online cycling business Tredz delivering double digit l-f-l sales growth. An incentive programme for cyclists, similar to its Motoring Loyalty Club (which grew to 2.9 million members), could help Halfords’ cycling division return to growth and build a loyal customer base. The collapse of online sports retailer Wiggle presents Halfords with an opportunity to expand its cycling business, with Halfords circling the business. Even if it does not purchase the business, the collapse of Wiggle gives Halfords the opportunity to reach a new audience, for which having a compelling online offer will be crucial. It could take inspiration from Wiggle by creating blog-style content featuring such as buying guides and other cycling-related content to develop its position as an expert in the market.”
