Halfords sales drop despite lockdown cycling boost

Car parts and bicycle retailer Halfords has cheered soaring cycling sales during the coronavirus lockdown, but the boost was not enough to offset tumbling motoring revenues.

The group – which was classed as an essential retailer during the lockdown and was able to keep stores open – said like-for-like bike sales jumped 57.1% in the 13 weeks to July 3 as Britons took to two wheels.

However, overall same-sales were dragged 6.5% lower after it saw a 45.4% plunge in motoring revenues over the lockdown quarter with fewer cars on the road.

It said the motoring sales trend was improving as lockdown restrictions eased, with batteries and battery care products in high demand.

Full-year figures for the 52 weeks to April showed underlying pre-tax profits fell 4.9% to £55.9 million on revenues 0.3% higher.

But shares were 6% lower as the chain painted a gloomy picture for the year ahead with three possible profit scenarios, each pointing to sharply lower results.

It said it could slip to a £10 million underlying pre-tax loss if sales fall 10.5% for the rest of the current year and even in the best-case scenario, profits are likely to drop to between £10 million and £20 million.

The group is expecting sales to remain skewed towards bikes despite a pick-up in motoring, which has a knock-on effect on profits, given that cycle sales are lower margin.

Halfords stressed the scenarios were not guidance or forecasts and were “illustrative only”.

Chief executive Graham Stapleton said: “The start of the current financial year has of course been dominated by the impact of Covid-19, and our status as an essential retailer was a clear endorsement of the wider role that Halfords has to play in keeping the UK moving.

“Having responded quickly and decisively to cater for the surge in popularity of cycling during lockdown, we are now seeing increased demand for motoring services and products as people start using their cars regularly again, having not done so for the last few months.”

In May, the group revealed trading was ahead of expectations in the four weeks to the start of May, as sales fell 23% on a like-for-like basis against the same period last year.

Analysts at Liberum said the 2019-20 results were far better than first expected and upped its forecasts despite Halford’s profit scenarios.

They said: “While the focus will clearly be on recent trading, we do not think the full-year 2019-20 out-turn should be overlooked.

“It is very credible performance delivering profit stability against what was a very tough wider retail and macro backdrop.”