Halfords shares slump 24% on wet weather profit warning

Halford Shares plummeted on Wednesday after the group cut its annual profit guidance amid continued weakness in trading in most of its major markets.

Britain’s biggest cycling and motor services retailer saw its share price fall 23.7 per cent to 153 pence by mid-morning, making it the second biggest loser on the FTSE All-Share index behind financial advice firm St James’s Place.

The company has warned investors that it now expects underlying pre-tax profits of between £35m and £40m for the year ending March 29.

This compares to £43.5m in the previous financial year and previous forecasts of £48m to £53m.

It blamed weak customer confidence and “unusually mild and very humid” weather in the retail cycling and motoring markets for hurting store traffic and sales of some products such as winter accessories and car cleaning products.

Halfords also said the cycling sector was “more challenging and competitive” due to an increase in promotions as Brits buy products on credit, which is hitting gross margins more than expected.

Bicycle purchases in Britain plummeted last year to their lowest level in almost four decades, according to the Bicycle Association, amid significant cost-of-living pressures and a decline in the popularity of cycling.

The drop represents a sea change from the lockdown era, when reduced car use, a greater reluctance to travel by public transport and growing environmental concerns led to a boom in cycling.

However, Halfords’ automotive and workshop business, Autocentres, has performed relatively well since the end of Covid-related restrictions.

In the six months to September 29, its Autocentres division saw like-for-like sales rise by 18 per cent and total revenues rose by around a third to £356.9m.

Since its last trading update in January, Halfords said the segment has continued to achieve “good growth” thanks to strong customer demand for repair services offsetting a weaker consumer tire market.

The Redditch-based company believes underlying pre-tax profits for the next financial year will be broadly in line with its 2024 results, although this will depend in part on growth in its core markets and improving margins in its cycling business.

He told investors: ‘While we have reduced our profit forecast as a result of exceptional and very challenging market conditions in the short term, we remain confident in our strategy and long-term growth prospects.

“When our core markets recover, the platform we have built will leave us exceptionally well positioned to succeed.”

Analysts at Investec said: “Halford’s cash generation means it can weather the current very challenging and short-term market environment without impacting its strong balance sheet or future capital spending plans, and is well positioned for when markets to recover and generate substantial profits. .’