Autocentres boost Halford’s revenues despite slump in bike sales
Halfords Group (Halfords) has reported two-year revenue growth of 13.9 per cent in its third-quarter trading update, despite softening retail demand.
The cycling and motoring retailer has enjoyed booming business in its autocentres and services division, with a 90 per cent increase in revenue over the past two years and a 48 per cent like-for-like gain on last year’s figures.
The business particularly benefitted from the government’s MOT deferral programme in the first half of last year, which changed the seasonal profile of MOTs, creating a new third-quarter peak period for the autocentres sector.
It has now acquired Axle Group to secure its position as the UK’s largest vehicle service, maintenance and repair business.
Halford’s digital first business is also benefitting from extensive development, with sales up 71 per cent, delivered through strong traffic to its site.
The group’s retail record is much spottier with total sales down nearly two per cent on pre-pandemic levels two years ago and 8.5 per cent down on last year’s lockdown boom, when people rushed to embrace the great outdoors and remain active through cycling.
Halfords has revealed strong sales in the first half of the period were softened pre-Christmas as the emergence of Omicron impacted customer behaviour, as it has caused a 15 per cent fall in traffic during December.
In its retail motoring division, total revenue is down 1.5 per cent, although market data continued to show positive trends across key product areas such as car cleaning, oils and child travel.
Its cycling division has reported a 23.8 per cent drop in total revenue over the past 12 months, and a 2.1 per cent drop since 2020, with the initial splurge in bike sales not sustained over the course of the pandemic.
Premium adult bikes performed well, with a 20 per cent boost in sales, while e-bikes increased by over 100 per cent, however kids bike sales started well but softened later in the period.
Unexpected freight delays in junior bikes compounded the impacts of Omicron including lower footfall and general customer caution.
Chief executive Graham Stapleton said: “These results demonstrate the strength of our motoring services offer, and the outstanding performance from our autocentres business confirms the rationale behind our recent acquisitions.”
Halfords continues to target £80m to £90m in full-year profits before tax, after it upgraded its guidance in November.
The company’s guidance assumes the impact of Omicron continues to diminish, with no further experience with variants of similar severity.
Matt Britzman, equity analyst at Hargreaves Lansdown was encouraged by the performance of Halford’s autocentres, but argued “it’s not all rosy” for the company.
He said: “It seems the wheels have come off the super-fast pandemic pace of bike sales, with the lockdown induced cycling boom fading. It appears the lure of the great outdoors has worn off with a 23.8 per cent drop in total revenue compared to the same period last year. The group’s still confident in its recently raised full-year guidance, but markets seem wary of the fact it’s predicated on Omicron setbacks continuing to ease.”
Following the update, Halford’s shares have risen nearly one per cent on the FTSE All-Share after an initial fall of over three per cent this morning.