Halfords calms slowdown fears as motoring group’s revenues accelerate
Halfords Group shares rallied today after the motoring group posted near-double digit revenue growth for 20 weeks to 19 August.
Total revenues were up 9.2 per cent versus its last financial year and Halfords told investors it is on track to achieve full-year underlying profit before tax of £65million to £75million, with second half profit exceeding the first.
Halford’s shares were up 14.7 per cent to 153p approaching midday, providing a rare respite to the firm’s shareholders who have seen the price fall by around 57 per cent since the beginning of the year.
Brokers think Halford’s will suffer from a fall in discretionary spending as the cost of living crisis bites
The group, which has 400 UK stores, have primarily been under pressure as a result of concerns about its exposure to the cost of living crisis and broker downgrades.
Panmure Gordon said last month that the cycling and motoring group was ‘naturally at some risk’, lowering its stock rating to ‘hold’ from ‘buy’ and slashing its target price in half to 150p.
Panmure warned that Halford’s retail division – including the sale of bikes, scooters and accessories such as helmets, lights and locks – was now ‘exposed’ to the economic downturn.
It said: ‘Halfords is naturally at some risk coming into the period of significantly increased pressure on consumer spending in 2022.
‘We support much of the current strategy but we feel focus mainly on the AutoCentres business has left the retail division somewhat exposed in the current environment.’
However, in Wednesday’s update Halfords highlighted the fact it has shifted its business towards motoring, which now accounts for around 70 per cent of the group’s revenues and includes MOTs, servicing and breakdown cover.
This, it argued, should shield it from some aspects of the cost of living crisis.
Boss Graham Stapleton said: ‘The fact that this area of spend tends to be more needs-based rather than discretionary is leading to a very resilient group performance, despite the wider macroeconomic uncertainty.’
The firm also told investors it had made ‘good progress’ on its cost saving and inflation mitigation targets, while stock levels are in line with expectations.
Stapleton said: ‘We are working extremely hard to help our customers with the cost-of-living crisis and have dropped prices across nearly 2,000 motoring essentials, ensuring that products remain accessible and affordable for all.
‘Our motoring loyalty club is also proving to be extremely popular and has already attracted over half a million members since its launch in March, with benefits including MOT discounts and a free 10-point car health-check, putting almost £14millon of savings directly back into members’ pockets.’