Brexit worries among consumers plus weather hit profits at Halfords

Halfords, the UK’s biggest bike retailer, has issued a profits warning following a downturn in sales as consumers rein in spending amid continued uncertainty over Brexit, with the weather also playing a role.

The Redditch-based company said in May that it expected pre-tax profits in the current financial year to be “broadly in line” with last year’s figure of £58.8 million.

That figure has now been revised downwards to between £50m to £55m as the company this morning made a trading update for the 20 weeks to 16 August, in which it says total revenues fell by 3.9 per cent.

Within cycling, like-for-like retail sales, which reflect stores and websites that have traded for at least a year (excluding prior year sales from stores closed in the year) at constant foreign exchange rates, fell by 1.1 per cent.

In the comparable period 12 months earlier, like-for-like sales within cycling had risen by 0.8 per cent.

The company said that the decline in cycling sales had been “in line with expectations, given the exceptionally warm and dry summer last year,” with “strong growth in electric bikes and kids cycling offset by weaker big-ticket discretionary mainstream cycling.”

Group chief executive Graham Stapleton said: “During the first half of the year, we have seen weaker sales growth than expected, the impact of which has been partially mitigated by stronger margins and tight cost control.

“Poorer summer weather, together with weaker consumer confidence, has had a negative impact on performance albeit less discretionary categories, particular motoring services, have been more resilient.

“At this point in time, the impact of the uncertain economic environment remains an ongoing risk to big-ticket discretionary purchases in the second half. In light of this, we remain focused on improving gross margins and managing the cost base,” he added.

The business currently had around 800 shops and service centres, and plans to grow that number to 1,000, including doubling the number of its Cycle Republic and Tredz stores to 50.

Halfords said that it had “ refreshed the cycling space in 220 stores, delivering a better shopping experience for customers and generating working capital efficiencies through a ‘right range, right store’ approach,” and that “the remaining stores will be refreshed during the second half of the year.”