Boost to cycling sales sees Halfords upgrade profit expectation

Stronger than expected sales in cycling led Halfords' strong final quarter of 2024, the retailer has announced, upgrading its profit expectations for 2025 as a result.

Halfords' share price has jumped 19 per cent this morning in reaction to the news and it will give some hope to the bike industry that has faced such challenging times in recent years.

Communicating the news via an RNS Announcement, Halfords Group plc this morning noted that its recent trading had been strong, like-for-like retail sales growth of 13.1 per cent in December led by Christmas gifting of bikes and promotional deals that "resonated well with customers, notably in cycling".

> "The premium sector is the fastest-growing part of the cycling market": Halfords to double the amount of bikes in its range priced over £1,000

"In recent months we have seen an improvement in trading alongside continued progress on a number of key initiatives, including our pricing and promotion strategies and cost reduction measures," Halfords stated. "Cumulatively, these factors lead us to expect FY25 underlying profit before tax of £32m to £37m."

Despite the positivity, Halfords took the opportunity to raise concerns with the most recent Budget, arguing it meant "considerable uncertainty".

"Despite the recent positive performance, there remains considerable uncertainty regarding the outlook for the UK consumer in light of measures introduced by the Autumn Budget, which take effect from April and hence are in force for the entirety of FY26," Halfords' statement continued. 

"While the impact of changes to the minimum wage and national insurance contributions are relatively easy to quantify, adding c.£23m to our direct labour costs in FY26 alone as announced in November, their effects on the demand environment and health of the broader economy are harder to predict.

"We also continue to expect to see inflation passed through on managed services. We continue to work on possible mitigations for the additional costs we face and will share our plans alongside our FY25 results."

The bigger picture at Britain's biggest cycling retailer will be revealed in more detail when Halfords publishes its trading statement in April, but the news of cycling sales improving at the back end of 2024 is cause for cautious optimism given the challenging times the bike industry has suffered since the pandemic.

As recently as June, Halfords warned that the cycling market is "significantly worse than expected" and there would be likely more pain to come into 2025, fears that may be eased by today's update.

Publishing its preliminary financial results for the year to March 2024, Halfords last summer said it had seen its profits slashed amid "significantly worse than expected" cycling performance and bike sales dropping to 30 per cent below pre-Covid levels.

In October, the retailer revealed its new premium bike range had been a hit but that the cycling market remained challenging, a picture not helped by the "UK's wettest spring since 1986".