According to a number of headlines over the day or two, Halfords plans to close as many as 60 stores this year “despite rise in bike sales in lockdown” or “because of coronavirus” – depending on which newspaper you’re reading, to give just two examples – giving a perhaps overly-alarmist impression that the stories below them reflect a new announcement by the retailer. That isn’t the case, though, as we explain below.
News of the “closures” was tucked away in the car parts and bicycle retailer’s preliminary results announcement last week, in which the company said that during the 13 weeks to 3 July it had seen sales growth in cycling of 57.1 per cent on a like-for-like basis (stripping out the effect of changes to its store portfolio).
> Cycling market to stay strong for rest of year says Halfords
Halfords said in its results announcement that it would place “A stronger emphasis on reducing the operating costs of the group, including … an acceleration of the right-sizing of the Group's physical estate that was already underway, with the planned closure of up to 10 per cent of the group's physical estate (across both stores and garages), which includes the 22 Cycle Republic stores and 5 Halfords stores and garages that we have already exited this year.”
As of last Wednesday, the company traded from 446 Halfords stores, 3 Performance Cycling stores (trading as Tredz and Giant), and 371 garages (trading as Halfords Autocentres and McConechy's).
While a number of press outlets have reported that Halfords was closing 60 stores in addition to having already shuttered the Cycle Republic chain, the results announcement reveals that in reality, that isn’t the case.
Those stores, plus the five other outlets mentioned, have already been closed, meaning that a further 30 or so outlets will close during the remainder of the financial year, which runs until 26 March 2021.
As Halfords acknowledges, that does mean bringing forward the closure of part of its retail estate, but that rationalisation was under way before the coronavirus crisis struck and while that has undoubtedly made trading conditions tougher, it has hastened existing plans being put into effect, rather than prompting a new strategy.
Moreover, the closures will take place across its property portfolio, including its garages – so not all of those 30 or so sites that will be closed are retail stores.
“Right-sizing” has become an increasingly common buzzword across all sectors of the retail industry in recent years especially with the rise of online shopping and is ultimately aimed at making physical stores as efficient as possible in terms of the turnover they generate relative to their size.
In a period in which, even before the coronavirus pandemic forced the closure of most High Street and out-of-town stores many retailers were already struggling due to crippling rents and other overheads, it is a balance they need to get right if they are to continue to trade profitably.
Clearly, the ongoing COVID-19 crisis has hit the retailers hard and store closures and job losses very much tie in with the overarching doom-and-gloom narrative the business press is adopting when reporting upon the sector.
In this specific case, however, it does seem that a process that was already underway at Halfords, and which passed by almost unnoticed in its results announcement, has been picked up by the business pages a week later with the nuances lost for the sake of an attention-grabbing headline.
That’s not to say that all is rosy at the company – last week, it said that despite the growth in cycling, in motoring it had seen like-for-like revenue dropped 45.4 per cent as car use fell, especially in the early weeks of lockdown.
As a result, group sales during the period fell 2.8 per cent against the comparable period last year, while like-for-like sales were down by by 6.5 per cent, and even under its best case scenario profits at the retailer will take a significant hit this year.
Looking ahead to remainder of the current financial year, the company said: “We believe cycling demand will remain strong throughout the year and we will work hard to supply these unprecedented levels of demand.
“We expect a shift towards commuter bikes, as people return to workplaces and cycling infrastructure improves, and we expect bike servicing and repairs to become more in-demand as consumers take advantage of the Government's voucher repair scheme.
“We also expect motoring demand to improve during the year, as car journeys pick-up, workplaces and schools reopen and our retail stores can open with fewer safety restrictions in place,” it added.
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