Car parts, bicycles and child seats seller Halfords (HFD) has delivered 'a hat trick of positives' with its third quarter update, to borrow the words of broker Canaccord Genuity.

News of surprisingly brisk business over the key Christmas quarter sends the counter motoring 9.2% higher to 385.75p, reversing post-Brexit vote weakness; this has reflected worries over the consumer outlook and the impact of sterling weakness on Halfords' margins.

8489e36d1b5a4208

In its post-Christmas trading statement, covering the fifteen weeks to 13 January, Redditch-headquartered Halfords reports strong trading in its core retail division.

This reflects the success of CEO Jill McDonald's (pictured below) 'Moving up a Gear' strategy, with the numbers also boosted by last May's acquisition of Tredz and Wheelies, specialists in the online sale of premium bikes and accessories.

Jill McDonald CEO Halfords

McDonald also treats investors to news of the acquisition of a minority stake in UK mobile tyre fitting service Tyresonthedrive.com (TOTD) for up to £8m, and a very welcome 10p special dividend to be paid in February, debt levels trending well below target.

TOTD looks interesting, being is a high growth business that fits customers' tyres at home or work, and reaches 85% of the UK population. Formed in 2011, Halfords says TOTD has since generated compound average sales growth of 92%.

CORE BUSINESS MOTORS

Like-for-like sales grew 7% in cash generative retailer Halfords' core division, although savvy investors will note last year's flat performance, which made for a very soft basis for comparison. Nevertheless, all four of Halfords' main product categories exhibited growth in Q3.

Car maintenance, the highest gross margin category, motored in with 8.4% like-for-like growth, aided by more normal weather conditions, cycling sales sped 7.4% higher and car enhancement returned to positive territory. Especially noteworthy was the 15.4% surge in like-for-like sales in 'Travel Solutions', where child seats flew off the shelves, gaining a Mumsnet accreditation and with sales also rising ahead of legislative changes.

aeda9befad39aca8

ACQUISITIONS PARKED

'Having expanded the Group's capabilities in both motoring and cycling in recent months, through the Tredz, Wheelies and TOTD investments, the Board does not expect to undertake further acquisitions in the near future,' explains Halfords, which also carries out car servicing and repairs through its Autocentres arm.

'Accordingly the Board has approved a special dividend of 10 pence per share, totalling approximately £20m, as part of our progress towards our previously stated net debt target of 1 times EBITDA.'

Halfords - JAN 17

The one negative in today's update, according to Canaccord analysts David Jeary and Sanjay Vidyarthi, is an absence of an upgrade to the full year consensus pre-tax profit forecast of £74.2m. 'We assume this is due to the tougher Q4 comparative and absence of Easter, which equates to a 2% tailwind', they explain.

Find out how to deal online from £1.50 in a SIPP, ISA or Dealing account. AJBell logo

Issue Date: 19 Jan 2017