Discounting by rival sellers and bad weather have put Halfords (HFD) in a spin as it reveals poor cycle sales in the eight weeks to 28 August. A 11% like-for-like revenue decline in the period (not helped by tough comparative figures a year earlier) is below market expectations for the division, overshadowing decent business elsewhere in the group. The shares fall 8.1% to 468.55p.
Investors will be disappointed by the news given that the past few years have seen more and more people happy to spend hundreds, or even thousands, of pounds on new bikes as cycling becomes a serious leisure activity. Halfords has been one of the main beneficiaries of this trend, helped by selling its own products that are considered as good as many of the top brands on the markets.
Halfords says the disappointing cycling performance was primarily driven by mainstream bikes, as well as associated parts and accessories. 'We consider this to be principally market-driven, reflecting greater levels of discounting as well as poor weather deterring casual cyclists. Cycle Repair like-for-like growth remained strong at +27.6%,' it says in a statement.
The group plans to revamp its bike range for children and spend more time training staff on product and service skills.
Car Maintenance is the best performing division in the past eight weeks with 'Parts' a standout performer. Customer service metrics continue to improve. Actions in Autocentres continue to drive profitable growth.
For the first half, management anticipates retail gross margin to be at the better end of the previous full year guidance range (-25 to -75 basis points year-on-year decline) and retail operating cost growth of circa 3% (previous full year guidance: 4 to 5%).
Through mix benefits in margin and prudent cost control in line with the first half, management anticipates full-year group profit before tax to be broadly in line with prevailing market consensus.
Chief executive Jill McDonald says: "In my first three months at Halfords I have reviewed all aspects of the group and it is clear to me that Halfords is a strong business with a well-balanced portfolio of product and service categories, talented colleagues and considerable growth potential.
'This recent weakness in our Cycling sales is disappointing, but it comes after two years of very strong growth in the category and has been partly offset by strong growth in both Car Maintenance and Car Enhancement sales, which is a testament to the balanced nature of the business.'