Shares in the UK’s largest bike seller and auto spares chain Halfords (HFD) fell 4% to 337p after the firm reported a 26% drop in cycling sales in the 20 weeks to mid-August, which it blamed on disruption in the global supply chain and an exceptionally strong 2020.

Group sales were up 10.5% on the same period last year and encouragingly 18.7% higher than 2019, as motoring sales benefitted from market share gains and the trend towards ‘staycations’, as well as increased traffic at its Autocentres business.

STICK IN THE SPOKES

While cycling sales were up on 2019 levels, they continue to fall as a share of revenues with the motoring business now accounting for almost two thirds of turnover.

The global cycling supply chain ‘continues to experience considerable capacity constraints, leading to low availability of bikes throughout the period’, the firm said.

While children’s and electric bikes fared better, availability was particularly poor in the standard adult mechanical category, contributing to ‘materially lower growth rates’ towards the end of the 20-week period.

Having initially warned of supply chain problems in June when the shares were trading above 400p, today the company said it expects the disruption to continue ‘for some time’.

CONSUMERS MORE CAUTIOUS

While Halfords insists it is ‘confident in the long-term outlook’ for the cycling market, we suspect the surge in sales during lockdown has brought forward at least some of its potential future revenues.

As with US exercise bike seller Peloton, which recently halved the price of its products in an effort to re-kindle demand, it seems unlikely that customers who bought a bike from Halfords during lockdown will make a repeat purchase, although they may buy cycling-related products.

Moreover, consumers are much more wary of spending now than they were during the pandemic when they had time on their hands and money in their pockets.

A new survey by Intuit Quickbooks shows 60% of people intend to keep their spending to a minimum going forward, despite lockdown lifting. Of these, 19% have no choice but to rein in spending due to the impact of Covid on their finances, while the balance are doing so out of choice.

Younger respondents were the most financially contrained, while more than 50% of older respondents said they were reducing their spending out of choice.

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Issue Date: 08 Sep 2021