Halfords sees return to profit growth after annual earnings plunge
The retailer posted a 55% tumble in pre-tax profits to £43.5 million in the year to March 31, while underlying profits were 43% down at £51.5 million.
Your support helps us to tell the story
From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.
At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.
The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.
Your support makes all the difference.Retailer Halfords has revealed plunging profits after it was knocked by soaring costs and as customers cut back their spending, but forecast a return to earnings growth over the year ahead.
It posted a 55% tumble in pre-tax profits to £43.5 million in the year to March 31, while underlying profits were 43% lower at £51.5 million.
But shares in the group rose more than 5% as it said it was on track to grow underlying profits in line with market forecasts to £53.3 million over the year ahead, with trading having been good so far in the first quarter and like-for-like sales higher.
The group said its costs surged by around £68 million over the year as goods and shipping prices jumped higher.
It also faced a hit to the sales of so-called big ticket items, such as bikes, as customers reined in their spending amid the wider cost-of-living crisis.
Chief executive Graham Stapleton told the PA news agency consumers were cutting back on discretionary spending, but also some essential spending, such as on tyres.
Recent research by the chain found a 71% surge in the number of vehicles with tyres below or near below legal tread depth as cash-strapped motorists delay buying replacements and also as a result of potholes and poor road surfaces.
He said: “We’re pretty concerned about this.
“There’s some big safety implications here.”
He added that replacing tyres should be seen as “essential spending”.
“If you’re driving around on bald tyres, it’s not only unsafe but also uneconomical, because the car will use more fuel,” he said.
Halfords has launched an interest-free buy now repay later offer to help customers meet the cost of tyre replacements, allowing them to pay 15% upfront and then spread the remainder of the costs.
Its figures showed that like-for-like bike sales fell 10.9% year-on-year in 2022-23 as shoppers cut back.
Overall like-for-like revenues lifted 2.4%, as it saw a 15.4% rise across its autocentres chain, offset by a 1.8% fall in the retail arm, with a 4% rise in motoring sales weighed on by the drop in demand for bikes.
The good news is that across the business, inflation is forecast to be lower this year
But the group is hopeful of a turnaround in the current year as costs fall, with its own inflation expected to rise by around £30 million – less than half that seen in 2022-23.
It has been driving cost savings across the business, largely through store lease renewals and wider efficiencies.
“It’s been a very significant headwind to get through,” Mr Stapleton said.
“The good news is that across the business, inflation is forecast to be lower this year… it’s getting better but there’s still inflation.”
Analysts at Peel Hunt said: “Whilst March was wet and a pretty miserable end to 2022-23, and April did not start terribly well either, an improvement in the weather has brought a decent uplift in trading fortunes.
“The bike market remains under pressure, although recent weeks have seen some pick-up, but more encouragingly, the motoring market has been strong, and Halfords’ pace of gaining market share has, we think, accelerated.”