Halfords backs FY profit expectations but warns over supply chain disruption

Halfords backed its full-year profit expectations on Wednesday as it reported a jump in revenues, but warned that supply chain disruption was affecting its bicycles business.

In the 20 weeks to 20 August, revenues rose 10.5% on the year. Compared to pre-pandemic trading, revenues were up 18.7%, or 16.8% on a like-for-like basis. This was driven by increased scale of its Autocentres business, taking significant share, while the retail motoring segment also gained share, benefitting from the trend in staycations.

Like-for-like cycling sales during the period were down 22.8% compared to the same period a year ago. However, on a two-year comparison, sales were up 24%, having been boosted during the pandemic.

The company said it was still targeting full-year pre-tax profit of more than £75m.

However, it also warned over a "challenging" operating environment, citing factory production constraints and raw material inflation, general freight disruption, capacity constraints and cost inflation. The group also highlighted supply and recruitment challenges in respect of service technicians and HGV drivers.

Chief executive officer Graham Stapleton said: "The first 20 weeks of FY22 delivered a strong trading performance against a hugely challenging backdrop. Our motoring business now represents 65% of our revenues and continues to go from strength to strength, driven by the increased scale of our Autocentres business, the ongoing demand for our Halfords Mobile Expert Vans, and by recent staycation trends.

"Although our cycling business is currently impacted by the considerable disruption in the global supply chain, as the UK's largest cycling retailer we are well positioned to adapt and to serve our customers, and we remain confident in the long-term outlook for the cycling market. The strength of our overall performance is a clear illustration of the relevance of our service-led strategy and gives us the confidence to continue with our investment plans. We remain positive on our prospects for FY22 and beyond."

At 0955 BST, the shares were down 3.5% at 339.00p.

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said: "Halfords’ full year profit ambitions remain on track, but there are some things to consider. Cycling is a real growth opportunity, but the group’s being held back by supply chain problems. Not being able to offer the right stock, or enough of it, is inevitably putting a lid on progress in the division. These are unlikely to be resolved soon.

"The other thing to keep in mind is that staycations are likely going to become less popular as and when the world gets back to normal. What this will mean for sales in the next summer season is yet to be seen."