Halfords cuts FY profit guidance, shares tumble

Halfords shares tumbled on Thursday after the motoring and cycling products retailer cut its full-year profit guidance amid weakness in the consumer tyre market and labour shortages.

The company said it now expects underlying pre-tax profit for FY23 of between £50m and £60m, down from previous guidance of £65m to £75m. Halfords had already warned on profits last June and November.

It noted that the labour market remains "very challenging" and said it has been unable to recruit enough skilled technicians in its Autocentres business. This is expected to limit growth of higher margin sales during the upcoming fourth-quarter MOT peak.

"In addition, we have also seen weakness in the consumer tyre market continue for longer than initially anticipated and expect a deeper decline in demand for more discretionary high-ticket items in retail than previously forecast," it said.

In an update for the 13 weeks to 30 December, Halfords said group revenue grew 38.3%. This reflects strong sales in the motoring division and needs-based categories, but overall revenues were impacted by softer-than-expected cycling and tyre markets.

Chief executive Graham Stapleton said: "We have seen strong revenue growth in what are exceptionally challenging circumstances, and we have continued to grow our market share whilst also tightly managing our costs, inventories and cashflows.

"Consumer demand for our services and needs-based categories, which now account for the majority of our revenue, continues to grow, and our Motoring Loyalty Club is exceeding expectations as customers recognise the value of its unrivalled discounts and offers."

Stapleton noted unprecedented demand in the motoring services business but said the company was being hit by the nationwide skills shortage, with recruitment proving to be "extremely challenging in the current labour market".

"We are continuing to take a range of actions in order to fill 1,000 new automotive technician roles, which include our new Later Life Apprenticeship programme, as well as a focus on attracting more women and young people from disadvantaged backgrounds into automotive apprenticeships," he said.

At 0825 GMT, the shares were down 20% at 171.80 p.

Russ Mould, investment director at AJ Bell, said: "Just when it looked as if Halfords was turning a corner and leaving its problems in the rear-view mirror, along comes another bundle of issues which knock its earnings trajectory off track.

"The key problems are weakness in cycling and consumer tyres along with a shortage of skilled technicians hurting its motor service.

"The latter is a frustrating situation for the company. Demand for motoring services is very strong, but to not be able to capture all the potential business due to labour issues is frustrating.

"To Halfords’ credit, it already has an apprenticeship programme and last year opened this up to the over-50s to try and fill its skills gap. This aptly named ‘Retyrement Plan’ is aimed at bringing individuals back out of retirement and getting them trained up to help keep older vehicles on the road.

"The cycling market has slumped since a boom period in the early stages of the pandemic when people were desperate to buy any form of two-wheeled bike they could. Children’s bike sales continue to be resilient, but adult bike demand has suffered from the cost-of-living crisis where people are thinking twice about big-ticket items.

"It’s also the case that many people who bought bikes in the pandemic have now lost their desire to meander along the country’s roads and thus the second-hand market is awash with cut-price products."