Shares in Halfords Group PLC (LSE:HFD) dropped 18% in the first hour of trading after it tweaked down its City guidance.
The bike retailer and car parts group reduced its profit forecast by £5 million amid declining discretionary spending against a tough economic backdrop.
In response, Halfords is accelerating its investment in motoring services in 10 towns for more stable revenue after its Autocentres business saw a 34% revenue increase in the half-year, contrasting with a modest 3.2% growth in its retail division.
For the six months ended 29 September 2023, revenues were up 14% to £873.5 million, while pre-tax profits grew by just 3.3% to £19.3 million.
Halfords has tightened its profit guidance to a range of £48-53 million.
Broker Peel Hunt said while there was plenty to be “impressed by, strategically and tactically,” the problem is that “hardly any of the broader markets have lived up to the growth expectations set out in the summer, so profit is becalmed.”
The broker has lowered financial 2024 pre-tax profit forecasts by £5 million to £50 million and taken £10 million off each of the outer years.
“We sense this could be too cautious,” Peel Hunt said, but it added conditions could hardly be any more difficult for Halfords, especially in tyres and bikes.
But the broker felt the downgrades are “unfortunate rather than careless, and we urge investors to look at the glass half full, as we see value here.”
“It may take the consumer perking up for it to emerge, but we are sure it will,” the broker added.
At just after 9am, Halfords shares were changing hands for 182p, down 46p. Peel Hunt said 'buy' up to 275p.