The wheels fell off for bikes to car parts retailer Halfords PLC (LON:HFD) today as Peel Hunt downgraded its rating for the shares in a note entitled “Road to Nowhere”.
In early morning trading, Halfords was the top FTSE 250 faller, down over 4%, or 14.8p at 324p as the broker cut its rating to ‘sell’ from ‘hold’ with a reduced price target of 325p, down from 350p.
In a note to clients, Peel analyst Jonathan Pritchard said: “Fundamental headwinds are increasing for HFD and the new store format doesn’t move the dial. We doubt current consensus forecasts reflect that and it’s hard to see a reason to hold the shares.”
He added: “Rising oil prices mean fewer miles driven and less depreciation, bad news for car maintenance as weFit momentum wanes.
“In bikes, the replacement cycle is lengthening and price inflation may have a big impact on volumes.“
The analyst concluded: “More inspiration is required across the group (we were underwhelmed by our visit to Derby’s “store of the future”).
“The cash attractions here are clear, but gross margins and cost ratios are under pressure as well as LFL, so forecasts are falling (8-15% off FY18-19 numbers today).”