Halfords Group plc (LON:HFD) saw its shares drive higher this morning after the bicycles to car parts retailer's 7.5% drop in annual profits proved a touch better than expected, weighed by a weaker pound which increased the cost of imported goods.
For the year to March 31, the FTSE 250-listed company posted pre-tax profits before one-off items of £75.4mln, down from £81.5mln a year earlier, although that was slightly ahead of market expectations for £74.8mln.
The profit fall came as Halfords' revenue increased by 7.2% to £1.1bn, with overall like-for-like revenues up 2.7%, reflecting 3.1% like-for-like sales growth in its retail business and just a 0.6% like-for-like sales increase at its autocentres.
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Halfords’ chief executive Jill McDonald - who earlier this month resigned to take up a position leading Marks & Spencer Group PLC's (LON:MKS) clothing and homewares division – said: "Profit performance for the year was impacted by the weaker pound but our plans are well developed and I am confident this will be offset over time.”
The group added: “We anticipate FY18 profit to be in line with current market expectations and remain confident in the outlook for the group.”
Reflecting that confidence, Halfords confirmed it is paying a special dividend of 10p per share in addition to a proposed full-year payout of 17.51p, up 3% on last year’s 17.00p dividend.
In early morning trading, Halfords shares gained 2.1%, or 7.6p at 366.40p.
Strategy seems to be paying off, says analyst
Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: “Jill McDonald has grasped what many UK retailers have failed to. In order for bricks & mortar retailers to compete with cheaper online rivals they have to offer something digital rivals can’t – face-to-face, hands on service and expertise. “
He added: ”It’s a strategy that seems to be paying off, and were it not for the fall in sterling, would have delivered results this year.
“However, it’s taken a long time for Halfords to get its act together and we just hope that the group doesn’t lose its way again once Jill McDonald has left for pastures new.”
-- Adds share price, analyst comment --