Halfords Group PLC (LON:HFD) rose on Wednesday as the firm said sales in the final weeks of its last financial year had been “better than expected” despite the pandemic.
In a trading update for the year ended 3 April, the bicycle and auto parts retailer said as a result of the sales boost towards the end of the year, it now expected that adjusted pre-tax profit for the year will be “at the upper end” of its previously guided range of £50-55mln.
READ: Halfords expects 'severe' coronavirus impact in coming weeks
Meanwhile, Halfords said group sales in the four weeks to 1 May were 23% lower than last year on a like-for-like basis, however, this was better than they had initially expected.
The firm said this performance reflected a “strong performance” in its cycling business as people explored alternatives to public transport to get around during the lockdown as well as methods of exercise.
In the motoring division, the company said essential categories such as batteries and battery performed well but the segment suffered “overall weakness” due to a significant reduction in car journeys.
As a result of the better than expected trading and cost saving efforts, Halfords said its liquidity position had improved to around £159mln as of 1 May, however, it stressed the pandemic situation remained “very uncertain”.
The group added that following a strategic review and a transaction with Pure Scooters, it has transferred 11 of its Cycle Republic stores.
“We remain focused on providing essential services during lockdown, supporting key workers, including serving over 21,000 NHS front line workers so far, as well as the wider population who need to travel. Cycling has provided commuters with an important alternative to public transport and consequently we have seen significant growth within our Cycle2Work programme, cementing our position as the market-leading business in this segment”, said Halfords chief executive Graham Stapleton.
“Whilst trading since our last update at the end of March has been better than anticipated, driven by a strong performance in cycling, considerable uncertainty remains and as such we continue to take all necessary measures to preserve cash and protect our financial position. I am confident the actions we are taking now will put the business in a strong position when we emerge from the crisis and enable us to continue to deliver on our strategic transformation in the medium term", he added.
In a note on Wednesday, analysts at Peel Hunt retained their ‘buy’ rating and 150p price target on the company, saying it was “not surprising” that Halford’s had done well out of the increased take up of cycling among British consumers during the lockdown.
The broker added that while motoring was currently weak, it “will re-emerge as we exit lockdown”, although this would not be at the expense of cycling as “organised sport remains blocked and public transport is no fun”.
“If Halfords [earnings per share] can get back near to last year’s 20p the shares are still fabulously cheap, especially as fundamental changes for the better were afoot pre-crisis. They have been postponed not cancelled. HFD is far from perfect, but is also far too cheap”, Peel Hunt said.
The strong update sent the shares 12% higher to 129.2p in mid-morning trading.