Halfords Group PLC (LON:HFD) said warned profits in the second half could be “significantly lower” than in the first half.
Recent performance benefited from high demand for bikes amid the summer ‘staycation’ trend, with sales up 5% in the 20 weeks to August 21, also thanks to the new website and increasing scale in the motoring services business.
READ: Halfords offers 50% upside if investors come round to “clear, structural tailwinds” - broker
As a result, profit before tax for the six months to October is expected to come in at £35-40mln, from £27mln recorded a year ago.
However, the second half could suffer from the natural fall-off in cycling and staycation products during winter months, alongside a difficult economic outlook.
The FTSE 250 retailer is focusing on areas with long-term growth prospects, such as motoring services, business-to-business and electric mobility, while governmental investment in infrastructure could provide market tailwinds for the medium-term.
Not all roses
“Cycling is not as profitable for Halfords as other areas of the business. This is in part because of the rapid rate of growth, which can hold margins back,” analysts at Hargreaves Lansdown commented.
“While it’s great to see the group capitalising on new consumer trends, it’s not immediately going to be perfect news for the bottom line.”
“Halfords is pressing on with plans to close about 80 sites this year, and has suggested there will be cut backs in other areas too… But as the winter months arrive and there’s a natural drop off in cycling and holiday-related sales, coupled with a very iffy economic outlook, the plans to trim excess weight are sensible.”
Shares slipped 5% to 175.6p on Tuesday morning.