Halfords Group PLC (LSE:HFD) has warned that its full-year profits will be at the lower end of expectations and said it does not expect the challenges that businesses are facing to dissipate soon.
“Since the period close, we’ve continued to see resilient trading in the more needs-based categories, but there has been a softening in the more discretionary areas” the company said.
As a result, Halfords said its underlying profit before tax is now expected to be at the lower end of its £65mln to £75mln range.
The news came as the company unveiled half-year results which showed revenues grew to £765.7mln compared to £694.8mln last year (and £582.7mln in 2020 pre-Covid) but underlying pre-tax profits slumped to £29.0mln from £57.9mln last year (and £30.2mln in 2020).
All segments delivered like-for-like revenue growth over three years (compared to 2020), with Autocentres +30.0%, Retail Motoring +10.2% and Cycling +8.6%, while total revenue growth of +10.2% against 2022 reflecting benefits as the UK emerged from the final Covid lockdowns.
Service-related sales represented 42.6% of group revenues in the period and are expected to reach around 48% of sales following the acquisition of Lodge Tyre. Over half of group sales are expected to come from services in full-year 2024.
Tyre market share increased although the tyre market has not recovered in line with expectations and remains significantly below pre-Covid levels which will continue to impact underlying trading in National Tyres until the market recovers to normal levels.
Cost and efficiency programmes will exceed £20mln of savings compared to last year, ahead of the £15mln target previously announced.
Gross margins fell to 51.3% from 51.7% while an interim dividend of 3p was declared.
Second-half trading has continued to be strong in needs-based areas, but the more discretionary areas have softened, Halfords said.
The group cautioned it remained challenging to predict consumer confidence “but we don’t expect the challenges that businesses are facing to dissipate soon.”