Halfords’ shares tumble 27% after warning on inflation

Halfords’ shares lost more than a quarter of their value on Thursday after the retailer warned inflation was hitting earnings and demand for bicycles.

Graham Stapleton, chief executive officer of the motoring and bike company, said, “rising inflation and declining consumer confidence [will] naturally present short-term challenges” as the group unveiled annual results.

Shares tumbled 27 per cent to 143.8p by the close.

The Worcestershire-based company, the UK market leader in cycling retail, said there was reduced demand from customers, especially for “more discretionary, higher ticket items”.

It said underlying pre-tax profit for the current year to April 2023 would be £65-75mn against analyst expectations that varied from £70mn to just over £90mn.

Sales in the retail cycling division, which boomed during the coronavirus pandemic, have recently been affected by supply chain disruptions, while demand has been knocked by the worsening cost of living crisis and rising inflation.

However Stapleton was keen to stress the growth in motoring and services.

He said the motoring services business, which includes Autocentres and National Tyres, now accounted for more revenue than the cycle division.

Stapleton added that the longer-term outlook for bike division was more positive, as the government continues to build infrastructure in support of cycling, and that product shortages had largely been eliminated.

But he was critical of the recent government decision to withdraw subsidies on electric car purchases in the UK, saying it would reduce take-up of new technology.

Demand for electric vehicle servicing is also on the rise, Halfords said, pointing to a 140 per cent increase year on year in the number of electric vehicles being brought into its garages.

The company is training hundreds of electric car technicians as it looks to fill a gap in the market for servicing such vehicles. It is also looking to position itself for growth in sales of electric bikes and scooters.

Russ Mould, investment director at AJ Bell, said that a return to normality and tighter household budgets were “clearly resulting in some of the Covid-induced surge in demand drying up”.

“The cycling boom during the pandemic and the great abandonment of public transport . . . were both great news for a business specialising in push bikes and motoring products and services,” he added.

Despite the headwinds, Halfords reported revenue of £1.37bn in the year to the end of April, up 6 per cent and at the higher end of forecasts. Pre-tax profit rose 50 per cent to £96.6mn.

Its “mobile expert” vans unit expanded last year, growing to 253 vehicles and more than 230 technicians.

These vans, which also trade under the brands Tyres on the Drive and National Tyres, offer motoring services from oil changes to battery replacement.