Halfords shares were riding high on Tuesday after the group released its first half-year results, which were punctuated with areas of optimism that shone through otherwise gloomy performance.
Group revenue was down just 0.1% in the first half of 2024 compared to 2023. Halfords faced tough comparables against last year when the company enjoyed strong growth and the flat revenue growth wasn’t a surprise.
Indeed, investors are evidently pleased that the decline in sales wasn’t more dramatic, and shares rose over 13% at the time of writing.
Autocentres’ like-for-like sales ticked marginally higher, while retail softened as consumers held off purchasing discretionary items such as cycles.
“Halfords continues to fight an uphill battle as weak consumer demand has put the brakes on growth over the first half. Marginal growth in Autocentres was offset by weakness in the Retail division, where cycling remains challenged. Price-conscious customers continued to trade down to budget ranges, and a lack of big-ticket discretionary sales has weighed on performance,” said Aarin Chiekrie, equity analyst, Hargreaves Lansdown.
“Halfords is leaning into cost cuts to help soften the impact on the profit line, with the group halfway towards its £30mn savings target.”
“The group’s confident that it can meet the market’s full-year forecasts, which are looking for underlying pre-tax profits of around £29mn. With £21mn already secured in the first half, this target now looks well within reach, especially as freight costs are expected to be at the lower end of previous guidance.”
Following in the footsteps of Kingfisher yesterday, Halfords took the half-year update as an opportunity to sound the alarm on the impact of National Insurance increases and what it means for earnings in the future.
“Halfords tries to stand out from its competition by delivering expert advice and assistance to customers, face-to-face, with more than 12,000 staff on the books,” Chiekrie said.
“That means the government’s recent decision to hike employers National Insurance contribution is set to really bite, adding around £23mn of direct labour costs next year, so the group will have to pedal even harder to try and offset these additional costs.”