Halfords (LON:HFD) have seen their shares surge on Thursday afternoon as the firm gave shareholders an impressive update.
Halfords who work in the automobile and motoring sector reported an earnings rise in its third quoter which accounted for the festive trading period.
Notably, the revenue earned from its Autocentres servicing unit grew over 30%.
Retail saw a like-for-like improvement in the Cycling segment, by 5.9%, though in Motoring, like-for-like revenue was 2.7% lower than last year.
When studying the figures from its financial year, which cover 40 weeks the results are not as impressive.
Total revenue has shrunk 0.2% year on year, and has seen a slump of 1.2% on a like for like basis.
For the full-year, Halfords maintained its guidance of underlying pretax profit, in the range of £50 million and £55 million. The measure is also on a pre-IFRS 16 basis, an accounting standard governing the financial treatment of leases.
Graham Stapleton, Chief Executive Officer, commented:
“I am pleased with our overall performance in Q3, with total revenue growing nearly 5% in the quarter. Our results reflect the positive actions we have taken across the Group to deliver on our strategy, particularly Motoring Services, which grew strongly.”
“Within Retail, Cycling performed particularly well, as customers responded to our innovative product ranges and differentiated proposition. Approximately 85% of our bike range is unique to Halfords, including our successful partnership with Disney and the development of an innovative range with Trunki, both of which helped to sell a record number of Kids bikes in the period. In addition, our ability to provide customers with a unique, free, build and storage offer was met with strong demand, as we built 86,000 bikes in the week before Christmas.”
“As National Garage Chain of the Year in 2019, Autocentres has continued to demonstrate good sales growth, organically and through acquisition, and remains well on track to deliver a 3rd year of profit growth.”
“Though pleased with our performance, market conditions remained subdued and we are not anticipating a near-term improvement. We will continue to focus on improving our customer proposition, building our services business and managing our costs and operations tightly. In the context of the current retail market I am pleased to be reporting a positive L4L performance and to reconfirm profit guidance for the full year.”
Halford’s financial outlook
“Alongside a solid sales performance, the Group has delivered continued gross margin growth. Good product ranging and innovation has negated the need for either heavy or early discounting. Further margin upside was delivered through service revenues attached to product sales. In addition, we have remained focused on tight cost control and improved operational efficiencies, with underlying operating expenditure in line with the previous year, despite upward cost pressures.
As a result of these actions, we reconfirm our expectation that FY20 underlying profit before tax, on a pre-IFRS 16 and 52-week basis, will be in the range of £50m to £55m.”
Progress from one year ago
Around this time a year ago, Halfords saw a very different situation.
The retailer said that expected profits have fallen from the previous estimate of £70 million down to between £58 million and £62 million this year.
“This has been a challenging third quarter for the business, driven by exceptionally mild weather and ongoing weak consumer confidence. Together, these factors have led us to reduce our profit expectation,” said Graham Stapleton, the chief executive.
“Halfords is a robust business and we firmly believe that the strategy we outlined in September is the right direction for the business,” he added.
The group’s last profit warning came in May last year when the bike specialist said profits would come in flat. In September, the retailer said that profits would not rise in 2020.
Halfords shareholders can be pleased with the update regarding Christmas trading, however the final period of the financial year will have to be impressive to see growth.
Shares in Halfords trade at 157p (+7.9%). 16/1/20 12:14BST.
