Halfords shares slipped on Thursday after it released results showing costs rising amid a challenging consumer backdrop, which overshadowed a 1% increase in underlying profit before tax.
The group reported a 4.1% increase in revenue on a like-for-like basis to £893.3 million.
The UK’s leading motoring and cycling services provider delivered particularly strong growth in its cycling division, with sales up 9.0% like-for-like to £208.0 million, benefiting from favourable summer weather.
The retailer sells two-thirds of children’s bikes in the UK and saw double-digit growth at its performance cycling business, Tredz.
Gross margin expanded by 200 basis points to 51.4%, whilst underlying profit before tax edged up 1.0% to £21.2 million. The group generated £27.6 million in free cash flow, strengthening its balance sheet to net cash of £18.6 million at period-end.
These are all respectable metrics, given the challenges the UK faced during the period.
Halfords’ Autocentres division grew like-for-like sales by 4.3%, with consumer garages achieving approximately 8% growth despite a continued decline in the consumer tyres market.
“Halfords is keeping its wheels turning, but the road ahead looks bumpy. The motoring services and cycling retailer delivered steady like-for-like growth at the interim stage and reaffirmed full-year guidance, helped by cost savings and its push into services,” said Garry White, Chief Investment Commentator at Charles Stanley.
“Yet rising labour costs and a fragile consumer backdrop may mean it will be challenging to keep margins in gear in the second half of the year. The next market communication is not until April 2026 when management issues a trading update ahead of the annual results. Because of continuing questions about the health of the British consumer, the shares could see continuing volatility until then.”
The company’s Fusion garage network has expanded to 79 sites, remaining on track to reach 150 locations by FY27.
The Halfords Motoring Club membership has grown to around six million, including more than 400,000 premium members generating approximately £20 million in annual subscription revenue.
Halfords declared an interim dividend of 3.0p per share, unchanged from the prior year, and confirmed it remains on track to deliver full-year underlying profit before tax in line with market consensus.