Halfords’ shares surge by 20% as popularity of staycations and high car servicing sales lead to upgrade of profit forecast
- Halfords expects underlying pre-tax profits of £80m to £90m this fiscal year
- Autocentres revenues climbed 88.8% and staycation product sales grew 45%
- Coronavirus has made cycling and electric-powered transport more popular
Shares in Halfords soared by nearly a fifth today after the group raised its earnings guidance as it continued to benefit from the British staycation boom and a strong performance by its car servicing division.
The retailer now expects to earn between £80million and £90million in underlying pre-tax profits this fiscal year, compared to previous estimates of £75million.
It made the announcement as it revealed sales jumped by around a fifth in the six months to October against their pre-Covid levels, with revenues in Autocentres climbing 88.8 per cent and staycation products increasing 45 per cent.
Staying home: Halfords’ expects to earn at least £80million in underlying pre-tax profits this fiscal year thanks in part to the pandemic staycation boom
Halfords said the growing trend among customers for domestic holidays, and to be more environmentally and health-conscious, has boosted sales of products such as cycle carriers and roof boxes.
Profits also more than doubled to £64.3million at the Redditch-based firm, which has been one of the standout winners from the pandemic primarily due to the rising popularity of cycling and electric-powered forms of transport.
All areas of the business have witnessed trade boom over the past two years, including its business-to-business, group services and online arms, each of which have seen sales rise by over three-quarters.
The group said the former two divisions had been buoyed by the acquisitions of maintenance firms Universal Tyres, McConechy’s Tyre Services and Tyres on the Drive, helping expand its presence across the UK.
However, cycling sales have only grown modestly despite surging during the first lockdown in 2020 as supply chain problems have caused the firm higher freight costs, lower availability of some bikes and logistical delays.
A shortage of HGV drivers is a core reason behind the logistics issues currently being experienced by the company, along with many other British businesses reliant on sourcing products from overseas.
To try and offset this, the business is undertaking a massive training scheme involving the upskilling of 24,000 more employees
Halfords remarked. ‘Moving anything around the globe over the last six months has been particularly challenging. Even if goods are manufactured, and a container is found to ship them to the UK, the recent HGV driver shortage has meant that this final leg of the supply chain has been more costly and unreliable.’
Labour shortfalls have also impacted the firm’s garages and HME vans divisions, whose workers were often forced to self-isolate,’ and combined with the high demand, led to lower-than-expected sales.
To try and offset this, the business is undertaking a massive training scheme involving the upskilling of 24,000 more employees and training 2,000 staff to service electric vehicles, like e-bikes and e-scooters.
Supply issues: ‘Moving anything around the globe over the last six months has been particularly challenging,’ Halfords remarked
Halfords admitted that it still expects to be affected by supply chain issues in the future, but said problems are reducing and is optimistic that demand for its goods will remain robust.
Its chief executive Graham Stapleton said: ‘There is good momentum in our existing business, the strategically important area of Motoring Services continues to grow strongly, and our recent acquisitions are all performing well.
‘As a result, despite the challenging trading environment, I am very excited about our future growth prospects.’
Nicholas Hyett, an equity analyst at Hargreaves Lansdown, said Halfords’ performance ‘support our long term belief that Halfords’ mixed online and bricks & mortar offer makes sense in an increasingly digital world.
‘With management increasing focussed on upskilling its workforce to deliver great service as well as good products that fundamental strength should grow. Together with diminished supply chain disruption that bodes well for the second half of the year.’