Bicycle & car parts retailer Halfords has today reported a 24.5 per cent drop in pre-tax profit to £71 million as it announced details of a £100 million investment plan.
Over three years, Halfords will invest the money into its Retail arm as it seeks to reposition the business in a bid to boost sales growth and profitability.
Focusing on five areas, the plan will concentrate on improving customer service, revamping its category propositions as well as its store estate, developing multichannel operations to support supply chain capabilities while creating “a service-led digital proposition”.
Commenting on the strategy, Halfords CEO Matt Davies said that the retailer is setting out a group sales target of £1 billion in 2016.
He said: “Today I am announcing our ‘Getting Into Gear 2016’ plan, designed to significantly improve our Retail customer experience and bring about sustainable and profitable sales-growth momentum.
“This programme will focus on supporting our colleagues to deliver consistent friendly expertise backed by major improvements in store environments, plus building on the authority of our offer, infrastructure and digital capabilities.
“We expect these vital investments will inevitably reduce short-term Retail profitability but will deliver long-term revenue and profit growth together with sustainable shareholder value.”
Halfords remains on course to open between 20 and 30 Autocentre units per year, noting that 23 new units were opened over the year “as investment for long-term growth continues”.
In the 52 weeks to March 29th 2013, group sales increased one per cent to £871.3 million, up 0.3 per cent on a like-for-like (LFL) basis.
Halfords’ retail operations struggled over the year, as total sales reached £745.5 million, a 0.9 per cent decline on the same period last year and down 0.7 per cent LFL, while retail gross margin remained broadly flat.
However, Autocentres reported a 13.5 per cent total sales rise compared with the same period last year as LFLs rose seven per cent, the ninth consecutive quarter of LFL growth as new centres and investment in marketing and its tyre proposition drove sales.
Following the roll-out of a 24-hour ‘reserve & collect service’ as well as more general improvement to the functionality of its existing website, online Retail revenue jumped 15.9 per cent over the year, representing 10.3 per cent of its total retail sales.
Online cycling products saw sales leap 26.5 per cent in the retailer’s final quarter though store cycling sales suffered as consumer interest in the activity waned after a surge around the ‘Summer of Sport’, falling 0.6 per cent LFL over the full year.
Halfords Car Enhancement and Travel Solutions offerings also disappointed over the year as LFL dropped 4.2 per cent and 6.8 per cent respectively and the retailer blamed poor sales of the latter on bad weather.
Davies said that such mixed results have forced the retailer to focus on areas of opportunity for investment.
He commented: “The fall in Group profitability over recent years illustrates the need for sustainable and profitable revenue growth over the medium and long-term to offset ongoing cost inflation.
“We must strengthen our proposition and customer offer in an environment where shopping patterns are changing and competition is increasing.
“As a result the Board asked me to carry out a review of the business with the management team and bring forward a plan to reposition Halfords to meet the challenges now and that lie ahead.
“My conclusion is that Halfords is a good business with a clear strategic framework in place. However, there is some repositioning necessary to move Halfords from being good to being great; we must act now.
“Our single most important objective is to drive profitable sales growth and to do this through leveraging our expertise.
“The investment required is anticipated to reduce short-term Retail profitability but is designed to deliver sustainable revenue and profit growth together with sustainable shareholder value.”