Halfords shares dive amid stark profit warning

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Halfords bonuses
// Like-for-like group sales drop 1.7% in 14 weeks to January 4
// Halfords warned that profits will be some 16% lower than previously expected
// The news has sent its share prices spiraling as much as 20%

Halfords has seen its shares drop by more than 20 per cent in morning trading after issuing a stark profit warning.

In the 14 weeks to January 4, like-for-like group revenues fell 1.7 per cent, including a retail sales drop of 2.2 per cent.

The cycling and automotive retailer cautioned that in light of the falling sales during the crucial Christmas period, it expected profits for the 2019 financial year to come between £58 million and £62 million – dramatically below the consensus estimates of £70 million.

It added that profits were not expected to return to growth until after 2020, and that it expected profits for the following year to remain largely flat due to waning consumer confidence amid the Brexit process.

Halford’s also attributed “exceptionally mild weather” to its poor performance, which was dragged down by a 3.4 per cent drop in motoring sales, while cycling performed slightly better with a 0.3 per cent decline.

Outside its retail arm Halfords Autocentre – which maintains customers’ cars – performed better, growing 1.4 per cent.

“Christmas has delivered a complete reversal of what had been shaping up to be quite a good year for Halfords,” Hargreaves Lansdown’s equity analyst Nicholas Hyett said.

The British weather is anything but reliable, and we already knew from clothing retailers that the warm winter was disrupting normal shopping patterns, but the apparent collapse in consumer confidence is a much more far-reaching concern.

“We still think Halfords’s core strategy of investing in services is the right one, and has helped sales inch up for the year as a whole – the fact Autocentres continues to deliver reasonable growth is testament to consumers’ willingness to pay for expertise where they’re needed.

“But better qualified staff cost more money, and despite Halfords’ attempts to protect margins, that’s hitting the bottom line.”

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