Halfords has raised its profit expectations for the year following improved trading, but warned it is preparing for a £23m rise in direct labour costs due to changes outlined in the UK’s Autumn Budget.

The motoring and cycling retailer now expects underlying profit before tax to reach between £32m and £37m, up from previous estimates.

This comes after a robust performance in Q3, where like-for-like sales growth was positive in both its retail and autocentre divisions.

The peak trading period saw particular strength in cycling, with Christmas gifting driving like-for-like sales growth of 13.1% in December.

The company’s autocentres also recorded strong results, particularly in the services, maintenance, and repair (SMR) sector, which saw like-for-like growth of 10.3%. This was driven by the successful rollout of Halfords’ “Fusion Motoring Services,” which offset weakness in the consumer tyres market.

In its November interim results, Halfords noted “ongoing market volatility through the first half of FY25 and indicated that we expected this to continue through the second half of the year.” However, it has since revised its forecast, citing stronger trading performance.

Despite the positive news, the retailer has cautioned that it is facing additional costs stemming from the Autumn Budget, which it expects to total £23m due to rising direct labour expenses.

“We also expect to continue to see inflation passed through on managed services. We continue to work on possible mitigations for the additional costs we face and will share our plans alongside our FY25 results,” Halfords said in a statement.

“There remains considerable uncertainty regarding the outlook for the UK consumer in light of measures introduced by the Autumn Budget, which take effect from April and hence are in force for the entirety of FY26,” it added.

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