Halfords profits could double up as bike sales boom amid lockdown
The cycling and car parts chain said it expects pre-tax profits for the year ending in April will hit between £90 million and £100m, up from £52.6m a year earlier.
Before the announcement analysts had been anticipating a figure of just over £70m, according to a company-provided consensus.
The figures are the first that the group has provided for the current crisis after it stopped guiding due to the pandemic. Less than two months ago it had said it would “not be appropriate” to give profits guidance at the moment.
Many companies have withdrawn their guidance due to the pandemic, and Halfords acknowledged that its range was wide.
It said in a stock market statement: “Although only six weeks remain of the 2021 financial year, the expected profit range remains quite broad as trading patterns continue to be volatile, with sales ahead of Easter particularly difficult to predict whilst the UK remains in lockdown.
“As the country starts to open up once more, our overriding priority remains the health and safety of our colleagues and customers.”
Halfords has continued to see volatility in the last seven weeks since its third quarter ended, but trading has been better than anticipated.
Bike sales remain high, with sales at its cycling business up 43 per cent during the period compared with last year, on a like-for-like basis.
Halfords said a 14 per cent decline in motoring sales was better than traffic levels would suggest as there has been a 40 per cent drop in car journeys.
But sales of bulbs, batteries and general maintenance products have remained good, the business added.
“Although we have continued to experience a volatile trading environment across the first seven weeks of the fourth quarter, overall trading has been stronger than we initially anticipated across the business,” Halfords, whose stores have remained open, said.
Full-year results are due to be announced on June 17.
Sophie Lund-Yates, equity analyst at financial services firm Hargreaves Lansdown, said: “Cycling sales have skyrocketed once again, and that’s despite Halfords having trouble getting hold of all the right stock. This suggests a deep-rooted and organic demand for cycling goods.
“This is hardly surprising given lockdown living and the closure of gyms. But what this means at the business level for Halfords is significant.
“As a less profitable faction of the group, growing cycling’s scale should bring incremental margin benefits. As the store estate becomes more streamlined, cycling sales could be more insulated from a reduction in shop numbers too.
“Cycling enthusiasts are more likely to travel a little further to get what they’re looking for, compared to someone that’s after a new wiper blade.
“There’s no getting away from the uncertain trading outlook though. Mapping demand over the next couple of months is pretty much impossible.
“The strong trading update means it’s likely the balance sheet is still in good nick though. The net cash position is something of interest as we look to full-year results. Quite what the group plans to do with that stash is unknown, but an attractive dividend can’t be ruled out.”