Halfords scales back profit forecasts as cycling revenue falls

Halfords has reduced its profit forecast for 2023 after a spending squeeze saw customers spend less on bikes.

The UK's biggest bike retailer revised its full year pre-tax profit outlook to the “narrower range” of £48 million to £53 million, a reduction of the upper end prediction by £5 million.

Earlier this year, the company expected full-year underlying pre-tax profit to be between £48 million and £58 million compared to an earlier forecast of  between £51.0 million and £57.7 million.

The announcement saw its shares fall by 22 per cent in early trading, and 19 per cent overall this week; they had risen earlier in November after a £1.4 billion takeover bid from Redde Northgate had been dismissed.

Earlier this year, the company said that its cycling revenue had fallen by 2.7% in the first 20 weeks of 2023, compared with the same period in 2022.

While its overall like-for-like revenue was up 7.8%, largely because of growth in its Autocentres, the company's cycling revenue was down. It operates 392 stores and 589 garages across the UK.

Halfords said that cycling, along with car cleaning and touring, were "adversely impacted by unfavourable weather and low consumer confidence". Cycling now represents just 25% of the total revenue, with Autocentres making up more of Halfords' revenue.

Graham Stapleton, chief executive of Halfords, said: “Everything that’s in our control, we’ve done our very best. The bit that we can’t control is the macroeconomic environment.”

He added that customers were still buying needs-based products but spending less on “more discretionary, higher-ticket” product categories, such as cycling, where revenue declined 2.8 per cent in the first half.

However, he emphasised that Halford’s cycling business, which accounts for 37 per cent of the group’s sales mix, had performed ahead of the “very difficult” cycling market overall, which fell 5.8 per cent.

“What we are doing is ensuring as little inflation as possible gets to the customer,” Stapleton said. “We just know customers will remember who supports them in a cost of living crisis.”

The fall in Halfords' cycling revenue follows financial struggles for other cycling retailers. 

Last month, Wiggle Chain Reaction Cycles (WiggleCRC) entered administration, with 105 people laid off by the cycling retailer. The redundancies were split across various parts of the business with 70 from Wiggle, 28 from Chain Reaction Cycles and 7 from UK distribution arm Hotlines.

The online giant is still looking for a buyer for its business. Halfords and Stapleton pledged to help customers affected by the situation earlier in November.

Stapleton said: "If you’ve bought parts or accessories, covered by warranty from a retailer that is no longer trading, Halfords will honour the warranties. We’ll also support Wiggle+ customers with Tredz voucher worth £15."

“The cycling market is fundamentally sound and is ahead of where it was in 2019,” Stapleton continued. “But the extraordinary distortion caused by the pandemic and the volatility of the past  three years has resulted in the closure of many independent bike shops, and now we are seeing large online retailers calling time too.”