Halfords Shares Tumble as Profit Impacted by Inflation

Halfords (LON: HFD) announced its interim results for the 26 weeks to September 30 on Wednesday, which sent its shares down more than 13%.

The automotive retailer reported revenue rose to £765.7 million from £694.8 million, driven by service-related sales. This was above analyst expectations of £638 million in revenue.

The company saw revenue in its autocentre’s division jump 30% compared to pre-pandemic levels.

Halfords posted a profit before tax of £29.3 million, well below the £64.3 million reported the prior year. The company’s profit before tax was impacted by “significant cost inflation” and “low customer confidence.”

Graham Stapleton, Chief Executive of Halfords, stated: “In such a volatile macroeconomic environment, our strategy of focusing on the kind of predictable and recurring revenue that comes from motoring services and needs-based products has never been more relevant. Once the acquisition of Lodge Tyre has annualised, Service-related sales will account for over 48% of our revenues and we expect this to grow to over 50% next year.  Lodge Tyre will also mean motoring represents around 77% of total sales.”.

Looking ahead, Halford’s said it has good visibility on H2 costs, with cost and efficiency programs set to exceed £20 million of savings vs last year, ahead of the £15 million target. In addition, the company said that while H2 trading to date has continued to be strong in needs-based areas, the more discretionary areas have softened. As a result, underlying profit before tax is expected to be at the lower end of our £65 million to £75 million range.

The company has had a difficult year due to a challenging macroeconomic climate impacting the majority of retailers. Halfords shares have tumbled 43% in 2022, despite a rally in the last three months.

The Christmas period will remain essential for retailers such as Halfords and may determine the current effects inflation and higher interest rates are having on consumer spending.

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