Halfords blames it on the weather as it warns on profit

(Sharecast News) - Halfords warned on profits on Wednesday, pinning the blame on weak consumer confidence and the weather, as it reported a drop in sales.
In an update for the 20 weeks to 16 August, the retailer said group like-for-like revenue fell 3.1% and retail revenue was down 3.9%, with cycling sales down 1.1% and motoring sales 5.9% lower.

Autocentres was a bright spot, with LFL revenue in that segment up 1.1%, while group online sales grew 8.4% year-on-year.

Halfords said poorer summer weather and weaker consumer confidence dented sales during the first half, although this was partially mitigated by stronger margins and tight cost control.

The company also warned that it expects underlying pre-tax profit for the year to come in between £50m and £55m. Back in May, it had guided to profits "broadly in line" with 2018's £58.8m.

Chief executive Graham Stapleton said: "In the second half, we believe the economic and political uncertainty will continue to impact big-ticket discretionary spend and, therefore, as in the first half, we will continue to focus on improving gross margins and controlling costs.

"We set out a new strategy for the business last year and while it is still early, we have already seen encouraging signs of progress. We remain confident that it is the right strategy to drive the sustainable growth of the business."

At 0915 BST, the shares were down 3.4% at 166.44p.

Russ Mould, investment director at AJ Bell, said: "Halfords is going from bad to worse with yet another profit warning. The company is blaming the weather and weaker consumer backdrop but if you read the reviews of Halfords online it would seem the retailer has a big problem with in-store stock availability, staff who aren't very helpful to customers and delays with online orders reaching stores for collection.

"Halfords used to be the go-to place for car parts and bikes but customers who have a bad experience will simply vote with their feet and go elsewhere. Is the company now paying the price with its falling sales?

"If the company wants to pin its fortunes on being a service-led business it seems there is a lot more work to be done to improve standards.

"For now, it sits among the group of struggling retailers battling a decline in revenue and profit.

"Interestingly its share price went up on the latest trading update. One could argue that the share price has already been beaten up and so expectations were already low. But that could be a dead cat bounce unless the company's eternal optimism can actually feed through into higher earnings."