UK's Halfords says cycling and consumer tyres markets to decline this fiscal year

FILE PHOTO: A view of the Halfords store front in Rugby Britain November 19, 2020. REUTERS/Molly Darlington/File Photo

By Echha Jain

(Reuters) -British bicycle and car products retailer Halfords Group reported a drop in full-year profit on Thursday and flagged a likely slowdown in the overall market for cycling and consumer tyres this year.

The more than 130-year-old company, which has retail stores, garages, mobile vans and home delivery services, reported a 18.3% fall in annual profit, broadly in line with analyst expectations, as purchases of products for cycling and domestic holidays decreased.

The company blamed cool and wet weather early in the year for reduced staycation spending, while Britain's prolonged cost-of-living crisis further limited discretionary spending.

Halfords' costs have also risen and it expects freight costs to be 4 million pounds ($5.07 million) to 7 million pounds higher than it foresaw at the start of the year.

"Elevated cost inflation continued to be a significant headwind," the company said.

It predicted a negative impact until the end of the current fiscal year, but said the impact, which it considered to be industry-wide, was not long term. Inflation in Britain has eased, according to the latest official figures.

In February, Halfords said it was seeing "very challenging and exceptional short-term market conditions" and was cautious about a recovery.

For the reporting period, underlying pre-tax profit from total operations came in at 36.1 million pounds ($45.62 million), down from the 44.2 million pounds it logged last year.

"There should come a time when the hard work in these difficult years comes to fruition. However, for now, forecast momentum is negative," analysts at Peel Hunt wrote in a note.

Halfords' shares, which fell as much as 8% in early trade, were 1% higher by 1327 GMT.

The company said it would now divert resources to strengthen its operating profit margin, which would likely result in lower market share gain and overall revenue growth in fiscal 2025.

($1 = 0.7896 pounds)

(Reporting by Echha Jain in Bengaluru; Editing by Subhranshu Sahu, Barbara Lewis and Shounak Dasgupta)