Halfords has revealed a slump in profits amid falling demand for bikes

Halfords has seen profits tumble

A disappointing year of trading has led to a slump in annual profits for Halfords, the retailer renowned for its range from car parts to bicycles.

Underlying pre-tax profits plunged by 18.3% to £36.1million in the twelve months until March 29. This includes the business chain for tyre supplies, which it has since outsourced as part of a new deal.

The company's pre-tax profits on a statutory basis suffered an even greater fall, with a dip of 45% to £19.9million. Cycling sales that were measured on a like-for-like basis dropped by 2.8%. Nonetheless, there was a glimmer of positivity with the wider group noting growth of 5% due to improved sales at their Autocentres division, where sales saw a significant increase of 10.7%.

The firm commented on consumers cutting back "even further" on non-essential items of high cost, such as bikes and touring goods, along with tyres. They predicted this trend would continue into the next financial year.

At the close of March, Halfords noted that trading conditions had "continued to be soft". They highlighted low levels of consumer confidence for larger discretionary purchases and attributed this drop alongside poor weather in spring to a reduction in store footfall and a resultant impact on sales - particularly those related to cycling and 'staycation' products.

Looking towards 2024-25, they expect sales volumes of cycling and consumer tyres to continue to decline, while motoring servicing and retail motor products are expected to stay generally level. The inflation over the past twelve months also took its toll on Halfords. Increases of approximately £37million caused total cost inflation to surge to about £120million over the last three years.

Chief executive Graham Stapleton said that consumer confidence was being held back by interest rates staying higher for longer and election uncertainty. He said: “If the forecasts are right and interest rates start coming down this summer and keep coming down, there’s no doubt that will help.”

On the election, he added: “Regardless of the result, just getting a result and having greater stability in place and getting uncertainty out of the way will help with consumer confidence.” Halfords said it had resorted to promotions to boost cycling sales, ramping this activity up by 33% in the second half. It also said more customers purchased cycling products on credit, affecting the firm’s margins. He said the “short-term outlook remains challenging”.

The group is pausing some investment on longer term projects during the more difficult trading conditions, for example slowing the pace of planned expansion for its motoring club scheme. It is trimming overall group costs by another £30million this year, after cutting out £35million in the past financial year.

Mr Stapleton said it would look to renegotiate store leases on more sites that were coming up for renewal, while also looking to artificial intelligence (AI) technology to help drive efficiencies, in particular in its contact centre. He said AI would be not replacing skilled employees and stressed there were no planned job cuts as a result, but did not rule out future impact on staff.

He said: “We’ll look to be efficient wherever we can in the business. We can’t ever say never as we look at becoming more efficient.”