Halfords profits fall sharply as weaker economy hits consumer confidence

Profits at bike and car parts retailer Halfords fell sharply last year, as a boom experienced by the company during the Covid-19 pandemic ended amid rising inflation and a weakening UK economy.

In full-year results on Wednesday, Halfords said underlying profit before tax for the year to March was £51.5mn, compared with £89.8mn in the previous year. Citing various “market headwinds” that had affected the results, it estimated cost inflation was £68mn.

Group revenues were $1.59bn, a 15.3 per cent increase on the previous financial year and 39.5 per cent higher than 2020.

Halfords also said it expected profit growth this year, backing analyst consensus forecasts of £53.3mn of underlying profits before tax. Shares rose more than 5 per cent in early trading.

Graham Stapleton, chief executive, said he was “confident” about the future despite the uncertain economic backdrop.

“In a very challenging year, our focus has been on supporting both customers and colleagues through the cost of living crisis,” he said. “This has led to an outstanding sales performance and significant market share gains.”

Halfords said, however, that its consumer tyres and cycling divisions had seen “significant” volume declines, of 14 and 24 per cent respectively compared with the same period in 2020. But it noted its market share had increased in all categories.

Businesses have had to navigate major changes in shopping habits and the economic backdrop since the start of the pandemic when there was a series of lockdowns and inflation was ultra-low.

Halfords said British Cycling estimated the 2023 financial year ended with sales volumes almost a quarter lower than pre-Covid levels, though motoring had fared much better.

“Consumer confidence has been very volatile, with the impacts of increasing interest rates, energy bills and general inflation severely impacting customers’ willingness to spend,” said Halfords. The company said cycling sales also fell after Liz Truss’s “mini” Budget in September last year.

Earlier this year, Halfords warned on profits, blaming ongoing staff shortages and weaker demand for higher-price items.