Halfords warns bike demand hit by inflation and tight consumer spending

Halfords has warned that inflation is hitting earnings and demand for bicycles, sending shares in the retailer down as much as a fifth on Thursday morning.

Graham Stapleton, chief executive officer of the motoring and bike company, said, “rising inflation and declining consumer confidence [will] naturally present short-term challenges” as the group unveiled annual results.

The Worcestershire-based company, known for its bike shops, said there was reduced demand from customers, especially for “more discretionary, higher ticket items”.

Sales in the retail cycling division have been affected by supply chain disruptions, while demand has been knocked by the worsening cost of living crisis and rising inflation.

The worsening picture comes after a cycling boom during the pandemic, as more people took up cycling during the lockdowns.

Shares fell 21 per cent to 156p in early morning trading, less than half the price a year ago.

Halfords said the longer term outlook for its bike division was more positive, as the government continues to build infrastructure in support of cycling and as greener modes of transport become more popular.

“The cycling boom during the pandemic and the great abandonment of public transport . . . were both great news for a business specialising in push bikes and motoring products and services,” said Russ Mould, investment director at AJ Bell. “A return to normality and tighter household budgets are clearly resulting in some of the Covid-induced surge in demand to dry up.”

He added that the company was looking to “position itself for long-term growth” on the back of the switch to electric vehicles, which includes ebikes and escooters.

Despite the headwinds, Halfords reported revenues of £1.37bn in the year to the end of April, up 6 per cent. Profit before tax rose 50 per cent to £96.6mn.

The results were buoyed by Halfords’ growing Autocentre division, which provides car servicing and repairs, and its retail motoring unit.

Halfords said the Autocentre business was a “key area of strategic focus” and was less exposed to the demand and supply issues affecting its retail cycling division.

Its “mobile expert” vans unit expanded last year, growing to 253 vehicles and more than 230 technicians. These vans, which also trade under the brands Tyres on the Drive and National Tyres, offer motoring services from oil changes to battery replacement.

Demand for electric vehicle servicing is also on the rise, Halfords said, pointing to a 140 per cent increase year on year in the number of electric vehicles being brought into its garages.