Halfords profit forecast trumps expectations on holiday bump

(Reuters) -Shares of Britain's Halfords jumped 20% on Tuesday after the bicycle and car products retailer reported robust holiday sales and forecast fiscal 2025 profit above analysts' expectations.

Halfords said that Christmas gifting boosted like-for-like sales growth in cycling to 13.1% in December, while colder weather in recent months had helped its motoring products portfolio with like-for-like sales growth of 5.5% this month.

"In recent months we have seen an improvement in trading alongside continued progress on a number of key initiatives, including our pricing and promotion strategies and cost reduction measures," the 130-year-old retailer said.

Its shares were up at 152 pence by 0822 GMT.

Halfords said that it was on-track to exceed its target of 30 million pounds ($37.3 million) in annual cost savings, and now expected underlying pre-tax profit of 32-37 million pounds for the year ending March.

The company, whose stores offer everything from car parts and accessories to bicycles, and has garages, mobile vans and home delivery services, had said in November that it was "comfortable" with market expectations for annual profit.

Analysts, on average, are expecting a profit of 28.3 million pounds, according to a company-compiled consensus.

However, Halfords flagged that changes to Britain's minimum wage and national insurance contributions would add direct labour costs of about 23 million pounds for fiscal 2026, when the policies take effect.

"While the impact of changes to the minimum wage and national insurance contributions are relatively easy to quantify ... their effects on the demand environment and health of the broader economy are harder to predict," it said.

Peel Hunt analysts in a note said that Halfords' cost savings were "coming through ahead of hopes," and that will be important in light of the wage and insurance policies.

($1 = 0.8044 pounds)

(Reporting by Pushkala Aripaka in Bengaluru; Editing by Savio D'Souza and Tomasz Janowski)