Published : 1 year ago, on 21/06/2023

UK’s Halfords expects pricing efforts to drive profits

By Sarah Young

LONDON (Reuters) -Halfords forecast profit would rise 3% in its current financial year, saying its efforts to keep prices low should help it to retain customers squeezed by inflation that limits their power to spend on bikes and motoring.

British inflation held at 8.7% in May, according to data released on Wednesday, defying expectations for it to drop, and meaning the country still has the highest rate of any major advanced economy.

Halfords, which sells bikes and is the UK’s biggest provider of motoring services and products, said trading since the start of its new financial year in April had been strong and its plan to grow market share was on track.

Chief Executive Graham Stapleton said Halfords is investing in prices to keep them low, putting resources into growing its loyalty club and offering customers interest-free financing so they can spread the cost of replacing car tyres over a longer period.

“Customers are spending more time thinking carefully about big ticket discretionary spend, not just in bikes, but everywhere,” Stapleton said in an interview.

Shares in Halfords, which have risen 14% in the last three months, traded up 5% in early deals.

Cost inflation last year was 68 million pounds ($86.56 million), Stapleton said, but he forecast it would fall to 30 million pounds in the current financial year.

While the cost of energy, labour and currency remains high, there is deflation in the cost of bicycles and rubber-based products, he said.

For the 12 months to the end of March 2024, Halfords said it was comfortable with analysts’ consensus forecast for underlying pretax profit of 53.3 million pounds, compared to the 51.5 million pounds reported for last year.

That result was a fall of 38% on the previous year, resulting from the cost of living crisis and a tough comparison against the COVID-era when people had more to spend on bikes and tyres.

($1 = 0.7822 pounds)

(Reporting by Sarah Young; editing by James Davey and Barbara Lewis)