Halfords to deliver stalling sales amid pressure on consumers

Halfords is set to confirm flatlining sales for the past year, as investors await more detail on how much autumn Budget cost rises will hit the business.

The motor products and cycling retailer has previously cautioned that its shoppers have held off making costlier purchases because of the uncertain economic backdrop over the past year.

The business is expected to confirm on Tuesday November 26 that sales edged 0.1% lower for the half-year to September 27, compared with a year earlier.

In an update last month, Halfords said the marginal dip was compared with a strong performance by its garages business a year earlier.

It said there was still strong growth for services, maintenance and repairs in recent months, but demand for tyre fitting was flatter with cost-conscious shoppers turning to budget ranges instead.

The retailer, which runs about 380 shops across the UK and nearly 550 garages, also said record levels of rainfall over the spring contributed to weaker retail sales, with leisure cycling demand coming under pressure.

Analysts have said the company will be hoping that recent cost-saving efforts will help keep its finances robust despite pressure on consumer spending.

Aarin Chiekrie, equity analyst at Hargreaves Lansdown said: “It’s been a tough start to the year for Halfords, as weak consumer demand saw first-half sales growth grind to a halt.

“Price-conscious customers have been trading down to budget ranges, and a lack of big-ticket discretionary sales has weighed on performance.

“Halfords is leaning into cost cuts to try and help soften the impact on the profit line.”

It has previously said it is expecting to make £30 million of cost savings this year, in a bid to offset around £35 million in cost inflation.

Investors will be keen for an update from bosses on how cost-saving efforts have progressed, as well as the potential impact of last month’s Budget.

Retailers wrote to the Chancellor earlier this week warning that they may have to cut jobs and increase prices because of the impact of an increase in national insurance contributions (NICs), packaging taxes and a planned rise in the minimum wage.

Analysts at Peel Hunt said the majority of the cost increase is likely to weigh on the firm’s profitability because of challenges finding further savings or passing it on through prices.

They said: “The NIC increase looks likely to be in the early double digits, and finding additional cost savings will be challenging, in our view.

“It is unlikely that Halfords will be able to raise prices in either division.”