Halfords chief executive Matt Davies today unveiled his plan to grow the retailer’s sales to £1bn by 2016 following a slump in full-year profits. Retail Week summarises the City’s reaction.
“The statement is honest about current retail performance, and the significant investments needed to fundamentally improve both service and store standards. Clearly, significant near-term forecast downgrades are disappointing, but we view risk to our numbers as being to the upside, and feel that the changes being put in place should lead to medium-term industry outperformance.” – Bethany Hocking, Investec
“Matt Davies has outlined a strategy similar to our ‘we fix five point plan’ which they have called ‘Getting into Gear 2016’. Broadly the company plans to significantly improve service, refurbish the outlets, improve the supply chain and logistics infrastructure, which is well overdue. We believe this is the right strategy. However, the impact of these initiatives will be larger than we envisaged.” – Kate Calvert, Cantor Fitzgerald Europe
“Halfords was a clear beneficiary of 2012’s ‘Summer of Sport’, with the successes of Bradley Wiggins and co contributing to a surge in cycling sales. However, interest waned later in 2012, as both the Olympic buzz and warm weather wore off, contributing to a full year decline in product sales. More significantly, despite these external pressures, Halfords’ offer has proved less compelling than specialists including Evans, Cycle Surgery and Wiggle. The retailer has acknowledged these threats, instead setting out to capture a larger share of the parts, accessories and clothing market; sales in this area grew 26.5% in the final quarter, representing one of the bright spots for the retailer.
“Sales of car enhancement and travel solutions were too impacted by exogenous factors, including a persistently frugal consumer and bleak winter weather, which suppressed demand for more non-discretionary items, such as camping and other outdoor accessories, and made Halfords’ out-of-town formats a less attractive proposition.” – George Scott, Conlumino
“The implication is that 15% sales growth over three years will not generate any EBITDA growth, suggesting a deeper level of investment than we had expected - the big surprise is on gross margin. Of course management may have set expectations very cautiously, but we think the market will need to see EBITDA growth over the period to justify the valuation.” – Sanjay Vidyarthi, Espirito Santo