Halfords boss Matt Davies is unapologetic about asking suppliers to contribute to its turnaround plan despite concern from the Forum of Private Business (FPB).
Davies said: “Our suppliers are benefitting from top-line growth at Halfords but that doesn’t come for free.
“I am very comfortable with what I am asking our suppliers to do. We are asking them to help support the business. It is voluntary.”
Davies defended Halfords’ action after the FPB said it was “extremely concerned” by the request as Halfords was accused of squeezing small businesses. The FPB has urged the Competition and Markets Authority to investigate the practice.
The bill for suppliers is thought to amount to hundreds of thousands of pounds in some cases and the FPB said that Halfords’ demands were among the most severe they had seen.
Davies said that 95% of suppliers of all sizes have been contacted, to provide a “few million pounds” between them.
“It is not Halfords picking on small businesses. We’re investing £100m into growing the business. There is no free ride. We are not a charity,” he added.
Davies said Halfords was currently in negotiations with suppliers on the contributions.
Davies was speaking after the car part and cycle specialist retailer this morning revealed pre-tax profit before exceptionals increased 1.1% to £72.6m and total sales 7.9% to £939.7m in the year to March 28.
Davies is currently driving Halfords through the second year of its three-year £100m turnaround plan to generate sales of £1bn by 2016.
Davies said he was happy with Halfords’ full-year progress. Halfords performed ahead of expectations, revealing that it is a year ahead of its strategy based on the outlook for profitability; it now expects its full-year results for 2015 to be ahead of the 2013 EBITDA of £103m. Halfords 2014 group EBITDA fell 2.3% to £101.1m.
Retail sales increased 7.7% to £803.1m with like-for-likes up 7.6%, and sales at its garage Autocentres business advanced 8.6% with like-for-likes down 0.1%. Online sales jumped 17.7%.
In the year Halfords increased investment by 61.7% to £30.4m as it refreshed 27 stores to its new shop fit and launched a new website in November.
The retailer has improved its staff retention levels and customer service; its net promoter score increased from 55% to 72%.
Davies said cycle sales had boomed with like-for-likes up 19% as sales of Boardman bikes doubled. Cycling is now its biggest category
Halfords is set to launch a new service called Car Parts Direct by the end of summer, enabling customers to easily order in car parts to store or to their homes. Davies said the service will provide 130,000 car parts through partnerships with wholesalers across the country. The expres service will enable parts to be delivered to customers within the hour.
Halfords revealed gross margin across its retail business fell by 144 basis points as its Autocentres recorded a 78 point increase but it said this was in line with guidance.
Additionally, across the year car maintenance like-for-like sales increased 4.9%, car enhancement was down 0.1% and travel solutions were up 2.1%.