Halfords fourth-quarter sales rise: What the analysts say

Halfords’ motoring division reported a healthy 3.5% increase in like-for-likes for the quarter.

However, challenges remain for the retailer in the fiercely competitive cycling space. Here’s what analysts are saying about the results:  

“Q4 trading has beaten expectations, although management continues to guide to in-line full-year profits.

“While some encouragement may be taken from the like-for-like growth improvement on Q3, there has been a significant slowing of top-line momentum over the full-year as a whole, after two years of strong growth in FY14 and FY15.

“In our view, this in part reflects an increasingly competitive landscape and there is a risk that lower growth in cycling over the year may reflect both cyclical and structural pressures.” – Adam Tomlinson, Liberum

-

“The jury must still be out as to whether the precipitous decline in cycling sales last summer was owing to downward cyclical trends and weather-related reasons or whether there are deeper structural problems at play.

“The final concern on investors’ radar is the potential for further gross margin pressures next year given weaker sterling”

Ben Hunt, Haitong Research

“We will not get a proper data point until Q1 FY2017. The lack of growth in PACs (parts, accessory, clothing) remains a concern.

“The final concern on investors’ radar is the potential for further gross margin pressures next year given weaker sterling.” – Ben Hunt, Haitong Research 

-

“Given the weakness reported in Q2 in cycling, and further weather anomalies since then, Q3 and now Q4 trading performance in both cycling [especially bikes] and car maintenance should be received well by the market.

“It has been a tricky year for Halfords with a lot of change but there is positive momentum going into FY17, a raft of initiatives being implemented in both segments, and there are clearly some soft comparatives at various points through the year. Halfords also looks well placed to manage pricing in response to currency headwinds in cycling.” – Matthew McEachran, N+1 Singer

-

“The standout category this quarter was motoring, driven by a 9.5% like-for-like growth in travel solutions. Cycling, the category that Halfords was once so certain would be the panacea, lagged the wider performance, up 1.9%, though this is an improvement on last year.

“Cycling, the category that Halfords was once so certain would be the panacea, lagged the wider performance”

Andrew Stevens, Verdict

“This Q4 contributed to full-year group growth of 1.7%, up 1.5% on a like-for-like basis, and cycling actually declined for the full year, as Halfords continues to struggle against online specialists, often keener on price and with better ranges.

“While the retailer will add some colour to the figures at its prelims in June, these numbers will prove disappointing against group revenue growth of 6.9% last year.” – Andrew Stevens, Verdict