Halfords set to cut space as web sales accelerate

Cycles and car parts retailer Halfords plans to reduce its selling space by at least 10 to 15% as it seeks to cut costs across the business.

The initiative is evidence that the internet is bringing about profound changes in how retailers use their property portfolios.

Halfords chief executive David Wild has said that “goods sold online don’t need so much shelf space”, although a Halfords spokesman insisted this is not the only reason why Halfords is looking to reduce its space.

Halfords recorded a 60% uplift in multichannel sales in its first half, while like-for-likes fell 4.1%.

Half of Halfords’ 462-strong store portfolio is coming up for lease expiry over the next 10 years, and rather than close stores, it is seeking to downsize or relocate to smaller premises in certain locations.

Wild said: “We’ve focused on where we can save on costs and that includes negotiations with landlords. We’re taking a hard line with landlords - finally they’re beginning to realise there isn’t the price inflation of three years ago.”

Wild said in “most cases” Halfords is looking to reduce the size of its stores. “We can afford to operate with smaller buildings,” said Wild, who added the retailer is also negotiating on rent reductions, monthly rents and rent holidays in some cases.

An average Halfords store covers 10,000 to 11,000 sq ft, and Wild said the goal is to reduce this to 8,000 sq ft, including a mezzanine.

He added that the aim is to “get the balance down by between 10 to 15% and hopefully more”.

Numis analyst Andy Wade said the tactic of reducing selling space is being deployed by other retailers, including Thorntons and Game. He said if retailers have a strong online business “they don’t need as much space”. He added the strategy “absolutely makes sense” but pointed out that it “might not be easy” for Halfords to find suitable units to relocate to on prime retail parks.

Halfords, one of the more robust performers in the recession, reported disappointing trading results last week. It still expects to report group pre-tax profit up 12% to about £67m in the six months to October 1.