Bicycle and car maintenance specialist Halfords is rethinking its supply chain and distribution centre network in an effort to save costs and drive efficiencies.
The overhaul comes as the retailer posted a like-for-like fall of 3.8 per cent in its fourth quarter to March 29, and a total sales slide of 1.7 per cent.
Halfords chief executive David Wild said the retailer will rationalise its three distribution centres and undertake a “complete review of the whole supply chain”. Two of the distribution centres will close next year when their leases expire.
The main distribution centre in Redditch, Worcestershire, will remain open – its use will change, but Wild would not disclose how – and a new centre will open in the Midlands. As a result, Halfords is entering a consultation period with 150 staff. No decision on redundancies will be made until next year.
Halfords expects cost savings of £4m a year, after an exceptional cost of £8m.
Investec’s David Jeary said Halfords’ management were “rightly pleased with a good performance in Q4”, pointing out that the like-for-like decline was an improvement on the third quarter’s 7.8 per cent fall.
Wild added that the retailer would open around 10 stores in the UK this year, as well as up to 10 more in Central Europe. He also said he wants to increase its proportion of sales in multichannel.
Halfords revealed it is scrapping its eight standalone bike stores – Bikehut and Cycle Republic – because they did not deliver the expected returns.
Wild said Halfords opened the standalone bike stores to increase market share in the premium cycling sector, but that the retailer “can do that with our superstores and the net”.
Like-for-likes in cycling and car maintenance rose, while the car enhancement category continued to decline, driven by “very poor” sat-nav sales. Wild said: “Sat-navs are still a problem. Deflation has mitigated somewhat, but volumes have declined. But it’s still a market with opportunity, and we’re investing in it.”
The retailer is expecting to report an increased profit before tax of between £92m and £92.5m when it updates on June 10.
UBS analyst Andy Hughes said the update “reinforces our view that Halfords is positioned defensively compared to its retail park peers. Although the outlook remains challenging, today’s news may result in a shift in consensus towards the upper end of the range”.