Supply chain difficulties following move to centralise distribution set to hit retailer’s Q2 like-for-likes
Halfords could suffer a 2% hit to its second-quarter like-for-like sales because of supply chain difficulties that have resulted in stores being under-stocked and the suspension of its next-day delivery service.
A source close to the retailer said that while the “worst of the troubles are behind Halfords”, there will “certainly be an impact on Q2 sales, but it’s hard to put a number on it”.
Numis analyst Andy Wade said it was “pretty difficult” to put a figure on the potential like-for-like decline, but estimated that it is “likely to be closer to 1% to 2% rather than 5% to 10%”.
“It will affect the headline like-for-like number rather than profitability,” he added. “Obviously it’s not great for Halfords but it’s not the end of the world.”
Glitches in Halfords’ new distribution centre in Coventry, which opened in July, led to the suspension of next-day delivery service on its website as fears grew over the amount of stock being delivered to stores.
It is understood the retailer has been struggling to get stock through the centre for four to five weeks. It is not clear when next-day delivery will be reinstated, but the source said it is likely to be “days or weeks” as opposed to months.
“Halfords is working day and night to get these teething problems solved,” the source added.
The website is now operating a six-day delivery service only.
A Halfords spokesman said: “As with all complex projects there were some issues that delayed deliveries but we are confident the majority of these are behind us.”
He added: “We have a strong promotional programme, in store and online, planned for the bank holiday weekend. This is an up-weighted event on last year with more stock in store and we are confident of good product availability.”
Halfords closed two distribution centres to centralise operations and make savings of £4m a year by 2011. The retailer said this plan is still on track. Wade said the “temporary disruption” is “likely to weigh but the bigger picture remains unchanged”.
He said: “The rationale for the distribution centre move remains clear and, encouragingly, we do not expect to see downgrades to the £135m to £137m March 2011 pre-tax profit.”