A boom in bike sales during lockdown has not been enough to offset the impact on Halfords’ more profitable car business, but the retailer remains optimistic for motoring revenues as car journeys rise and consumers shun public transport.
The auto parts to bicycles chain, which remained open during lockdown as a retailer of essential parts, said on Tuesday that cycling sales had risen almost 60 per cent on a same-store basis in the 13 weeks to July 3, as consumers avoided public transport and turned to biking to get out in the good weather.
Revenues at the retailer’s more profitable car business dropped 45.4 per cent on a like-for-like basis over the same period, however. Total group sales dropped 6.5 per cent.
Graham Stapleton, chief executive, said the fall in motor part sales was not just driven by the drop in car journeys across the UK but also because “dark stores”, where customers are served at the entrance rather than being allowed in stores, made it harder to sell items such as car radios.
“The areas that are particularly affected are technology and audio . . . It’s obviously very difficult to browse and experience the technology offer,” he said. “And it requires fitting, we haven’t been able to fit inside a car until the last week or two.”
He said car parts sales had improved in recent weeks, adding: “There’s every reason to think that when lockdown is fully eased there could even be more cars on the road than before because more people want to use private transport.”
For the full year to April 3, Halfords reported an underlying profit before tax of £55.9m, down 4.9 per cent from the year before. Like-for-like sales were down 2.3 per cent.
The group expects the remainder of its 444 stores — the majority of which are now open — to reopen in the next week. It withdrew guidance for this year but outlined three scenarios, ranging from pre-tax losses of £10m to profit of £20m.
Halfords shares dropped as much as 12 per cent.
Jonathan Pritchard, analyst at Peel Hunt, said that while the scenarios might have unnerved investors, he did not think there were any “warning signs” in the company’s announcement. “I don’t quite know what the market is nervous about,” he added.
The company has sought to cut costs and preserve cash, “reflecting the challenging environment”, but Mr Stapleton said there had been a “very, very limited” number of job losses because of the pandemic and that there were no immediate plans for further staff cuts.
Kate Calvert, analyst at Investec, said: “Obviously the weather’s been good out there, and cycling has become a form of transport . . . Typically it tends to be a very strong demand for cycling in the summer and autumn, so whether some of that’s been pulled forward we’ll see.”
Mr Stapleton was optimistic the momentum would continue: “I don’t see any reason why cycling can’t continue to grow; customers want to avoid public transport, more will use the cycle to work scheme.”
Halfords said it had £200m of financing available through revolving credit facilities and overdrafts, as well as £10m in cash and the potential to draw £25m from the government’s coronavirus business interruption loan scheme.