Will there be a bumpy ride ahead for Halfords?
MOST high street shops have only just reopened their doors.
However, as an “essential retailer”, Halfords is an exception.
Clearly, staying open puts it in a better position than many, but it’s a mistake to assume profits automatically come for the ride.
Halfords’ full-year revenue rose 0.3 per cent to £1.1billion, but as the financial year ended at the start of April, a lot of the lockdown is left out of these numbers.
Disruption will drag into the current financial year, and that’s before you consider that stores are still operating at lower capacity.
However, the extent of the squeeze on retail sales is the biggest question. While a chunk of Halfords’ revenue is regular and unavoidable, the remainder is made up of customers’ discretionary spending.
With the economic outlook looking very challenging, it’s going to be more difficult to get consumers to part with spare pennies on nonessential gadgets and gizmos.
The uncertainty also means the group’s strategic overhaul is pushed out, while it keeps cash in more essential areas of the business.
Sales had been lacklustre before the outbreak. Investing in staff expertise, the in-store experience and tightening links between the retail and Autocentre businesses were supposed to propel stronger growth for the long term.
There are some positives though. The group has benefited from a huge increase in demand for cycling goods. This area of the business is less profitable at the moment, but could be a great opportunity to boost margins in the future. Overall, Halfords has a lot of the right ideas, but how long it takes to get sales moving in the right direction depends on how badly customers’ wallets are hit by the economic downturn.
So while the underlying business is sturdy, the outlook is too uncertain for real positivity.
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