Halfords punctured by the cost of living crisis

HALFORDS shares fell to their lowest level in nearly two years as it became the latest firm to warn that surging inflation would present ‘challenges’ for its business.

The bike and car services retailer sank 27.7pc, or 54.7p, to 142.8p after its boss Graham Stapleton said price rises and waning consumer confidence would ‘naturally present short-term challenges’.

Halfords warned the cost of living crisis meant it was facing ‘reduced demand’, particularly for more costly items that were not essential, while ‘ significant cost inflation’ was also expected to hamper its performance.

As a result, it expected profits for its financial year would be lower at between £65m and £75m.

The bleak forecast overshadowed results for the year to April, which saw Halfords report a profit of £96.6m, up 50pc year-on-year, as its sales were boosted by growing market share for its motoring business and auto centres, which offer MOTs, tyre replacements and vehicle maintenance.

However, the group’s cycling business suffered a 25pc drop in sales year- on-year as the end of lockdown restrictions put an end to the Covid-inspired cycling boom.

The results failed to create confidence among analysts, with broker Liberum downgrading the stock to ‘hold’ from ‘buy’ and slashing their target price to 160p from 410p.

Liberum said Halfords’ outlook was ‘ poor’ and that as a result, they saw ‘limited’ catalysts for the share price in the short term.

It was also a gloomy picture in the wider market as the FTSE 100 slumped 3.1pc, or 228.43 points, to 7044.98 during the day, and the FTSE 250 was down 3pc, or 588.5 points, at 18727.48.

Concerns over the global economy and inflation continued to linger after the Bank of England raised interest rates by 25 basis points to 1.25pc, the highest level since 2009, and predicted UK inflation would be over 11pc in October, higher than previously forecast.

It followed more drastic action by the Federal Reserve, which hiked interest rates by 75 basis points, the sharpest increase since 1994, to counter soaring US inflation.

Susannah Streeter, analyst at broker Hargreaves Lansdown, said inflation risked being ‘a slow poison’ for the economy. She added that worries about inflation will ‘ratchet up’ given the eye-watering rate of price rises, which could push the central bank to hike rates more steeply if ‘ red hot prices’ showed no signs of cooling.

Retail stocks also weighed on the blue-chip index after a profit warning from Asos (down 32.5pc, or 376.5p, to 783.5p) and bleak sales figures from Boohoo (down 11.3pc, or 7.32p, to 57.62p) spooked the sector.

JD Sports slumped 7.6pc, or 8.45p, to 102.9p, Next dropped 4.6pc, or 278p, to 5764p, Primarkowner AB Foods slipped 1.2pc, or 19.5p, to 1595.5p, Ocado tumbled 6pc, or 50p, to 787.4p and B&Qowner Kingfisher fell 3.6pc, or 9.2p, to 246.7p.

Several other FTSE 100 firms dropped as they went ex-dividend, with housebuilder Persimmon down 12pc, or 263p, at 1932p, electronics firm RS Group sliding 7.1pc, or 62.5p, to 818p, private equity outfit Intermediate Capital shedding 7.6pc, or 111.5p, to 1356p, property group Land Securities losing 3pc, or 22.2p, to 722.4p and investment firm 3i Group falling 5.8pc, or 65p, to 1060p.

Safety equipment firm Halma dropped 5.7pc, or 113.5p, to 1876.5p after its long-serving boss Andrew Williams decided to retire after 18 years in charge. He will be succeeded by the group’s chief financial officer Marc Ronchetti.

Williams’ departure overshadowed a strong set of results, with a record profit of £316m for the year to the end of March, up 14pc year-on-year. Revenues also rose 16pc to a record £1.5bn.