Following the news that Halfords now expects its pre-tax profits to fall in the range of £35m and £40m, significantly below its prior guidance of £48m and £53m:

Jamel Boughedda, Associate Analyst at GlobalData, a leading data and analytics company, offers his view:

“The retailer had already narrowed its profit guidance in its interim results at the end of January, but it has seen a further material weakening in three of its four core categories due to persistently low consumer confidence and mild, wet weather – despite the essential nature of its motoring and tyre categories.

“As the most needs-based part of its business, Halfords’ autocentres have remained resilient, with more consumers maintaining their cars rather than replacing them in a tough economic environment. This should be holding up a declining retail market, but the fact that is hasn’t is concerning for Halfords. Autocentres had a strong year up to Q3, with YTD sales up 22.4%, so its profit warning highlights the significant declines in its retail sales against expectations.

“The poor performance in its cycling, retail motoring, and consumer tyre segments resulted in a drop in like-for-like revenue growth in its retail business, with the mild but wet weather leading to declines in store footfall and a lack of demand for winter products. In January, volumes in the cycling market fell 8.0% year-on-year, but given the weather has been milder this winter, cycling should have benefitted. Assuming these issues persist during the peak Easter period, this points to an issue beyond weather-related effects for Halfords, with it needing to invest in its proposition to extend it beyond just replacement purchases.

“Halfords pinned its poor cycling performance to a more challenging and competitive market, with more promotions and consumers purchasing on credit leading to weaker gross margins. This challenge will persist as consumer confidence remains low, with the high price points of bikes discouraging consumers from buying. Halfords must innovate to reinvigorate its cycling sales, for instance by expanding its successful Motoring Loyalty Club into its cycling business.”