Halfords suffers setback from weaker sterling

Optimistic outlook
Optimistic outlook

Shares in Halfords slumped after the retailer revealed that half year profits took a knock from increased costs linked to the Brexit-hit pound.

The car parts-to-bicycles chain said that pre-tax profit fell 6.4% to £36.6 million in the six months to September 29, while underlying pre-tax profit slipped 9.8% to £36.8m.

Sales rose 3.8% to £588.7m in the period, but Halfords booked £15m of additional costs as, in common with its high street peers, the pound’s descent since the referendum saw its purchasing power plummet.

Overall, the retailer said that it will stomach a £25m increase in costs this year thanks to Brexit, although it has plans in place to mitigate the impact, including increasing some bike prices.

In common with most British retailers, its products are sourced in dollars.

Shares were down over 5% to 314p in morning trading.

Nevertheless, like for like sales rose 1.5% in the period, with motoring seeing a 1.9% increase and comparable cycling sales up 2%.

Total cycling sales were up 7% and finance chief and interim boss Jonny Mason said: “It is pleasing to report positive sales growth for this period, despite the poorer summer weather and the uncertainty in the UK economy.

“We are also pleased with our profit performance in the half, as we offset a large part of the (circa) £15m increase in costs that resulted from the impact of the weaker pound.

“Looking ahead, we have strong plans both in-store and online for the Cyber, Christmas and winter peaks.”

Halfords added that while “prolonged uncertainty” over Brexit terms, continued sterling weakness and a slowing economy would hurt the firm, it could also benefit from an increase in the number of people choosing to stay at home rather than holidaying abroad.