>
Shares of Halfords crash 20% after lowering earnings expectations as demand in bike and tire market slows
- Halfords tempered earnings forecasts in a September update
- It blamed lower demand in its auto and bike businesses
- It also said a shortage of technicians at its auto centers would put a dent in sales
Halfords has lowered its profit forecast for the year as demand for car and bicycle products slows amid the cost of living crisis.
The retailer boomed during the pandemic, but came under pressure over the past year due to high inflation and declining consumer confidence.
Halfords told investors on Thursday it had seen long-term weakness in the consumer tire market and expects a deeper drop in demand for more expensive retail items.
Halfords is issuing a profit warning as consumer tire demand slows
It also said it had struggled to recruit technicians for its autocenters business amid a tight labor market, which would “limit growth in higher-margin sales during the important upcoming Q4 MOT peak.”
As such, it expects full year underlying profit to be in the range of £50-60m, up from £65-75m.
The group tempered profit expectations in November due to higher costs and declining demand for bicycles.
Halford shares were down more than 20 percent in morning trading to 169.12 pence and fell more than 50 percent over the course of the past year.
The reduction in the annual profit forecast came despite a turnover growth of 21.7 percent and 4.6 percent respectively.
CEO Graham Stapleton said: ‘We have seen strong sales growth in an exceptionally challenging environment, and we have continued to grow our market share while also tightly controlling our costs, inventories and cash flows.
“Consumer demand for our services and need-based categories, which now represent the majority of our revenue, continues to grow, and our Motoring Loyalty Club exceeds expectations as customers recognize the value of its unparalleled discounts and offers.”
Halfords was one of the few retailers to disappoint shareholders in recent weeks as supermarkets received a surprise boost over the Christmas period.
Marks & Spencer this morning celebrated record grocery sales and the highest market share in apparel and home markets in seven years.
Halfords said it did not expect a significant near-term recovery from expensive, discretionary spending, but expects the consumer tire market to recover this year.
It added: “We remain confident in the longer term outlook and believe the company is well positioned to benefit from the strong platform we have built as market conditions improve.”