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Shares in Halfords plunged almost 30 per cent on Wednesday after the UK bicycle and car parts retailer issued its second profit warning in two years because of bad weather and the rising cost of living.
The London-listed group said profits would be more than a quarter lower than previous forecasts, sending shares 28 per cent lower to 144p by early afternoon.
Halfords, which has 386 shops and 645 garages across the UK, said cycling and motoring had been hit by weak customer confidence and unusually mild and very wet weather reducing footfall in its stores.
This prompted a new forecast in an unscheduled trading update for underlying pre-tax profits of between £35mn and £40mn for the year to the end of March, down from £48mn to £53mn previously.
In the 12 months to March 2023, Halfords posted an underlying pre-tax profit of £51.5mn, compared with £89.8mn the previous year.
Consolidation in the cycling sector and more customers making purchases on credit had also led to weaker profit margins in the group’s retail business, it said.
Data published this month by research group GfK showed consumer confidence dipped in February, driven in part by a drop in consumers’ assessment of their personal financial situation.
With inflation staying steady at 4 per cent last month, households are continuing to watch discretionary spending in an effort to offset cost of living pressures.
The company, which boomed during the Covid-19 pandemic as demand for bikes and cycling products surged, said it remained “confident” in its strategy.
But it added: “Looking ahead to [2025], we remain cautious on market recovery in the short-term, and the current significant volatility in market conditions means that forecasting accurately is challenging.”
In January last year, the company cut its forecast for pre-tax profit for the 12 months to March 2023, citing difficulties in hiring staff in its garages and a fall in demand for tyres.
Adam Tomlinson, analyst at broker Liberum, said the profit warning on Wednesday was “clearly another disappointing update” and a fresh indicator that Halfords’ target to double profits over the medium term was “very stretching”.
There were “no visible positive catalysts at this stage” on the outlook for the company, he added in a note.
