Leading data and analytics company GlobalData has reviewed the preliminary FY22/23 results for motor and cycling retailer Halfords.
Retail analyst Jamel Boughedda offers his view: “The company has continued strong performance in autocentres and a resilient motoring segment lifted group revenue up 15.3%. However, its investment in prices to support consumers and an increase in labour costs dragged down its underlying profit before tax by 38.3% to £51.5m.”
In April, the retailer forecast that its sales over the mid-term would increase to £1.9bn ($2.4bn) from £1.6bn ($2.03bn) registered in FY22/23.
“Current market conditions have been unfavourable to many retailers, but a significant skill shortage in autocentre technicians, a worry that Halfords previously flagged up, has sent labour costs rising higher for the group.”
What is Halfords getting right?
Boughedda adds that due to the cost-of-living crisis, consumers are maintaining their current vehicles rather than purchasing new ones. This boosts demand for Halfords autocentre services.
Halfords’ investment in this area, such as through its Motoring Loyalty Club, has also helped acquire new customers and book roughly a third of its MOTs due to memberships and transferring retail shoppers.
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Additionally, its loyalty scheme is proving vital to the business. Halfords has seen members cross-shop more than four times the rate of non-members, allowing demand to remain resilient during difficult economic conditions.
In terms of revenue, there was a decrease of 2.2%. Boughedda asserts that the retailer must look at new ways of developing its cycling offer, either through new ranges or brands that entice shoppers back to Halfords, as cycling continues to be its Achilles heel.
However, as the company’s Cycle2Work scheme has grown 16.7% year-on-year, Halfords should boost awareness of this scheme to capitalise on demand.
Boughedda concludes: “The retailer anticipates an underlying profit before tax of £53.3m as volumes in the consumer tyre and retail motoring market are expected to be positive. Continued investment in its proposition such as its loyalty scheme and Cycle2Work can help improve its position in the market, especially as inflation eases and consumers’ discretionary incomes start to rise.”