Profit slump at Halfords despite Olympic boost to bike sales

Lower margins in cycling part of business means sales growth doesn't filter through to bottom line

by Simon_MacMichael   November 21, 2012  

Halfords logo

Tags

Halfords, Britain’s biggest bicycle retailer, has revealed that the retail side of its operations, in which cycling now makes up a third of sales, saw operating profit plunge by nearly a quarter despite a strong boost to sales on the back of Team GB’s Olympic success and Bradley Wiggins’ Tour de France victory.

A strong performance in the smaller Autocentres side of the business failed to offset the retail decline, with group profit before tax and non-recurring items falling by 23.4 per cent to £41.9 million.

Part of the reason behind higher sales of bikes and other bike parts and accessories not translating into higher profit at group level is that according to Halfords, its cycling offer has lower margins, particularly in sale of products such as premium bikes, than other parts of the business.

In cycling, the company said that a poor start to the financial year mainly due to poor weather in the spring had been followed by a strong boost to sales due to the impact of the ‘Summer of Sport,’ with like-for-like sales – which exclude the impact of new stores and therefore give a true year-on-year comparison of trading – up 14.7 per cent in the second quarter.

The difficulties of the preceding three months, however, meant that like-for-like sales in cycling were up just 1.9 per cent for the six months as a whole.

Cycling accounted for 32.9 per cent of the retail division’s £393.0 million in sales during the period, equivalent to £129.3 million.

In a presentation accompanying its results announcement, Halfords highlighted some of the main developments on the cycling side of the business, including the unveiling of its Victoria Pendleton range, stocking of the Cinelli and Tifosi brands and launch of the latest version of its Carrera Virago with its Cycle to Work scheme-friendly £1,000 price point.

Looking forward, as well as introducing a sub-£500 Boardman range, the company is eyeing a major push next year on the parts, accessories and clothing side of the business, saying that it has recruited a new commercial team “ to aggressively drive this category.”

That will include increasing the number of items it stocks from brands including Gore, Altura, Shimano, Mavic, Knog and Sram, as well as bringing products in for the first time from companies including Campagnolo, Lezyne, Northwave, Hi5 and Adidas.

The company is also aiming to grow its share of the repair and maintenance market, of which it says it has 5 per cent share, reflecting the fact it punches below its weight there considering its clout in bike sales, where it claims to control around 14 per cent of the market.

It said that during the period, it had seen growth of 36.5 per cent in cycle repair revenue after making investment in training and other resources.

Dennis Millard, Halfords’ chairman, said: “Our Retail performance improved markedly in the second quarter after a difficult first quarter and, with a proactive trading stance, we took full advantage of the opportunities provided by the ‘summer of sport’.

“We continue to be encouraged by the performance and long-term potential of Autocentres. We also made good progress on channel and category initiatives; central to this is the priority of building a company-wide customer service ethic as well as investing in training and support for colleagues. 

“Our second-half Retail planning assumptions remain unchanged and cautious given the prevailing pressures on the consumer as we approach the important winter and Christmas trading periods. We continue to plan for a full-year Group Profit before tax and non-recurring items of between £66m and £70m.

“We have a strong platform for sustainable growth; the management team retains its focus on active trading, cash generation, prudent cost management and the delivery of strategic objectives.”

5 user comments

Oldest firstNewest firstBest rated

I have two local Halfords stores and I have complained to both that they'll never be taken seriously as a bike store until they actual have somewhere out front to *park a bike*

(seemed obvious to me)

posted by mad_scot_rider [536 posts]
21st November 2012 - 16:27

like this
Like (4)

I'd no more trust them to maintain my bike than I'd let PC World loose on my computers.

The world seemed flatter years ago?

brittleware's picture

posted by brittleware [30 posts]
21st November 2012 - 17:18

like this
Like (1)

mad_scot_rider wrote:
I have two local Halfords stores and I have complained to both that they'll never be taken seriously as a bike store until they actual have somewhere out front to *park a bike*

(seemed obvious to me)

And I have two local Halfords stores near me as well and I have also complained to both that they'll never be taken seriously until they employ someone who actually understands bikes.
Seems obvious to me.

posted by festival [101 posts]
21st November 2012 - 21:24

like this
Like (2)

Most people just wheel their bikes in, why don't you? Regardless, the 2 nearest superstores in my area both have cycle racks outside. maybe it's the retail park owners?

posted by hounslowrob [27 posts]
22nd November 2012 - 13:09

like this
Like (2)

Sub-500 Boardman bikes might be interesting if they continue to offer the value that their higher models do...

Apart from that, I suppose stocking more clothing etc is a good sign that they're starting to take the bike market seriously, rather than just selling BSOs at £99.

Boardman CX Team '14 | Cannondale CAAD8 '12 (written off, SMIDSY) | Scott Sportster '08

Gizmo_'s picture

posted by Gizmo_ [732 posts]
23rd November 2012 - 13:25

like this
Like (2)