UK share markets have risen solidly at the beginning of March as optimism over the economic recovery has improved. Both the FTSE 100 and FTSE 250 are trading around 2% higher from Friday’s closing levels. But these rises are overshadowed by the stratospheric jump in the Halfords Group (LSE: HFD) share price on Monday.
The bicycle and auto maintenance retailer’s just shot 15% higher from its price at the end of last week. Indeed, at around 350p per share, Halfords was earlier trading at its most expensive since September 2018. It’s up 148% over the past year.
The UK retail share has exploded following the release of full-year financials. Here are the key points of Halfords’ latest update.
Trading picks up
The business has spiked after announcing that trading has been better than expected in recent weeks. It said that while it has “continued to experience a volatile trading environment across the first seven weeks of quarter four,” it added that “overall trading has been stronger than we initially anticipated across the business.”
As a consequence, Halfords upgraded its profits forecasts for the full fiscal year to this March. It now anticipates pre-tax profits of between £90m and £100m, a figure which also bakes in the planned repayment of £10.7m worth of government furlough support.
Drilling down into Halfords’ numbers
Like-for-like sales at Halfords were up 6.2% in the first seven weeks of the current quarter, it said. Comparable sales at its core Retail division were up 5.1%, driven by strong bike sales which rose 43% on an underlying basis. The company said that supply issues had eased in recent weeks, though it described supply as remaining “sub-optimal.” Cycle stocks have recently been hit by global container shortages and supply delays.
This more than offset the impact of slumping like-for-like sales of Halfords’ auto parts and accessories on the Retail arm. These dropped 14% year-on-year, though the business noted that “sales of blades, bulbs, batteries and general maintenance products [have been] performing better.”
Halfords’ Autocentres services division has been the standout performer in recent weeks. Like-for-like sales here were up 13% in the first seven weeks of this final fiscal quarter. The business said that “despite journeys being c.40% below pre-pandemic levels, our Autocentre business has continued to demonstrate signs of growing market share.” It added that it has witnessed “strong demand for both our garage business and Halfords Mobile Expert vans.”
What the City says
Commenting on today’s release, Hargreaves Lansdown equity analyst Sophie Lund-Yates says “there’s no getting away from the uncertain trading outlook though... Mapping demand over the next couple of months is pretty much impossible.”
But she adds that rocketing cycling sales despite stock problems reflected “a deep-rooted and organic demand for cycling goods.”
Moreover, Lund-Yates suggests there are strong growth opportunities for the Autocentres arm. She notes that “this market is highly fragmented at the moment, and there’s market share for the taking.”
