4th Sep 2019 09:30
(Alliance News) - Halfords Group PLC cut annual profit forecasts Wednesday after like-for-like revenue fell in the 20 weeks to August 16 due to a weaker performance from its Retail unit and sales have been weaker than expected in the first half.
Shares in Halfords were down 3.4% at 166.44 pence in London in morning trade.
The motoring and cycling products and services firm said like-for-like revenue for the company dropped 3.2% in the period, with a 3.9% drop in Retail revenue. Within Retail, Motoring revenue fell 5.9% and Cycling revenue dropped 1.1%.
The drop in Cycling sales within Retail was, Halfords said, expected after "the exceptionally warm and dry summer last year".
This was slightly offset by a 1.1% rise in Autocentres revenue.
Margin-wise, Halfords's gross margin across Motoring, Cycling, and Autocentres rose year-on-year with costs "tightly controlled across the business".
Overall service-related sales grew from the year before, due to greater service penetration as well as Halfords's new cycle care and weCheck services.
Online sales rose as well, climbing 8.4%. Most online orders from Halfords.com are still collected in-store.
Halfords also noted the "challenging environment" as present, which it says is a risk in terms of " big-ticket discretionary purchases in the second half". As such, the company will focus on widening its gross margin and controlling its cost base.
The firm expects its financial 2020 underlying profit to be between GBP50 million and GBP55 million. The firm posted a GBP58.8 million underlying pretax profit in 2019, itself down 18% on the year prior.
At the time of its annual results in May, Halfords anticipated underlying pretax profit for the current year to be "broadly in line" with that achieved in 2019.
Halfords Chief Executive Graham Stapleton said: "Despite sales growth in group services, online and B2B, we have seen our overall sales impacted by cooler, wetter weather and weaker consumer confidence year-on-year. The market has been challenging but we are pleased to have seen increased market share in our core categories.
"In the second half, we believe the economic and political uncertainty will continue to impact big-ticket discretionary spend and, therefore, as in the first half, we will continue to focus on improving gross margins and controlling costs.
"We set out a new strategy for the business last year and while it is still early, we have already seen encouraging signs of progress. We remain confident that it is the right strategy to drive the sustainable growth of the business."
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