12th Jan 2023 10:43
(Alliance News) - While a host of names were battling for the crown of UK retail Christmas king, the market deemed Halfords Group PLC was one of the sector's biggest losers.
Shares in the company were 19% lower at 175.50 pence each in London on Thursday morning.
A guidance cut from the motor and cycling products retailer, as well as a complaint about a "skills gap", soured an otherwise decent of Christmas trading updates from retailers.
Halfords said its third-quarter revenue grew but progress was stifled by subdued market conditions in its cycling and tyre-focused units. The motoring and cycling products retailer said revenue in the 13 weeks to December 30 jumped 22% on-year, 4.6% like-for-like.
"Overall revenues were impacted by softer than expected cycling and tyre markets," it cautioned, however. "Macro-economic headwinds continue to impact the cycling and consumer tyre markets although we gained share across all our measured markets including Cycling, Motoring and Tyres."
Halfords reduced underlying pretax profit guidance to a range of GBP50 million to GBP60 million, from the lower end of its GBP65 million to GBP75 million range previously.
"Like many businesses, one of the biggest challenges we face is recruitment. Put simply, we can't get enough qualified technicians into our garages to meet demand. There are parallel issues in many other parts of the economy where large skills gaps are opening up," Chief Executive Graham Stapleton said.
Stapleton called on the UK government to "consider a number of initiatives" to ease a skills shortage.
AJ Bell analyst Russ Mould commented: "Just when it looked as if Halfords was turning a corner and leaving its problems in the rear-view mirror, along comes another bundle of issues which knock its earnings trajectory off track.
"The key problems are weakness in cycling and consumer tyres along with a shortage of skilled technicians hurting its motor service. The latter is a frustrating situation for the company. Demand for motoring services is very strong, but to not be able to capture all the potential business due to labour issues is frustrating. To Halfords' credit, it already has an apprenticeship programme and last year opened this up to the over-50s to try and fill its skills gap. This aptly named 'Retyrement Plan' is aimed at bringing individuals back out of retirement and getting them trained up to help keep older vehicles on the road."
Halfords was one of the pandemic's winners. Covid-19 led to a boom in cycling as lack of international travel meant 'staycations' were popular.
It has been tough for the retailer since then, however.
Liberum cut the stock to 'sell' from 'buy' in the wake of the retailer's car crash update.
"This update is clearly disappointing and probably the first of the larger company Christmas updates that has seen significant guidance cuts. We still see the overall strategy of evolving towards to a more integrated product/service offer as sensible, but the H1 results and today's update highlights that Halfords' exposure to discretionary areas is still greater than might have been perceived," Liberum added.
By Eric Cunha, Alliance News news editor
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