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UK's Halfords bumps up profit outlook ahead of Christmas

Cycle retailer Halfords lifts guidance, says supply snags easing
Cycle retailer Halfords lifts guidance, says supply snags easing   -   Copyright  Thomson Reuters 2021
By Reuters

– Halfords boosted its annual forecast on Wednesday as half-year earnings held strongly above pre-pandemic levels, with Britain’s largest cycling retailer betting on sales of kids bikes and e-bikes to drive earnings through Christmas.

The company, which also sells car parts, reported sales growth across its business despite persistent supply chain issues, including production constraints, raw materials inflation, freight disruption and driver shortages.

“Moving anything around the globe over the last six months has been particularly challenging,” the company said, adding that freight costs have at times reached 10 times the normal rate, partly owing to a shortage of lorry drivers in the UK.

Halfords shares jumped 11% by 0843 GMT, on track for their best day since September last year.

The company, which has benefited from a surge in cycling during the COVID-19 pandemic, said it now expects earnings in its 2022 financial year to be between 80 million pounds ($108.3 million) and 90 million pounds, up from a previous forecast of 75 million pounds.

Britons picked up cycling for its health benefits as well as to avoid public transport during the health crisis, with data from research company Statista showing the number of people cycling for sport, leisure or travel rose above 7.5 million in England last year.

Halfords said demand remains good, adding that it was comfortable with the current availability of children’s bikes and electric bikes as it heads into the Christmas trading period.

Gains in the market share gains of its motoring business helped underlying pretax profit for the 26 weeks to Oct. 1 rise to 64.3 million pounds from 55.4 million pounds last year and more than double pre-pandemic levels.

Sales in the cycling business during the half-year period fell 25% year on year but remained 9% above the same period in pre-pandemic 2019.

Peel Hunt analysts, who have a ‘buy’ rating on the stock, said the greater focus on motoring services was resonating with customers, bringing gains in market share.

Halfords said more customers were switching to electric forms of transport, with sales of e-bikes, e-scooters and accessories growing by more than 140% from two years ago.

($1 = 0.7389 pounds)