Halfords shares edge higher after in-line H1 trading update

Investing.com -- Shares of Halfords Group Plc (LON:HFD ) rose on Tuesday after the company posted a trading update for the first half of the fiscal year, with like-for-like sales coming in line with analysts' expectations. 

At 3:52 am (0752 GMT), Halfords Group PLC was trading 2.7% higher at £145.80.

“We note that the trading environment remains challenging in Cycling and Tyres, but we think HFD has been seeing resilience in its Motoring Services and Products business,” said analysts at RBC Capital Markets in a note. 

The company reported that group LFL sales were down just 0.1% year-over-year, compared to RBC’s forecast of a 0.3% decline. 

The Autocentres division, which includes services, maintenance, and repair, saw LFL sales grow by 0.8%, overcoming difficult comparisons after an 18% rise last year. 

However, softer consumer demand in the tyres business posed some challenges, as more customers opted for budget tyre ranges amid economic uncertainty.

In its retail segment, Halfords’ LFL sales slipped 0.7%—a touch weaker than the 0.5% drop forecast by RBC. 

“While consumers remain cautious in their discretionary spending compounded by uncertainty around the contents of the upcoming Autumn Budget, we have continued to focus on controlling the controllables and I am pleased with our performance in the first half of FY25,” said Halfords’ chief executive, Graham Stapleton.

Motoring products performed better than expected, but the cycling market remains under pressure. 

Analysts cited high inventory levels and increased discounting as major headwinds, particularly in the leisure cycling category. 

Halfords’ premium cycling brand Tredz reported positive LFL growth, suggesting some resilience in performance cycling despite the broader market struggles.

RBC highlighted that Halfords' Fusion efficiency program is progressing well, with the initiative now rolled out in 17 towns during the first half. 

The company aims to expand Fusion to 39 towns by the end of the fiscal year, up from an initial target of 25. 

“We think that HFD remains on track for c.£30mn of cost savings in FY25 and we note gross margin improvements given better buying and easing FX headwinds,” said analysts at RBC.

Halfords reiterated that it expects flat volumes in motoring services and products and market declines in cycling and tyres for the year.

“We expect consensus PBT forecasts for FY25-26 to be broadly unchanged following the release today,” RBC said. 

RBC Capital Markets analysts see potential for Halfords to emerge as a major player in the electric vehicle servicing market but believe that a substantial increase in EV adoption across the UK is still several years off.

Source: Investing.com