Halfords reports boom in cycling sales during lockdown, but faces ‘acute’ supply shortages
Halfords reported a continued surge in pandemic-inspired cycling sales but warned that supply shortages were a risk to its growth projections, in its annual results this morning.
The retailer, which was classed as an essential retailer and was allowed to remain open during the lockdown, reported annual profits grew by 72 per cent, rising from £40.4m last year to £96.3m in its year ending April 2. This is towards the upper end of the company’s March expectations of £90m to £100m.
Like-for-like sales in Halfords’ cycling business soared by 54.1 per cent as the public sought an alternative to public transport and invested in new hobbies during lockdown. But the retailer said “supply challenges for cycling products remain acute” amid Covid-19 disruption, and that this added “uncertainty to its outlook”.
Halfords told City PM that stock shortages were being driven by a combination of high global demand and component shortages, as well as local Covid-19 lockdowns in Asia.
Revenue for its overall retail business in FY21 was £1.3bn – an increase of 9.4 per cent on last year.
In addition to its surge in conventional bike sales, Halfords reported e-mobility sales – including e-bikes, e-scooters and accessories – rose by 94 per cent.
Retail demand for the store’s motoring products, however, suffered from a “supressed market” throughout the year as lockdowns markedly reduced the number of car journeys.
Its motoring revenue fell 12 per cent on a like-for-like basis – but this was “better than transport data would suggest”, the retailer said, pointing out that car journeys in the UK were down 25 per cent.
Despite the pandemic boom, cycling sales were hard to predict, with like-for-like sales soaring by up to 100 per cent in the first half of the year, and declining in the second half.
Although retail demand for motoring was down, the company reported a total revenue growth of 31.6 per cent in its autocentres, a 9.7 per cent rise on a like-for-like basis. This was 89.6 per cent higher than last year, as the company expanded its Halfords Mobile Expert business, launching new vans and hubs across the country.
Halfords forecast further profit growth in the 2022 financial year, predicting a continued cycling product boom as well as a rising demand for staycation-led goods thanks to foreign travel restrictions.
“Demand for our services remains strong in the new financial year, and our touring categories are currently performing particularly well given the trend towards staycations this summer,” chief executive officer Graham Stapleton said.
“In the longer-term, we remain confident in the future prospects for the UK’s motoring and cycling markets and our ability to compete strongly in both,” he added.
Shares were down almost 5 per cent at one stage in response to the news that cycling supply shortages could hamper the company’s future growth.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said this fall echoed uncertainty around the company’s outlook, and warned the supply shortage could worsen as demand for bikes continues to surge.
“Halfords reckons those issues aren’t going to disappear over the hill any time soon, and the timing of a return to normal trading patterns remains highly uncertain,” Streeter said.
“With many people swapping a foreign beach for staycations in the countryside, touring models are in high demand, and risk speeding out of the shops much faster than they can be replaced.”
“The new trend of swapping four wheels for two isn’t likely to be reversed as more people return to work, with more people adopting cycling for the commute,” she added.