Halfords share price rallied as LON:HFD upgraded its profit expectations for the financial year 2025 in its trading update. The upwardly revised outlook comes against a background of improved trading performance and successful strategic initiatives, though significant hurdles remain.
The retailer saw positive like-for-like sales growth in Q3 across both its Retail and Autocentres divisions. A marked improvement from that seen in the first half.
Christmas proved particularly successful for the firm’s cycling segment, which recorded an impressive +13.10% sales growth in December.
Performance shows, that despite pressure on consumer spending, Halfords’ product mix and promotional strategies are resonating with its consumers.
The company’s pivot towards services continues to impress, with Autocentres delivering strong performance in the higher-margin Services business.
Consumer garages achieved +10.30% like-for-like sales growth in Q3, supported by the ongoing rollout of Fusion Motoring Services.
This growth helped offset weakness in the consumer tyres market, highlighting the importance of the company’s diversification strategy.
There has been more good news, thanks to the cold weather, which has driven a +5.50% growth in the sales of Motoring Products during January.
The company has also been able to reduce its expenses with foreign exchange rates and freight costs moving more favourably than had previously been anticipated. While a program of cost reduction measures is on track to exceed the firm’s £30.0 million full-year target.
As a result Halfords was able to upgrade its FY25 profit guidance to between £32m-£37m of profit before tax.
However, the company still faces multiple challenges, many of which are due to the measures announced in the Autumn Budget.
The introduction of minimum wage increases and additional employer national insurance charges, will add approximately +£23.0 million to Halfords’ direct labour costs in FY 2026 alone.
The impact of the autumn budget on consumer spending and the wider economy remains to be seen, and inflation continues to dog costs in the firm’s managed services business.
However, Halford’s management has said they are working on mitigation strategies, which they will share with investors alongside the FY25 results.
The +19.0% jump in the Halford’s share price today, tells us that the market likes what it sees, and suggests that investors would reward any continuation of the turn around.
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