Halfords has blamed ongoing supply chain issues, inflation hitting customers’ spending and a return to more normal demand following the Covid bike boom for its cycling sales slowing in the latest financial year.
Publishing its preliminary results for the 52 weeks to 1 April 2022, the retailer noted a 27.2 per cent reduction in cycling retail revenue compared with the previous financial year, but insists cycling revenues were not expected to grow versus the peak of lockdown and were hit by supply chain disruption.
Speaking at a presentation to City analysts accompanying publication of the results, incoming Chief Financial Officer, Jo Hartley, said there had been a “considerable softening of the market in cycling”.
Halfords says comparison with financial year 2020 “offers a better understanding of underlying performance”, without the disruption Covid caused during financial year 2021, and saw a 2.7 per cent increase in retail cycling revenue when compared with two financial years ago.
However, regardless of how you view the figures, cycling sales cooled in comparison with the surge in interest during the pandemic.
Supply chain disruption
Chief Executive Officer, Graham Stapleton, said that cycling sales “whilst strong” had seen more volatility in the past year and were constrained by wider supply chain disruption, “industry-specific production bottlenecks” and some signs later in the year that demand began to be impacted as inflation and cost of living concerns grew.
Availability of kids bikes, in particular, suffered from ill-timed supply hiccups as the pre-Christmas period was hit by sea freight delays “which affected consumer confidence over certainty of delivery”.
One area Halfords saw strong growth was electric mobility revenue (e-bikes, e-scooters and associated accessories), which was up 74 per cent from 2020.
Overall, the retailer’s pre-tax profit of £89.9 million is up £32.9 million (57.8 per cent) compared with 2020, and down £9.7 million (9.7 per cent) versus financial year 2021.
Looking ahead Halfords remains optimistic it is “well-positioned, given
our market leadership position in both motoring and cycling, and our strong balance sheet, to emerge from this challenging trading environment in a relatively stronger position.”
The company also expressed faith in cycling’s long-term outlook “as government infrastructure and climate needs necessitate greener modes of transport.”
Explaining the situation to city analysts, CFO Hartley said the retailer’s Autocentres business had been more consistent than cycling as it is “much more needs-based” and “consumers are continuing to do what they need to for their car”.
CEO Stapleton also added that he believes the market will “move with us” when they opt to increase bike prices.
“We have got very strong market leadership, have very big market shares and 80 per cent of our bike range is own brand, we feel confident that we can move pricing up and the market will move with us,” he said.
“There is quite significant price inflation in cycling to the extent that the market overall can stand because we will pretty much set the market price. We have got a really good understanding of where we can move pricing and what limit we can move it to. We’re comfortable we have put as much of that inflation through as customers and the market can take.”