Britain’s Halfords Group (HFD.L) slashed its annual profit forecast on Wednesday and cautioned that there might be no profit growth next year due to a decline in demand for bicycles, car products, and tyres, causing a sharp drop in its shares.
The company cited “very challenging and exceptional short-term market conditions”, attributing the situation to adverse weather conditions.
Despite attributing the challenges to wet, mild weather, Halfords remained wary about a potential recovery.
Shares plummeted by 23% to 154 pence at the opening, marking their lowest level since October 2022.
The declining sales at Halfords reflect the struggle retailers are facing amidst squeezed incomes for Britons, particularly with the economy slipping into recession in the latter part of the previous year.
Halfords highlighted that rain and warmer temperatures led to decreased foot traffic in its stores and subsequently reduced sales of anti-freeze.
In January, sales volumes for motoring products fell by 5.1% compared to the same period last year.
Similarly, cycle sales were 8% lower, and tyre sales dropped by 4.3%.
Analysts at Peel Hunt noted the positive aspect of Halfords maintaining its market share but observed that consumers were exercising caution.
They remarked, “While our macro indicators for disposable income growth this year are all lit up green, which bodes well for spending power into the second half of 2024, consumers still remain cautious, shopping by need.”
For the financial year ending on March 29, Halfords anticipated an underlying pretax profit of £35-40 million ($51 million), marking a downgrade of at least 17% from the previous forecast range of £48-53 million given just last month.
The company also projected that profit in its 2025 financial year would be broadly in line with 2024, representing another downgrade compared to a consensus forecast of £56 million according to LSEG. ($1 = £0.7906)