‘Significant market deterioration’ forces profit warning for retailer

Halfords has released a profit warning after experiencing a “significant market deterioration”

Unusually mild and very wet weather combined with reduced consumer confidence has impacted an already competitive market, and has meant three of the retailer’s four core markets have weakened.

Profits before tax were anticipated to be between £48m and £53m for 2023/24 “assuming markets did not weaken further in Q4”.

Halfords has now dropped its profit expectations to the range of £35-£40m. “Decisive action has been taken on cost” but Halfords says it’s not enough to offset the significant market deterioration in the period between now and the end of the financial year.

The weather and consumer confidence affected footfall and caused little demand for sales of categories such as winter and car cleaning products.

The Redditch-headquartered firm also says that the cycling market is becoming more challenging and competitive thanks to its consolidation. More customers are purchasing on credit, leading to weaker gross margins than previously anticipated.

In Q3, Halfords said it was on track to secure £30m in operational savings this year, whilst looking to make strategic investments in its stronger divisions.

It reported revenue growth of 13.9% alongside a sales increase of 8.3% and has saved £16.6m in the six months to September.

Now looking ahead to 2025, the firm says it remains cautious on short-term market recovery, and the volatility of the market results makes forecasting accurately challenging. Next year’s profit before tax will be supported by cost savings that “more than offset net inflationary headwinds”.

But it is confident that when core markets recover, the platform leaves it “exceptionally well-placed to succeed”.