Retailer’s shares plummet 30% as ‘profit machine goes into reverse’

Halfords’ share price has dropped 30% in early trading after it slashed its profit forecast on the back of poor post-Christmas sales.

It saw “a significant drop” in like-for-like sales in January as three of its four markets underperformed.

Monthly sales in cycling were down 8%, retail motoring down 5% and consumer tyres down 4% – which the retailer called a “significant market deterioration”.

But it had been relying on a strong second half to its financial year to hit its numbers.

Russ Mould, investment director at AJ Bell, said: “Halfords’ profit machine has gone into reverse as a result of customers watching their pennies and wet weather deterring them from visiting its stores and buying  winter products. That suggests it could be sitting on excess stock and will need to find a way to clear it.”

The retailer has now cut its forecast for underlying pre-tax profits by nearly 30%, to £35m-£40m, less than five weeks after it had restated expectations that it would achieve £48m-£53m in the year to March 29.

Investors reacted badly, with the share price down 30% to 141p at 10am today, wiping off more than £120m from the company’s market value.

The drop comes just two months after it experienced a 19% one-day fall after an underwhelming update to the market in late November which scuppered its expected return to the FTSE 250.

Mould added: “Halfords has gone back to days of old where it would regularly disappoint with earnings guidance and always have some excuse as to why its business is not running smoothly.

Chatter about a takeover approach from Redde Northgate last November amounted to nothing, but a resurrection of profit warnings from Halfords could prompt shareholders to push for change which could include new ownership.”

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