Halfords reports stable results as it braces for £23m Budget costs

Halfords has reported stable financial performance as it readies itself for a £23m increase in direct labour costs driven by the recent Budget.

The Redditch-based retailer, which offers motoring, cycling, and leisure products, indicated that the rising costs, along with other short-term challenges, may impact its financial results for the latter half of the year.

In its most recent financial report, the company revealed that it has only factored in a £9m increase in labour costs for its FY26 plans.

Revenue for the first half of FY25 was £864.8m, a slight dip of 0.1% compared to last year.

Underlying profit before tax came in at £21m nearly unchanged from £21.3m a year earlier.

Retail revenue was steady at £516.1m, with like-for-like sales falling by 0.7%, reflecting concerns about how the Budget might impact consumer spending.

Improved margins helped offset lower volumes, particularly in the cycling segment, which remains about 33% below pre-pandemic levels.

The Autocentres division saw revenue grow by 0.8% to £348.7m, but its underlying EBIT dropped to £9.1m, impacted by challenges in the tyres market and higher labour costs.

Despite persistent challenges from headwinds, Halfords says it expects conditions to ease in the long term.

Its rollout of Fusion Motoring Services strategy (which creates a closer relationship between Retail and Autocentres within a town) has expanded to 40 sites in FY25, following strong returns from the first wave of new locations.

Graham Stapleton, chief executive officer of Halfords, said: “I am pleased with the progress we have delivered in the first half. Against ongoing headwinds, we have continued to focus on controlling the controllables, with a disciplined approach to cost and margin optimisation.

“We are particularly excited by the outstanding results we are seeing from our Fusion Motoring Services programme, which creates a stronger connection between our Retail stores and Autocentres in a town to fulfil all our customers’ motoring needs. Now live across 22 locations, these motoring services locations are delivering phenomenal returns with a significant uplift in both sales and profit. Given the strength of these results, we are now targeting 40 Fusion sites this year.

“The cost implications from the recent UK Budget are particularly acute for a specialist retailer that provides expert advice and assistance to customers, face to face.  While we will work hard to mitigate these costs, we urge the government to consider alternative ways of supporting businesses like ours, including the acceleration of the Apprenticeship Levy reform, which would help us to upskill existing colleagues and offset some of the new headwinds. Looking ahead, while the short-term outlook remains challenging, we will continue to build on our unique omnichannel platform and focus on what we can control to deliver on our strategy this year and beyond.”