Halfords upgrades profit forecast but braces for £23m Budget impact

Despite a positive Christmas trading performance, Halfords is bracing itself for a £23m increase in direct labour costs.

The retailer of motoring, cycling and leisure products has upgraded its underlying profit before tax forecast to £32m to £37m after seeing stronger consumer demand.

Pricing and promotion strategies alongside cost reduction measures helped to boost like-for-like retail sales in cycling by 13.1% in December. Halfords is on track to exceed its £30m saving target whilst freight headwind costs are expected to drop below the previous expectations of £4m-£7m.

However, the retailer is still uncertain about the UK’s outlook in light of measures announced by the Autumn Budget.

It says whilst the impact of changes to minimum wage and national insurance is easy to quantify, the effects on the “demand environment and health of the broader economy are harder to predict.

“We also expect to continue to expect to see inflation passed through on managed services. We continue to work on possible mitigations for the additional costs we face and will share our plans alongside our FY25 results”.