Halfords raises profit outlook amidst consumer uncertainty
- Halfords reported a significant increase in like-for-like sales, achieving a 13.1% growth during December.
- The company has raised its profit outlook for the year, now expecting between £32 million and £37 million.
- Despite these positive results, Halfords cautioned about uncertainties in the consumer market due to upcoming budget changes.
In the UK, Halfords has recently announced an improved profit outlook following a recovery in trading, particularly during the Christmas period. The automotive and cycling retailer reported a 13.1% increase in like-for-like sales in December, indicating a rebound from previous struggles. Despite the positive trading results, Halfords has cautioned about uncertainties regarding the consumer market due to tax-raising measures in the autumn budget, which are set to take effect in April. These budget changes are anticipated to increase costs, with the company forecasting an additional £23 million in wages due to rising national insurance contributions and minimum wage adjustments. The company’s performance has been bolstered by favorable weather, which has led to a 5.5% sales increase in January 2025 within its motoring product division. As a result of this recovery, Halfords now expects its full-year underlying pre-tax profits to reach between £32 million and £37 million, exceeding analyst expectations of £28.3 million. This expectation has positively influenced the company's stock, which saw an increase of over 17% in morning trading. However, Halfords remains aware of the potential market volatility that may persist in the near future. The adjustments in minimum wage and national insurance contributions were described as easily quantifiable; however, the overall impact on demand and the broader economy remains uncertain. The company highlighted that such cost pressures could lead to price increases across its Autocentres segment as inflation from managed services is expected to be passed through to consumers. Despite recent improvements in trading, analysts have cautioned against assuming that this surge in sales represents a sustained upward trend in consumer behavior. They pointed out that, while the Christmas buying excitement was beneficial, it may not signify a broader recovery in the cycling market, which has shown signs of previously waning popularity. Nevertheless, the growth in Halfords’ automotive services, particularly in maintenance and repairs, has helped counterbalance any weaknesses in other areas.