Halfords says cycling market is down 20 per cent year on year

Halfords, the UK’s largest retailer of bicycles and accessories, says that the cycling market is down 20 per cent year on year, with the cost-of-living crisis resulting in a fall in high-ticket, discretionary purchases by consumers – an area in which it sees little prospect of a recovery in the short term.

The company’s view of how the market is performing was revealed in a trading statement to the London Stock Exchange this morning, covering the 13 weeks to 30 December 2022, the third quarter of its 2022/23 financial year, and including the key Christmas trading period.

> "Considerable softening of the cycling market”: Halfords sales slow as supply chain disruption and inflation bite

Besides providing the usual year-on-year trading comparisons, Halfords also revealed how its recent trading performance compared to the 2019/20 financial year, which it said would “provide a better understanding of underlying performance” by removing the impact of the coronavirus pandemic. 

At group level, total revenue growth in the third quarter of 2022/23 was up 38.3 per cent compared to 2019/20, and by 12.6 per cent on a like-for-like basis, which strips out the impact of changes in the store portfolio.

Growth was largely due to a particularly strong performance within the company’s Autocentres and, to a lesser extent, motoring retail, with needs-based categories performing better than discretionary ones.

However, total cycling revenue fell 10.5 per cent during the quarter compared to three years earlier, and on a like-for-like basis was near-static with a fall of 0.1 per cent.

Within cycling, the company – which enjoyed booming sales of bikes during the pandemic – said that its overall revenues were “outperforming the market, however the market remains 20 per cent down year-on-year to date.”

It said that children’s bikes had “performed well due to the stronger year-on-year availability and Christmas gifting demand,” resulting in revenue growth of 4.6 per cent compared to the previous year.

But revenue from sales of adult bikes was “weaker than expected down,” falling 12 per cent year-on-year, which Halfords said reflected “the impact of weaker consumer backdrop” compared to the first half of the year, “and the more discretionary, higher ticket nature of the category.”

However, the company added that revenue from bikes sold through its Cycle2Work scheme “continues to show resilience against economic backdrop,” with a 20.1 per cent rise recorded against the previous year.

Halfords said that it would give more detailed guidance at the end of March to City analysts on its expectations for the 2023/24 financial year and beyond, saying that currently, “it remains particularly difficult forecasting with any certainty.”

While expressing confidence over its longer-term outlook, it added that “consumers will, however, continue to face inflation, and we therefore do not expect a significant short-term recovery in high ticket, discretionary spending.”

The company’s CEO, Graham Stapleton, said: “We have seen strong revenue growth in what are exceptionally challenging circumstances, and we have continued to grow our market share whilst also tightly managing our costs, inventories and cashflows.

“Consumer demand for our services and needs-based categories, which now account for the majority of our revenue, continues to grow, and our Motoring Loyalty Club is exceeding expectations as customers recognise the value of its unrivalled discounts and offers.”

He warned that Halfords was suffering from a skills shortage within its car-servicing business, and was to recruit and train technical staff to address that shortfall.

But with the company’s profit expectations for the year, previously cut from £75 million to £60 million, reduced further to £50 million today, Halfords’ shares fell by 20 per cent as the market responded to the weaker-than-expected trading update.