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Cycling boom isn't enough to drive up Halfords’ shares
SHARES IN Car parts-to-bicycles retailer Halfords (HFD) failed to pedal higher as we’d hoped despite the delivery of full year profit
(7 Jul) at the upper end of previous guidance and the news recent trading is materially better than that anticipated at the start of the COVID-19 outbreak.
Bike sales surged during lockdown and Halfords is seeing the initial signs of recovery in motor-related sales.
Over the 13 weeks to 3 July, like-for-like cycling sales grew 57.1%, boosted by the avoidance of public transport, balmy weather and increased adoption of cycling as a health and leisure activity.
However, the fact that cycling products are lower margin means Halfords’ main growth driver is currently a less profitable one for the company; selling bikes involves lots of manual labour with staff having to assemble and adjust products.
In addition, Halfords’ lack of earnings guidance also disappointed the market and combined with the drag on earnings from having
a bigger weighting from cycling sales, drove the shares lower on results day.
While Halfords provided different scenarios, saying it will either make or lose a certain amount of money, that wasn’t enough for investors who wanted to see management have a firmer grip on how the year will pan out.