After being stuck in reverse for a large part of 2022, shares in car parts-to-bicycle seller Halfords (HFD) have finally got into top gear. The stock has moved 35% higher over the past month as the market appears to have reappraised the outlook for the retailer.

The company had been sitting on too much stock, and investors were worried that the cost-of-living crisis would hurt bike sales and see motorists switch their cars for public transport given the higher cost of filling up the petrol tank. Less driving might equate to reduced demand for car parts, accessories and services.

A trading update on 7 September was reassuring in that full year earnings guidance wasn’t changed, but for every good bit of news there was plenty of bad stuff such as a declining market for
bike sales.

At the point of the trading update, the stock was trading on less than five times 2022’s expected earnings. That might have attracted investors searching for value stocks.

A more obvious catalyst for the recent share price surge was the acquisition of LTC on 5 October, it boosted Halfords’ garage and mobile van capacity. The group wants to derive more revenue from motoring services, saying they provide ‘more resilient, needs-based revenue streams’.

The next test for the share price will be half-year results on 23 November.

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