Halfords lowers guidance as lack of technicians hampers growth

Halfords has lowered its full-year profit guidance after it revealed that a challenging labour market meant a lack of skilled technicians combined with a weak tyre market hampered growth.

In a trading update for the 13 weeks to 30 December 2022, it confirmed group revenues increased 38.3% and 12.6% LFL vs FY20 ( 21.7%, 4.6% LFL vs FY22).

The retailer added it reflects “strong” sales in Motoring and needs-based categories, but overall revenues were impacted by softer than expected cycling and tyre markets.

Meanwhile, it reported that services represented 50.3% of group revenue, and B2B 28.2% with a strong Commercial Fleet performance growing 138% year-on-year.

However, macro-economic headwinds continued to impact the cycling and consumer tyre markets although it gained share across all its measured markets including Cycling, Motoring and Tyres.

Halfords also revealed that it is focused on cost reduction, delivering over £20m full-year savings and exceeding its full-year target by 33%.

Looking ahead, it said it has been unable to “recruit enough skilled technicians” in its Autocentres business which it revealed will limit growth of higher margin sales during the important upcoming Q4 MOT peak.

It also expects a deeper decline in demand for more discretionary high-ticket items in retail than it previously forecast.

As a result of these revisions to its forecast, Halfords said it is reducing FY23 underlying profit before tax guidance to £50m to £60m.

Graham Stapleton, CEO, 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.

“With unprecedented demand in our Motoring Services business, we are particularly impacted by the nationwide skills shortage, with recruitment proving to be extremely challenging in the current labour market.”

He added: “We are continuing to take a range of actions in order to fill 1,000 new automotive technician roles, which include our new Later Life Apprenticeship programme, as well as a focus on attracting more women and young people from disadvantaged backgrounds into automotive apprenticeships.

“We are confident that we can offer unrivalled career progression for automotive technicians, and that this will allow us to attract and retain talented individuals, thereby enabling us to better service the demand through FY24.”