Halfords Shares (LON: HFD) Up Big, Firm Eyeing Expansion as Profits Rise

Halfords shares (LON: HFD) are on the move today, up by 12%, following the release of their first-half profit results which outstripped market expectations. The company additionally unveiled ambitious plans to enlarge its ‘Fusion' motoring services business, solidifying its growth trajectory.

With the stock price down more than 30% on a year-to-date basis leading into today's report, the upwards move will be welcome by HFD holders, who have otherwise had little to cheer so far.

For the six months concluding on September 27, Halfords declared a pre-tax profit of 21.3 million pounds, a figure that surpasses the forecasts made by industry analysts. This robust financial performance has anchored the faith of financial analysts in the company's capacity to meet, if not exceed, the market projections for its annual group profit.

Fuelled by the first-half financial success, analysts are now forecasting a full-year profit around 29 million pounds. Given that 21 million pounds of this target has been actualised in the initial half, the projections appear readily attainable. The confidence is further bolstered by the company's strategic plan to achieve savings of 30 million pounds by fiscal 2025.

However, despite the positive uprising in profitability, Halfords anticipates a rise in operational costs by about 29 million pounds. This prospective increase stems from enhanced National Insurance Contributions decreed in the UK government's annual budget. Notwithstanding these potential cost escalations, the company reassures that a significant portion of these expenses had already been accounted for, mitigating any significant financial surprise.

Eyeing an expansionary future, Halfords has set in motion an aggressive rollout plan for its ‘Fusion' strategy. This initiative aims to enhance garage services across the board, ambitiously expanding from the current 22 locations to a target of approximately 40.

The strategies come as Halfords, a venerable institution with over 130 years of history and a workforce of more than 12,000, grapples with the increased cost pressures following the aforementioned changes in employer social security contributions within the UK's budget. These fiscal decisions have had a widespread impact on numerous UK firms, Halfords included.

It's important to note, the short-term outlook remains laced with uncertainty due to alterations in consumer behavior in the wake of the UK budget changes and the ongoing cost-of-living crisis afflicting Britain. The company had previously flagged concerns in June regarding a potential market downturn, particularly within the cycling and consumer tires sectors, identified as collateral from factors such as adverse weather conditions and the protracted cost-of-living crunch in the country.