Halfords’ Share Price Crashed 32.3% on Its FY24/25 Profit Warning

The Halfords Group plc (LON: HFD) share price crashed 32.3% after releasing its latest trading update for the 2024 financial year. The company delivered a surprise profit warning barely a month before the end of its financial year and confirmed that it does not expect any profit growth next year.

During the third-quarter trading update on 25 January 2024, the Group had forecasted that its Underlying Profit Before Tax (PBT) for the 52 weeks ending on 29 March 2024 would range between £48 million and £53 million, contingent upon market conditions not deteriorating in the fourth quarter.

However, subsequent developments have revealed a substantial weakening across three of the Group's four principal markets—Cycling, Retail Motoring, and Consumer Tyres—leading to a notable decline in like-for-like revenue growth within its Retail sector.

Consequently, the Group has revised its PBT expectations to between £35 million and £40 million. This downward adjustment is primarily attributed to two significant factors:

The Cycling and Retail Motoring sectors have been adversely affected by persistent low consumer confidence and an unusually mild and rainy weather pattern, negatively impacting in-store foot traffic and sales of specific product categories, such as winter and car cleaning products.

Notably, the Retail Motoring market experienced a 5.1 percentage point decrease in volume in January (compared to a 0.2% increase in Q3); the Cycling market saw an 8.0 percentage point reduction (compared to a 5.1% drop in Q3); and the Consumer Tyres market declined by 4.3 percentage points.

The Cycling market has faced increased challenges and competition due to market consolidation. There has been a rise in promotional activities and customer credit purchases, leading to lower gross margins than previously expected.

Despite these challenges, the Group's Autocentres business grew strongly, underscoring its strategic importance and resilience. Even though the Consumer Tyres market deteriorated in January, there was a positive trend in the Service, Maintenance, and Repair (SMR) market. 

The PBT projection for FY24 considers the continuation of these challenging market conditions throughout the fourth quarter, including the crucial Easter cycling sales period in March. 

Looking forward to FY25, the Group remains cautious regarding a market rebound in the short term, given the current significant market volatility that complicates accurate forecasting.

Halfords share price.

The Halfords' share price crashed 32.25% to trade at 135.90p from Tuesday’s closing price of 200.60p.