The temperature is likely to be balmy this week — it could reach 16C in some places on Thursday. While the unseasonably mild spell is great news for motorists, it is bad news for retailers.
Halfords, which specialises in bicycles and car parts in 460 high street shops and retail parks, is among those expected to suffer. Mild weather and dry evenings mean that motorists will not be shopping for windscreen wipers or antifreeze.
Halfords is already suffering from higher petrol prices, which is currently averaging qbout 130p a litre, according to government data. Cash-conscious drivers will cut down on miles if they have to pay more for fuel.
All this does little to help Halfords, which said last week that profits had fallen by 23% in the first half of its financial year due to rising costs and investment.
The update sent shares down 2.3%, despite a 2.5% increase in like-for-like sales. Halfords also warned that profits would not grow until 2021 because of investment. It plans to plough up to £60m a year into stores, garages and digital platforms.
This is all part of the “back to basics” approach of new boss Graham Stapleton, who wants to focus on motoring and cycling. He took over from Jill McDonald, who left for Marks & Spencer.
His strategy has included own-brand relaunches and a tie-up with folding-bike maker Brompton — plus a decision to walk away from rescuing Evans Cycles, which was snapped up by Mike Ashley’s Sports Direct.
While analysts say Stapleton was right to shun that deal, they have raised concerns over a planned move away from camping equipment. The strategy carries the risk that Halfords will become overly tilted towards autumn and winter.
The average customer visits Halfords less than twice a year. Cutting spring and summer ranges could make the trips even more infrequent, according to broker Stifel. Halfords sees its specialisation as a way to compete against Amazon, but some claim it is risky.
Shares in Halfords have skidded around in recent months. They closed at 300p on Friday, almost 23% lower than their 12-month peak of 388p in May, before a profit warning. They are also under pressure over concerns that Halfords may fail to hit full-year guidance of broadly flat profits. The figure last year was £71.6m.
Last week’s results included a line saying that forecasts depended on “average winter weather”. If the recent warm weather is indicative of the months ahead, Halfords could struggle. Avoid.
