Halfords beats profit forecasts as garage revenue drives turnaround

Halfords beat analyst expectations on profits for the year to April 3, forecasting further gains as its garage-services business accelerates a turnaround. The motoring and cycling retailer reported underlying profit before tax of £45.4m, ahead of the £40.3m analysts had penciled in.

The beat came from the Autocentres garage chain, which the company has been expanding as a higher-margin counterweight to its cycling division. Halfords said the Autocentres business grew revenue in the double digits over the year, helped by stronger demand for servicing and repairs from an aging UK car parc. The cycling side, which has dragged group margins through an inventory glut and post-pandemic demand normalization, also showed signs of stabilization in the second half.

Management guided for profit toward the top end of current market forecasts for the current financial year. That guidance is contingent on Autocentres maintaining its growth rate through the summer peak season, when roadside assistance and scheduled maintenance volumes typically run highest.

The turnaround plan, launched two years ago under CEO Graham Stapleton, has leaned heavily on converting the Autocentres network into a higher-volume, lower-cost operating model. Halfords has also invested in a mobile van service and a digital booking platform to capture more of the "do-it-for-me" segment of the motoring market. The results suggest that strategy is starting to show in the numbers, even as overall consumer spending remains under pressure from elevated interest rates and inflation.

Halfords faces a modest year-over-year headwind from the National Living Wage increase and higher business rates, which the company said it would offset through procurement savings and pricing. The market's attention is now on whether the Autocentres growth can sustain its pace through the second half, when consumer budgets typically tighten after the summer.