Halfords sees supply chain issues start to ease – after cycling sales fall 25%

Halfords has said supply chain problems are starting to ease after they led to a 25% fall in cycling sales.

The group said the availability of bikes had been “lower than we would like” in spring and later deteriorated further, meaning demand was outstripping supply in some categories for most of the first half of its financial year.

But Halfords said it was confident of seeing good sales “as supply normalises in the future” and that it was “well set for Christmas trading”.

Image: Halfords said freight charges had been ten times their normal level

The group also revealed labour shortages had held back sales elsewhere in the business.

But it reported a 16% rise in profits for the six months to 1 October to £64m as overall revenues climbed 9% to £695m, led by its autocentres and sales of motoring products, such as roof racks and other “staycation” favourites.

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It also upgraded its full year underlying guidance from £75m to £80-90m, prompting a 15% surge in the Halfords share price in morning trading. The stock ended the day almost 20% higher.

Chief executive Graham Stapleton said inflation, labour shortages and supply disruption “will continue to impact the business”.

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But he added that demand for the group’s products and services “will remain healthy” and that it will “be able to manage and mitigate the operational challenges” for the remainder of the financial year and into the next.

Describing the kind of supply issues Halfords had faced, Mr Stapleton said: “Moving anything around the globe over the last six months has been particularly challenging.

Image: HGV driver shortages were among problems in the supply chain

“Even if goods are manufactured and a container is found to ship them to the UK, the recent HGV driver shortage has meant that this final leg of the supply chain has been more costly and unreliable.”

He added that freight charges had at times been ten times the normal rate.

Mr Stapleton said cycling sales were “very strong” in 2020/21 but that while still strong this year – at 9% ahead of pre-pandemic levels – they “have been constrained by supply chain issues and industry specific bottlenecks on production”.

“Although supply challenges have now begun to ease, we saw shortfalls in our premium ranges of own brand and exclusive mechanical bikes through most of H1, which saw demand outstrip an irregular and unpredictable supply.

“Nevertheless, we are confident, as supply normalises in the future, that we will see good sales in the categories hardest hit this year and we believe we are well set for Christmas trading.”

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1:09 ‘Interest rate rise wouldn’t tackle supply issues’

He added that Halfords was “pleased with the current availability of kids bikes and e-bikes” heading into the festive period.

The chief executive added that the labour market “has also not been without its challenges”.

“Self-isolation and high demand for technicians has meant that capacity within our garages and HME [Halfords Mobile Expert] vans has been constrained.

“While not a significant problem, it has undoubtedly meant that we have limited our sales potential over the first half of the year.

“Excellent labour productivity has partially compensated, and we hope to see an improvement in the labour market over the balance of year.”