Shares in Halfords (LON:HFD) motored to a four-year high after the car parts-to-bicycles seller raised FY27 profit guidance again. The latest upgrade was driven by a strong performance in the year-to-date. Summer heatwaves drove demand in seasonal categories such as bicycles, camping equipment and air conditioning services.
Halfords now expects FY27 underlying pre-tax profit to be between £55 million and £65 million. That is comfortably ahead of the current consensus of £52.6 million with a range of £48.9 million to £55.1 million.
Going through the gears
‘Building on the strong current trading noted in our FY26 results announcement, Halfords has continued to outperform over recent months,’ insisted the retailer.
‘This reflects momentum in the underlying business as we continue to deliver against our strategic priorities alongside a very strong performance in seasonal categories, in part reflecting unusually warm summer weather.’
Incremental profits
Led by CEO Henry Birch, Halfords estimates this heightened seasonal demand resulted in ‘incremental profit in the mid-single digit millions of pounds’.
| FY24 | FY25 | FY26 | |
| Pre-tax profit (£m) | 41.8 | 43.6 | 45.4 |
| Gross margin (%) | 48.2 | 50.7 | 52.8 |
| Return on capital employed (%) | 11.3 | 12.6 | 14.2 |
Source: Halfords, company accounts
As a result, the firm’s FY27 profit performance is likely to be further weighted towards H1. Halfords is determined to accelerate investment in technology and marketing in H2.
Under Birch, Halfords is in the early stages of an impressive turnaround. As the table shows, key financial metrics including profits, margins and return on capital employed (ROCE) are moving in the right direction. Furthermore, the retailer is taking market share in a tough consumer environment.
Birch is focused on improving like-for-like growth and margins. In addition, he is scaling the motoring services side of Halfords’ business. Over time, this should make Halfords less cyclical. It will bump up recurring revenue and increase the proportion of sales derived from non-discretionary categories.
This summer, Halfords benefited as searing temperatures stoked demand for staycations, in turn boosting sales of seasonal products. It is encouraging to see Halfords capitalising on its sales potential when demand is so high.
However, the company may struggle to replicate this performance next summer, when the weather will presumably normalise.
