Tyres-to-bikes retailer Halfords (LON:HFD) rallied as forecast-beating FY26 results confirmed its turnaround strategy has traction. The resilient garages business is proving to be a key growth driver for the group.
With CEO Henry Birch’s ‘Fit for the Future’ strategy delivering results, the motoring products seller saw ‘strong’ trading in April, May and June. Halfords now expects FY27 profits to be ‘around the top end’ of the £45.7 million to £52.3 million consensus range.
The Redditch-based retailer has yet to see any changes to customer behaviour due to the Middle East conflict. However, management remains ‘sensitive to its potential impact on consumer sentiment and spending power’. And Halfords would expect any such impact to take effect from H2 2026.
Going through the gears
For the year ended 3 April, Halfords’ underlying pre-tax profits ticked up more than 8% to £41.5 million. That beat the £40.3 million company-compiled consensus estimate.
Group like-for-like sales grew 4.8%, with like-for-likes positive in both the Retail and Autocentres divisions. Autocentres delivered another strong year, as growth in service, maintenance and repair more than compensated for tyre market weakness.
Retail detail
And despite a subdued consumer environment, the Retail business delivered impressive results. Motoring like-for-likes grew 2.9%, and Cycling sales rose 6.4%, helped by better execution of the retail basics.
Investors also applauded the continued expansion in Halfords’s gross margin. This increased 210 basis points to 52.8%, the highest level in a decade. Gross margin expansion more than compensated for rising operating costs driven by inflationary pressures and planned investments.
What did the CEO say?
Birch commented: ‘With good sales growth, higher margins and an increased dividend, we are delivering improved shareholder returns alongside a more compelling customer proposition.
‘These are early days in our growth strategy and there is much still to do as we seek to leverage Halfords’ clear strengths: leading market positions, an unmatched physical and digital presence in motoring and cycling, a trusted brand, and a unique services proposition made possible by more than 12,000 expert colleagues.’
Halfords is reaping the benefits of self-help actions and some market recovery. The retailer entered FY27 with positive momentum. This suggests Birch’s turnaround strategy has road left to run.
A net cash balance sheet gives Halfords the financial strength to weather the tougher economic times ahead. A 0.2p hike in the FY26 total dividend to 9p also demonstrates confidence in the retailer’s cash generation and improving profitability.
Birch is focused on improving like-for-like growth and margins whilst 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.
Service, maintenance, and repair work is an essential and recurring cost for motorists and is boosting Halfords’ resilience. This shift in the business will be positive if geopolitical instability and cost-of-living pressures slam the brakes on big-ticket discretionary purchases.
Read the press release here: https://www.halfordscompany.com/investors/
