Car parts-to-bicycles seller Halfords (HFD) delivered some good news for the retail sector by hiking FY26 earnings guidance. Shares in the Redditch-based business rallied on the surprise upgrade.
Halfords attributed the positive outlook to ‘strong’ trading, further gross margin expansion and well-managed costs. The upgrade shows CEO Henry Birch’s refreshed strategy is working.
Gross margin gains and tight cost controls are also helping Halfords to offset higher operating expenses. These have largely been caused by higher minimum wage and national insurance costs.
For the year to 3 April 2026, Halfords now expects underlying pre-tax profits to be around the upper end of the £36 million to £41.2 million consensus range.
Like-for-like growth
Halfords conceded the Middle East conflict is contributing to an ‘uncertain macroeconomic backdrop’. Encouragingly however, March and April trading has been in-line with expectations.
Group like-for-like sales grew by a solid 4.8% in FY26. Within the mix, retail like-for-likes revved up 4.1% and sales through the Autocentres garages arm rose by 5.8%.
Within the retail business, a 6.4% jump in cycling like-for-like sales more than compensated for the more modest 2.9% advance seen in motoring.
Halfords stressed the bulk of its FY27 energy costs and foreign exchange requirements are hedged with freight rates largely contracted in advance. As a result, the company is ‘currently comfortable’ with consensus expectations for a rise in FY27 pre-tax profits to between £42 million and £48.6 million.
What did the CEO say?
Birch commented: ‘I am pleased to see the positive results that are starting to materialise from the “optimise” phase of our “Fit for the Future” strategy as we focus on driving operational excellence and strengthening our foundations for future growth.
‘This momentum further underlines the significant potential that exists within the Halfords business, and I look forward to sharing more detail on our progress at our full-year results announcement in June.’
We’ve never been the biggest fans of Halfords. The company has dished out numerous profit warnings in our time covering the stock. Unsurprisingly, the shares are flashing red over one and five years.
Halfords’ sales have traditionally been a bit streaky. In FY21 and FY22, the business benefited from the Covid-19 cycling and staycation booms. But in the intervening years, Halfords has faced material cost headwinds which have squeezed margins.
Yet given a net cash balance sheet, and with the shares trading on a single digit price-to-earnings multiple for FY27, Halfords is becoming an interesting margin recovery play.
Birch’s refreshed strategy is focused on improving like-for-like growth and margins whilst scaling the motoring services side of the business. Over time, this should make Halfords less cyclical by bumping up recurring revenue and boosting sales in non-discretionary categories.
Read the press release here: https://www.halfordscompany.com/investors/
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