Halfords profits plunge 16% as weak pound sees import costs soar
Car parts and bicycles chain Halfords has become the latest firm to take a hit from the falling pound as it revealed a 16% drop in half-year profits.
The retailer said sharp falls in sterling since the Brexit vote sent the cost of imported goods surging by £6 million in its first half.
It posted pre-tax profits of £39.1 million for the six months to September 30, down from £46.4 million a year earlier as hefty discount promotions for its bicycles range also knocked interim profit margins.
The group warned over the impact of higher costs of importing goods, but said it had plans in place to help offset the blow and confirmed that full-year profits were set to meet City forecasts.
Halfords chief executive Jill McDonald said: " As an importer of goods, the sterling devaluation brings input cost headwinds for the group.
"However we do have a number of mitigation opportunities including working with suppliers, price, cost/process efficiencies and alternative product sourcing."
Shares in the group dropped 4% on the higher cost warning.
Halfords said on an underlying basis pre-tax profits dropped 12.1% to £40.8 million over the first half.
Despite the knock to its margins, Halfords said sales were strong in the first half, in particular for its bike ranges, which rose 4.6%.
Widespread discounting across the market saw Halfords ramp up promotions for bikes, with sales also buoyed by the success of Britain's cycling heroes at the Rio Olympics.
After a disappointing start to the summer, demand bounced back as like-for-like bike sales surged 12.5% in the seven weeks to August 19 and jumped by 16% in the final six weeks of the first half.
Motoring sales rose 1.1% overall in the half-year, thanks to a 7% rise in travel solutions ranges as drivers snapped up child safety seats and roof boxes.
But ongoing falls in satellite navigation sales left it nursing a 3.5% interim sales drop in its car enhancement offering.
Like-for-like sales were 0.9% higher at its Autocentre garages as a robust first quarter offset a 2.3% sales fall in the second quarter.
David Stoddart, analyst at Edison Investment Research, said: "It is clearly pleasing to see Halfords' retail sales accelerate during the second quarter, even if Autocentres' revenues declined over the same period.
"How sustainable that proves in the short term, if the meteorologists' forecasts of a tough winter are correct, remains to be seen.
"The headwinds from currency moves and the national living wage, however, will persist."