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LONDON (Thomson Financial) - Halfords Group Plc, the car parts and bicycle
retailer, said Wednesday it is confident of delivering full year earnings in
line with internal expectations despite reporting a slowdown in first quarter
underlying sales growth, sending its shares over 3 percent higher.
Prior to Wednesday's update analysts were forecasting a consensus underlying
pretax profit for the 450-store group's year to end-March 2009 of 93 million
pounds, up from 90.2 million pounds in the previous year.
In a statement published ahead of Halfords annual shareholders' meeting it
said total sales for the 13 weeks to June 27 increased 1.7 percent against a
tough comparative figure and were down 1.1 percent on a like-for-like basis,
which strips out the impact of new space.
Adjusting for the absence of a full Easter during the quarter, the
performance represents total sales growth equivalent to 3.0 percent and equates
to like-for-like sales growth of 0.2 percent.
The like-for-like sales outturn compares to a plus 3.2 percent run rate at
the end of the retailer's last financial year.
Many UK retailers are struggling as shoppers cut back on spending due to
higher fuel, food and mortgage costs.
However, Halfords said its car maintenance division continued to perform
strongly reflecting its "counter-seasonal and defensive characteristics" and
increased transaction values from ongoing product innovation.
It said sales in the leisure category, which includes bikes, continued to
improve after a slow start and, within the car enhancement category, in-car
technology continued to deliver year-on-year growth in both volume and value.
The retailer noted that the strong contribution from car maintenance meant
gross margin was "slightly ahead" of internal expectations and above the upper
range of its previous guidance.
However, reflecting the strengthening of lower margin leisure sales in the
balance of the season, it still anticipate a full year gross margin in line with
the guidance of a range of minus 20 basis points to plus 20 basis points.
Reflecting the favourable margin position and a focus on costs, profit for
the first quarter is ahead of internal expectations.
"This is an encouraging start to the financial year which, when set against
the strong sales growth achieved in the same period in the prior year (total
sales up 11.4 percent and like-for-like sales up 8.4 percent) underlines
Halfords' resilient and defensive proposition," said acting joint managing
directors Nick Wharton and Paul McClenaghan.
"Whilst not immune to the ongoing challenging retail environment, our market
leading positions, extensive ranges and unique service proposition continue to
provide us with confidence in delivering full year earnings in line with our
expectations."
Halfords has been without a chief executive since the surprise resignation
of Ian McLeod, who left to run Australian retailer Coles in February. Last month
it lured Wal-Mart Stores Inc executive David Wild to the role. He starts on
August 4.
At 8.30 am shares in Halfords were up 8-1/2 pence at 285 pence, valuing the
business at 602 million pounds.
Autobacs Seven Co, Japan's largest car accessories retailer, owns a 5.2
percent stake in Halfords, has a sourcing deal with it and has been tipped as a
possible future bidder.
Sine June 2006 Halfords has spent 66.1 million pounds buying back shares.
james.davey@thomsonreuters.com
jdd
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