Cycling sales grew for Halfords in its half year results (the 26 weeks to 27 September 2019), but overall like-for-like revenue fell for the retailer, citing weak consumer confidence. Perhaps crucially, the Group also hinted at a greater emphasis on service over product sales in its future.
Group sales fell 2.4% like-for-like in a “tough market” however sales switched to growth in the last six weeks of the period. Bigger ticket discretionary product demand was soft, while online and B2B (the latter now 15% of Group sales) all delivered strong sales growth.
Halford’s now-year old strategy “To inspire a lifetime of motoring and cycling” was updated, having optimied cycling space in all retail stores, based on a ‘right range, right store’ approach that won it a 2.5pts improvement in the customer New Promoter Score (NPS) driving sales and margin, the firm said.
“Addressing the headwinds faced by retailers of products”
Despite cycling’s positive performance, the Group singled out the motoring side of its business – as well as service over sales – as a priority: “We believe our plan enables the business to evolve into a consumer and B2B services-focused business, with a greater emphasis on motoring, generating higher and more sustainable financial returns. Our motoring and cycling products businesses remain core but, beyond this, we need to deliver a substantial shift to services in order to drive growth and address the headwinds faced by retailers of products.”
The group anticipates a medium-term evolution of service-related sales doubling as a % of total Group sales and Autocentres representing a materially larger proportion of Group profit. “As a result, motoring will inevitably grow in focus.”
An increasing focus on service is not revolutionary thinking for Halfords (or for the cycle sector), but confirmation (if it was needed) that even huge groups like Halfords struggle to absorb the irregularities and headwinds currently associated with retailing product, in bricks and mortar and online. CI.N has plenty of workshop-related articles for further reading on that topic, including a series on ‘how to make your workshop work harder‘.
Halfords CEO Graham Stapleton commented on the results: “In a period where retail sales were impacted by weakened consumer confidence, we are pleased to have successfully increased gross margin, kept a tight control over costs, and seen growth from our strategic investment.
“Twelve months on from the launch of our strategy to inspire and support a lifetime of motoring and cycling, we have made encouraging early progress. Our Autocentres business delivered strong growth in the half, while new initiatives helped to drive top line momentum in Group Services, Online and B2B.
“We are clear that our service-led strategy is the right one for Halfords. Our unique position, growing services business and positive macro-customer trends, gives us confidence that this is the right time to accelerate investment, leveraging our trusted household brand to become a clear market leader in Motoring services.
“Over the medium-term, we expect service-related sales to double as a percentage of Group sales and Autocentres to represent a materially larger proportion of Halfords’ profits. As a result, motoring will inevitably grow in focus for the Group. We are confident that this strategy will drive long-term sustainable growth.”