Halfords has this morning issued a statement that it proposes to close both its Cycle Republic stores and the Boardman Performance Centre following a strategic review.
The proposal is said to link back to the parent group’s strategic update in November, which outlines intent to bolster profitability of the firm’s cycling arm.
Today’s statement offers: “The proposed closure of Cycle Republic reflects the challenging economics of a store-based dedicated performance cycling operation. Exiting a low-returning, stock intensive business allows us to improve our return on capital whilst freeing up investment and resources to continue to drive our services-focused strategy, with an emphasis on accelerating the growth of our motoring businesses. The proposed closure is expected to be marginally accretive to earnings in FY21 and will also enhance cashflow and net debt on an ongoing basis, principally through lower working capital requirements.”
Going forwards Halfords will direct its attention to the Tredz business, which it says is better positioned to tap into the enthusiast segment and with a superior business model.
Tredz, acquired in May of 2016, is a predominantly online business with a greater emphasis on performance cycling, something Halfords says will focus going forwards. An investment in logistics and infrastructure will bolster the Tredz business over the course of 2020.
A consultation process will today launch with 226 staff set to be affected by the proposal with a view to mitigating redundancies where possible.
Halfords are also actively exploring opportunities to sell the sites as a going concern. Subject to the outcome of current negotiations and consultation, the stores are expected to close during the first half of FY21.
Graham Stapleton, CEO said: “The Board has come to the difficult, but necessary, decision to propose the closure of Cycle Republic, our retail store-focused performance cycling brand. This proposal is not a reflection of the hard work of our Cycle Republic colleagues, who I would like to thank for their commitment and passion in serving our customers. We are now moving into a Classification: Restricted period of consultation with impacted colleagues with a view to mitigating as many redundancies as possible.
“Going forward we propose to focus our investment and resources in Halfords and Tredz, through which we will deliver market-leading specialist propositions for both mainstream and enthusiast cyclists via a business model that improves our overall economics.”
The proposed closure of Cycle Republic closely follows the wind up of Cycle Surgery in January of this year, within which around 200 staff were affected. The two chains will represent a large chunk of business for suppliers further up the chain.
At the time of writing Halfords shares are down just shy of 20% on the day and trading at 82.80, an all time low for the business.