Halfords has blamed a sharp fall in its sales of bicycles and cycling equipment over the summer on bad weather that deterred casual cyclists from taking to the road or upgrading their kit.
In an unscheduled trading statement, Halfords said cycling revenues at stores open for a year or more fell 11% in the eight weeks to 28 August. The company, which is under new leadership, said discounting in the market was also a factor.
The news sent Halfords’ shares down by almost 10% to 459p on concerns that the retailer’s success, powered by the recent wave of enthusiasm for cycling, could be faltering.
The statement marked a contrast to Halfords’ last trading statement in mid-July, which showed cycling sales growth had slowed to 2% in the three months to 3 July but gave no hint that sales would fall.
Jill McDonald, who took over as Halfords’ chief executive in May, said the falling sales had taken the company by surprise, but that there was plenty more mileage for Halfords from the cycling bug in the long run.
“We issued this trading update because cycling has been a little bit weaker than expected. We are seeing cycling as a blip. Overall, poor weather over the summer has been wetter and colder than usual and it has been intermittent. We haven’t had long stretches of warm weather and that has deterred the casual cyclist.”
Halfords’ annual sales broke £1bn for the first time last year, with cycling its best-performing division. The company has capitalised on bike fever in the UK, fuelled by the sporting success of cyclists such as Bradley Wiggins and Chris Boardman, whose endorsed bikes Halfords stocks, the Tour de France and the 2012 Olympics.
The craze has led to a boom in sales of expensive bikes to well-off aging men, known as Mamils – middle-aged men in lycra.
McDonald joined Halfords from McDonald’s, where she led the fast food chain’s operations in the UK and seven other countries. Her predecessor, the cycling enthusiast Matt Davies, left to run Tesco’s UK operation.
She said Halfords had sold more high-end bikes in the past two months than a year earlier, but that prices had come under pressure from reductions made by competitors.
The company plans to revamp its children’s range and introduce new offers to tap into the long-term growth in sales. Growing participation, particularly by women, government investment in cycle lanes and other infrastructure and rising consumer spending would all underpin the market, McDonald said.
“Look outside and see what’s happening. The number of cyclists on the road is visible. We have got plenty of reasons to be optimistic about the future.”
Tandem Group, whose cycle brands include Dawes and Claud Butler, said a year ago that the market for cheaper leisure bikes was highly competitive with Halfords, JD Williams and supermarkets reducing prices.
Halfords said its other businesses, including car maintenance and parts, had performed as expected or better. Annual profit before tax would be broadly in line with market expectations, thanks to cost cuts and better-than-forecast profit margins.
Analysts at the stockbroker Stifel said: “Cycling sales are much weaker than expected. The company is guiding to unchanged consensus on the back of this sales weakness, which seems a little optimistic with Christmas to look forward to. This is an unexpected challenge for Jill McDonald.”
McDonald said her first few months had not felt like a baptism of fire. “No, it’s exciting. I’m as excited about automotive as I am about the cycling side. I’m enjoying it,” she said.
