Pedalling fast but still a long way to go

Elizabeth Fournier
SINCE he joined Halfords in October last year, new boss Matt Davies has had anything but an easy ride. But yesterday’s results really sent the wheels spinning off – shares fell 16 per cent after he revealed a 25 per cent drop in profits and a third shaved off the dividend, erasing most of the gains the struggling retailer has managed to add over the last couple of months.

There’s no arguing with Davies’ admission yesterday that at first glance “it’s not a pretty picture”. But if you look beyond the disappointing top line it seems he might have something up his sleeve.

Halfords used to occupy a fairly niche place in the market, particularly for cycle enthusiasts. But as interest in the sport has exploded so have the options for consumers, with independents and online stores offering cheaper and more specialised services.

Something needs to be done.

Though dividend cuts are never popular, sometimes they’re necessary, and when the money saved is being reinvested to expand popular cycling ranges and tighten prices it’s hard to argue against them.

Add an increased focus on cutting staff churn and improving the in-store experience, it looks like Davies has come up with a long-term, measured plan that might be just what the company needs to get back on track.

Yesterday’s sell-off was an understandable reaction to some poor figures, but has given more forward-looking investors an opportunity to buy on the cheap.

The road to recovery may be long and winding, but shareholders shouldn’t assume it leads to a dead end.