Halfords to shut garages amid growing cost pressures
Halfords is set to close some of its garages this year as it struggles with increased labour costs introduced by last year’s Autumn Budget.
Shares fell nearly two per cent in early trades.
The cycling and motoring specialist said the sites earmarked for disposal are not able to provide the “level of customer experience to which we aspire”.
The Autumn budget, which included increases to National Insurance Contributions (NICs) and the minimum wage, added £33m to Halford’s costs.
Halfords said “the majority” of impacted colleagues will be redeployed to nearby garages and the planned closures will “immediately” boost earnings. The firm did not confirm how many garages would be closed.
The company has already sold 11 stores during the last year – including branches in Devon, Hampshire and Dudley – leaving it with 373 retail stores and 632 autocentres as of March 28.
‘Encouraging’ rise in annual sales
Chief executive Henry Birch said that the overall picture for Halfords remained positive.
“The business has delivered a strong financial performance [this year], made good strategic progress and has a clear plan in place to tackle external inflationary forces.
“Halfords has a unique combination of retail stores, garages and mobile vans, a trusted brand, scaled omnichannel infrastructure, and access to valuable proprietary data,” he said.
Like-for-like sales rose 2.5 per cent in the year ended March 28, with overall revenue at £1.7bn.
Underlying profit before tax rose 6.4 per cent to £38.4m, while the company’s gross margin improved from 48.2 per cent to 50.7 per cent.
Julie Palmer, partner at Begbies Traynor, said Halfords’ results were “encouraging”.
“Demand from cyclists has been a bright spot, and with the current spell of good weather, that trend looks set to continue.
“However, the road ahead isn’t entirely smooth – motorists remain more cautious, with spending by this group more constrained by a still-subdued consumer backdrop, and it will be careful to manage rising costs across the business,” Palmer said.
Halfords reported £10.1m in net cash, up from £8.1m at the end of the last financial year.
It expects to offset “another year” of inflation through a “combination of pricing, buying and cost opportunities”, adding that it “continues to be somewhat cautious on the outlook for consumer spending”.
“We remain committed to a strategy emphasising motoring services across our unique combination of Retail and Autocentres, the successful execution of which will enable significant value creation in future years,” Halfords said.