By Angus Berwick
LONDON (Reuters) - British car parts to bicycles retailer Halfords (L:HFD) saw a near 6 percent fall in first-half profits due to a slump in sales of bicycles over the summer, it reported on Thursday.
Boosted by British successes in the professional sport, cycling has increased in popularity in recent years, encouraging Halfords to expand its range of bikes, parts, accessories and clothing and improving online categories to tap demand.
But the group said on Thursday its profit before tax fell 5.9 percent to 46.4 million pounds due to a wet summer putting people off buying bikes, along with greater discounting in the market.
Halfords, which trades from 463 stores in Britain and Ireland and from another 307 auto centres, said retail trading elsewhere was strong, with total sales up 1.8 percent at 533.5 million pounds, driven by its motoring business.
The news pushed Halfords' shares down 8.8 percent to 392 pence by 0906 GMT, placing it near the bottom of the mid-cap FTSE 250 index <0#.FTMC>, which was down 0.5 percent. The group's shares have fallen 16.5 percent over the last year.
Chief Executive Jill McDonald, who joined from fast food chain McDonald's (N:MCD) in May, said there was an "over enthusiasm" among firms to lower bike prices but said the outlook for cycling remained strong and forecast that the market would annually grow at a more modest rate of 3 and 5 percent.
"People are cycling more often, they're cycling for more miles, and those customers are more likely to trade up their bikes," McDonald said.
David Stoddart, analyst at Edison Investment Research, said Halford's drop in cycling sales was a "bitter pill" but the decision to increase dividends every year was a "sweetener" for investors.
Halfords is on average expected by analysts to post a full-year pretax profit of 83.1 million pounds, according to Thomson Reuters I/B/E/S Estimates, down 1.2 percent on last year's result.