By Neil Maidment
LONDON (Reuters) - British car parts to bikes retailer Halfords (L:HFD) posted a better than expected rise in annual profit as its customer service push and improved cycling ranges helped it hit its 1 billion pound sales target a year early.
In Halfords' first update since Jill McDonald joined from McDonald's in May to replace Matt Davies as chief executive, the firm said pretax profit for the year to March 27 rose 11.4 percent to 81.1 million pounds, ahead of analysts' forecast of 78.9 million, according to Reuters data.
Under Davies, who in May ended a successful two-and-a-half year spell as CEO to lead the UK operations of Britain's No.1 supermarket Tesco (L:TSCO), Halfords launched an investment drive to improve stores, customer service and cycling ranges in order to push sales to 1 billion pounds by 2016.
Halfords said on Friday total revenue grew 6.9 percent to just over 1 billion pounds, with like-for-like retail sales up 7 percent. Car maintenance sales rose 8.5 percent, helped by its fitting service, with cycling sales up 11.4 percent.
Shares in Halfords, which runs 470 stores and 305 Autocentre car repair units, were up 2.1 percent in early trade to 495 pence.
"New CEO Jill McDonald takes over a company with strong momentum," said Investec analyst Kate Calvert, who has a buy rating on the stock. "The job of modernising Halfords will be far from complete when the original 3 year plan ends in 2016."
Boosted by British cycling successes at events such as the Olympics and Tour de France, cycling has increased in popularity, with Halfords expanding its accessories, bike ranges and improving online categories to tap demand.
Last year the firm reopened its specialist bike shop Cycle Republic, having shuttered it in 2009, with analysts at Deutsche Bank (XETRA:DBKGn) expecting the business to add 200 million pounds to sales.
Halfords said more remained to be done in its turnaround push after years of under-investment and increasing online competition, with more staff training and store revamps scheduled this year, as well as a move to become a click and collect hub for other retailers in order to drive footfall.
The firm guided to a decline of 25-75 basis points in its retail gross margin for its 2015-2016 fiscal year due to higher sales of lower margin cycling categories and said retail operating costs would increase by 4-5 percent.
($1 = 0.6518 pounds)