Proactive Investors - Halfords Group PLC (LON:HFD) warned full-year profits would be lower today, sending shares down 20%, blaming a shortage in technicians, weakness in the tyre market and slowing demand for high ticket retail items for the shortfall.
In a trading update, the company reported 12.6% like-for-like sales growth in the third quarter compared to pre-pandemic 2020 (up 4.6% compared to last year) with strong sales in motoring offset by softer than expected cycling and tyre markets.
But it said an inability to recruit enough skilled technicians in the Autocentres business will limit growth of higher margin sales during the important upcoming quarter four MOT peak while “we have also seen weakness in the consumer tyre market continue for longer than initially anticipated”.
The company said the consumer tyre market remained materially (-13%) below pre-Covid levels as customers defer high ticket spends which has hit the performance of National Tyres.
As a result, Halfords lowered its fiscal year 2023 underlying profit before tax guidance to £50mln to £60mln from the £65mln to £75mln range it gave in November.
Analysts were quick to cut their forecasts, with Peel Hunt reducing its pre-tax number for the current year to £52mln from £67.5mln and to £50mln from £72mln for the following year.
The broker cut its price target to 250p from 350p and lowered its rating to ‘add’ from ‘buy.’
“There is a lot of caution baked into those numbers, but visibility is poor,” it said, adding “the timescale of recovery in key markets is not clear”.