Halfords share price plunges 25% as retailer downgrades profit forecast amid continued weak cycling demand

The share price of the UK's largest retailer of cycling products and services, Halfords, has plummeted following an announcement from the business that amid a slow start to the calendar year its profit forecast has been downgraded by at least 17 per cent.

Halfords' share price has fallen as low as 140 pence this morning, more than 25 per cent down on its closing price of 200 pence, and hitting its lowest level since October 2022. The market reacted to Halfords revealing that its January sales had disappointed, with cycling-related sales eight per cent lower than in the same month last year. Elsewhere, motoring sales were down five per cent, while tyre sales were down four per cent.

In its latest quarterly accounts, released last month, the company reported its bike market had performed "significantly worse than anticipated", a trend that appears to have continued into 2024.

Now, Halfords has blamed poor weather for hitting its business, rain and warmer temperatures meaning lower footfall in its shops and reduced sales of anti-freeze.

Consequently, for the current financial year, to March 29, Halfords has downgraded its pre-tax profit forecast to £35-40 million, down from at least 17 per cent from the £48-53 million figure given last month. Looking to the future, Halfords predicted that the 2025 financial year would be broadly similar to 2024, suggesting the bike industry's recovery following a few challenging years may have some way to go yet.

"While our macro indicators for disposable income growth this year are all lit up green, which bodes well for spending power into the second half of 2024, consumers still remain cautious, shopping by need," Peel Hunt analysts told Reuters of the situation at Halfords, noting that taking market share is a positive, but customers continue to count costs and shop "by need" given the economic picture.

Halfords' share price boomed during the pandemic, rising from 66 pence in March 2020 to a high point of 434 pence in July of the following year. It experienced a steady fall in the 12 months following that peak, before staying fairly consistent in the 18 months preceding today's drop.

Last year, amid poor cycling performance, the business said it would focus on "needs-based" sources of revenue, such as cheap motoring repairs, in a bid to fill the gap left by "discretionary" spending areas, such as cycling and car cleaning, which were "adversely affected by unfavourable weather and low consumer  confidence".

The noises last June were, however, that in the long term Halfords remains "very, very confident" about the cycling market. "Cycling still hits the sweet spot in terms of climate change… We still think it's the right place to be," the retailer's chief executive Graham Stapleton said at the time.

Those comments came a year after, in June 2022, the company warned of a "considerable softening of the cycling market" following its pandemic boom, with supply chain disruption and inflation beginning to bite.