The Week Ahead: Halfords expected to join the ranks of Christmas retail winners

Jill McDonald, chief executive of Halfords.
Photo: Tom Stockill

Jill McDonald, chief executive of Halfords. Photo: Tom Stockill - Credit: ©Tom Stockill

Halfords will join the party of retailers updating the market on festive trading this week, with experts forecasting it to emerge as another Christmas winner.

City analysts predict the car parts and bicycles chain will clock up like-for-like sales growth of 3.5% at its retail arm in the third quarter, which includes the critical Christmas trading period, helped by softer sales in the same period the year before.

Andrew Wade, analyst at Numis, said: “We note the relatively soft comparative last year.

“Considering this, alongside the relatively encouraging early indicators for Christmas trading, we see scope for an acceleration in retail LFLs (like-for-like sales) from plus 2.4% in the first half to plus 3.5%.”

However, Halfords, which will deliver its update on Thursday, has been stung from the collapse in the value of the pound, which contributed to profits slumping 16% in the first half of the year. The retailer said in November that sharp falls in sterling since the Brexit vote in June had sent the cost of imported goods surging by £6m during its first half.

It posted pre-tax profits of £39.1m for the six months to September 30, down from £46.4m a year earlier, as hefty discount promotions for its bicycles range also knocked interim profit margins.

The group warned over the impact of higher costs of importing goods, but said it had plans in place to help offset the blow and confirmed that full-year profits were set to meet City forecasts.

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The market will expect a further update on how Halfords chief executive Jill McDonald plans to mitigate falling purchasing power.

Tony Shiret, analyst at Haitong, said: “There is clearly limited visibility on the way in which Halfords will deal with rising input prices which is why the stock is on a seemingly low valuation and a neutral to slightly negative set of assumptions for 2017/18 when the main impacts will be evident.”

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