The UK's biggest bike retailer, Halfords, has once again scaled back its profit forecasts, with the company describing the cycling market as "challenging" and experiencing "significant market deterioration."
In a release published on Wednesday morning, it said it expects profit before tax for the full year to be in the range of £35m to £40m, down from £48 million to £53 million in November, which had already been reduced in turn. Volume in the cycling market fell year-on-year by 8%.
The announcement has seen shares in the London Stock Exchange-listed retailer to fall by over 31% as of Wednesday morning. Two reasons were given for the reduction in profit expectations of the bike and car giant, which operates over 400 stores in the UK
"Both the Cycling and Retail Motoring markets have been impacted by a combination of continued weak customer confidence and unusually mild and very wet weather, which affected footfall into stores and sales of categories such as winter and car cleaning products," Halfords said.
"Volume in the Retail Motoring market fell year-on-year by 5.1% pts in January (vs an increase year-on -year of +0.2% in Q3); volume in the Cycling market fell year-on-year by 8.0% pts in January (vs a decline of 5.1% pts in Q3); and volume in the Consumer Tyres market fell by 4.3% pts in January (vs a decline of 2.6% pts in Q3)," it said.
Furthermore: "The Cycling market has become more challenging and competitive as it continues to consolidate. Promotional participation has increased, and more customers are purchasing on credit, leading to weaker gross margins than previously anticipated."
The forecast "assumes the same challenging market conditions continue for the rest of Q4, including through our peak Easter cycling period in March".
"We have continued to take decisive action on cost, but in the short period between now and the end of the financial year this will not be sufficient to offset the significant market deterioration we have seen," Halfords said.
Graham Stapleton, chief executive of Halfords, said in November: “Everything that’s in our control, we’ve done our very best. The bit that we can’t control is the macroeconomic environment.”
He said that customers were still buying needs-based products but spending less on “more discretionary, higher-ticket” product categories, such as cycling
The Halfords news comes at a challenging time for the cycling industry. Last week, it was reported that the majority of staff at Wiggle Chain Reaction Cycles had been redundant, after the online retailer entered administration last October.
