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Halfords has shrugged off the collapse of the satnav bonanza, saying it will beat last year's record profits on the back of the continuing boom in cycling.
The retailer also said it expects a busy few months ahead as stay-at-home Brits head to Halfords to pick up their roof boxes, trailers, tents and cycle carriers and head into the countryside for their credit-crunch holidays this year.
Halfords today said profits for its financial year just ended are set to come in at between £92 million and £92.5 million, ahead of last year's £90.2 million.
Halfords profits have grown fat over the last few years as millions jumped on the in-car satellite navigation fad and installed the little screens and automated voice boxes into their motors.
However, with the credit crunch, the business has stalled.
“Satnav is after all a discretionary purchase,” chief executive David Wild conceded. “We, as a business, have also had to deal with serious price deflation of around 25% on satnavs. While that is good for the customer it has been hard for us to manage.
“The market in satnavs is not dead and penetration [the number of cars that have it installed] is still only around one in four. But it has been tough.”
The decline in satnav has been responsible for a 3.3% fall in like-for-like sales over the last year, though recent trading — down 3.8% over the last quarter — shows a recovery from the 7.8% slump in the Christmas quarter. Recovering group sales, said Wild, is down to the growing popularity in cycling.
Halfords is reckoned to sell one in three bicycles sold in the UK and sold a million bikes last year for the second year running. It said it has been helped by a 50% rise in the number of cycling commuters taking advantage of the government's Cycle2Work employee benefits scheme.
Halfords is now selling more higher margin premium-priced bikes retailing at in excess of £250, helped by its tie-up with cycling legend Chris Boardman.
Boardman designs the bikes and they are manufactured in Taiwan and Thailand. Olympian Nicole Cooke won her cycling gold medal on a Boardman-Halford design, said Wild. The secret to Halfords rising profits, however, has been cost-cutting. This has seen 100 people let go in recent months and will — despite the cycling boom — see the retailer pare back its BikeHut bicycle-only outlets.
Wild said BikeHut outlets will be converted to include the group's car accessories and motor maintenance products.That traditionally car maintenance core business of Halfords has also continued to boom, he said, as British consumers retain and maintain old cars rather than buy new ones. New car sales are currently falling at a rate of 30% a year.
The group also reported a bright start to its new financial year.
“We saw significant sales over the Easter weekend of roof boxes, trailers and tents, the last of which is a relatively new business line for us,” said Wild.
“We have some great offers and we are hoping to take advantage of people staying in the UK for holidays this year.”
