Halfords has reported a fall in underlying profits in its latest annual results as the motoring and cycling products retailer said its outlook remains “challenging”.

The group announced that underlying pre-tax profit from its total operations slipped to £36.1m for the year to 29 March, down from £44.2m a year earlier.

Halfords suggested that headwinds outside of its control were “worse than anticipated” and that in particular, market volumes in cycling and consumer tyres had declined year-on-year, worse than industry expectations. These markets have remained down when compared to pre-pandemic levels, with bike volumes down 30% and tyres by 14%.

The group also cited inflation as a “material headwind”, particularly driven by the 10% increase in the national minimum wage.

Despite the headwinds impacting the group’s financial performance in the short-term, however, Halfords remained upbeat about its “strong and growing” market positions, which it said could provide significant opportunities for profitable growth.

Halfords CEO, Graham Stapleton, said the group was pleased to have delivered a “resilient” financial performance against “challenging core markets”.

“We have continued to invest in our strategically important services business, which for the first time now represents over half of our total revenues,” Stapleton said.

“Our autocentres business was the star performer yet again. This was delivered despite a challenging tyre market, where drivers continue to delay the replacement of unsafe tyres.

“While the short-term outlook remains challenging, we continue to build a unique, digitally enabled, omni-channel business, which is well positioned for profitable growth.”

Halfords also indicated that trading since the start of the current financial year has “continued to be soft”, impacted by low consumer confidence around big ticket, discretionary purchases, and poor spring weather, which has reduced store footfall and affected sales.

Manager of the Quality Shares Portfolio at Wealth Club, Charlie Huggins, commented: “Halfords has continued to see caution from its customers, and inflation remains a problem, with both freight and wages rising strongly.

“Consumer confidence is clearly being impacted by cost of living pressures. But this isn't the full story. The post-pandemic cycling boom is unwinding. In addition, competition is fierce and increased promotional activity, especially in cycling, has clearly hit Halfords hard and put pressure on margins.

“Overall, Halfords is in a tough spot. It is rightly focusing on what it can control – like cutting costs. But unfortunately, there is a lot that is out of its hands. With consumers still feeling the pinch and on-going inflationary pressures, 2025 is shaping up to be another difficult year.”

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