UPDATE: Halfords Says Trading Likely To Be Tougher In 2011

27th Jul 2010 08:26

(Adds CEO comment, analyst comment, detail, share price.) By Hannah Benjamin Of DOW JONES NEWSWIRES LONDON (Dow Jones)--U.K. automotive and leisure products retailer Halfords Group PLC (HFD.LN) Tuesday said trading is likely to be tougher next year, when consumers feel the full effects of measures designed to tackle the U.K.'s hefty budget deficit. "We have to face the fact that most of the measures introduced in the emergency budget aren't really going to hit people until 2011," Chief Executive Officer David Wild told journalists on a conference call. "We've got VAT (Value Added Tax) going up in January, while the real impact of spending cuts will be felt more in 2011 than this year. Generally, the outlook for consumer confidence isn't that great," he said. Halfords' group revenue climbed 9.6% between April 3 and July 26, as it benefited from its acquisition of the Nationwide Autocentres chain in February, as the business continued to grow market share and capture increased fleet business. After adjusting for the impact of Easter, comparable sales in Halfords' retail stores fell 2.1% in the period, while comparable sales at its Autocentres were flat on the year. Halfords said it made a "sluggish" start to the spring season after poor weather in April and tightened consumer spending ahead of the U.K. general election and subsequent emergency budget. It also delayed the start of its summer leisure campaign until after the soccer World Cup, as television advertising during the tournament would have been costlier. Nonetheless the firm expects to increase full-year earnings in line with previous guidance. "Our view remains that the core Halfords retail business looks well positioned with its defensive, needs-driven offer, whilst the new autocentres operation offers the group a significant new growth angle, Singer Capital Markets analyst Mark Photiades told clients in a note. He is leaving his fiscal year 2011 pretax profit forecast unchanged at GBP136 million and expects Halfords to have a stronger second quarter. Halfords said sales have continued to grow in its core categories of car maintenance and cycling, although sales of in-car satellite navigation systems continued to fall, albeit at a reduced rate. Gross margin remained broadly flat on the year, with currency and sourcing inflation offset by self-help measures like better buying. Halfords has rebranded four Nationwide Autocentres following its acquisition of the business in February and said it has had "encouraging" initial results from these stores. It plans to rebrand all of them by March 2011 and open 12 new units this fiscal year. Singer's Photiades said as consumer spending comes under pressure, the autocentres should benefit from people trading down from expensive authorized dealerships. At 0724 GMT, Halfords shares were trading 26 pence, or 5%, lower at 491 pence, underperforming a 0.2% rise in the Dow Jones Smaller Companies index. -By Hannah Benjamin, Dow Jones Newswires; 44-20-7842-9298; [email protected] Order free Annual Report for Halfords Group PLC Visit http://djnweurope.ar.wilink.com/?ticker=GB00B012TP20 or call +44 (0)208 391 6028 (END) Dow Jones Newswires July 27, 2010 03:26 ET (07:26 GMT)