Halfords’ share price recovery is facing a bump in the road after warnings of a softer second half overshadowed a boost in sales.
Shares in the motoring retailer fell as much as eight per cent to 256p on Wednesday morning, putting the brakes on the stock’s gradual recovery in recent months.
Halfords posted seven per cent sales growth in the six months to October, telling shareholders the firm is making good progress towards its higher profit goal.
In an unscheduled update in August, the FTSE 250 company upgraded its underlying profit target to between £55m and £65m, which would mark a significant increase from last year’s £45m.
Halfords had said record temperatures during the summer were driving “very strong” sales in its seasonal ranges. Chief executive Henry Birch said on Wednesday that the business “continued to perform positively through the first half”.
Jonathan Pritchard and John Stevenson, analysts at Peel Hunt, praised the group’s “bullish” update, which it said shows the retailer is in a “position of strength”.
Before Wednesday’s sell-off, the company’s share price had more than doubled since Birch’s appointment in April. The stock remains 85 per cent higher in the year to date.
But analysts said the slump was likely caused by the company’s expectation that its profit will be weighted towards the first half of this year.
“The strong [first half] performance combined with accelerated investments in marketing and technology in [the second half] will result in underlying profit before tax being weighted towards [first half],” Halfords told investors.
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Chris Beauchamp, chief market analyst at trading platform IG, said Wednesday’s “nasty reversal” was an inevitable consequence of the “blistering rally” the group’s shares had enjoyed in recent months.
“Like any sportsperson who has enjoyed a speed boost, Halfords shares now look more than a little tired, with earnings estimates needing to catch-up with a share price that moved into fifth gear over the summer,” he said.
Ben Hunt, an analyst at Panmure Liberum, said the share sell-off was more likely caused by investors hoping to cash in on Halfords’s recent rally than being a direct reaction to the group’s trading update.
Halfords has enjoyed a revival in recent months, as new boss Birch has sought to expand the group’s network of garages and improve its retail offering.