Like-for-like sales are still heading south in 2012 at Halfords, the retailer focused on the needs of car and bike owners, albeit not as fast as they back-pedalled in 2011.
The board anticipates underlying group profit before tax of between £90m and £93m for the year to March 30th 2012 and group sales of around £861m, of which around £751m is expected to come from the Retail side with around £110m chipped in by the Autocentres.
Market consensus for the financial year ended is for profit before tax of £92.8m on sales of £859.5m.
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LFL revenue in the UK and the Republic of Ireland was down 2.3% in the 13 weeks to March 30th compared to the corresponding period of 2011, whereas for the year to the end of March, LFL sales were down 2.7%.
The car maintenance line has returned to growth, with LFL sales up 3.1% so far in 2012, compared to a 4.5% decline over the 52-week period. Car enhancement products saw the rate of LFL sales decline quicken to 14.5%, compared to a 52-week LFL contraction rate of 11.6%. Halfords said there were accelerated falls in both higher-margin performance styling and car cleaning products.
Leisure lines were up 2.2% on a LFL basis in 2012, a slow-down on the rest of the financial year, as can be deduced from the 52-week LFL growth rate of 5.0%.
The acquisition of the Autocentres continues to look like a winner, with LFL sales up 8.2% thus far in 2012 and up 6.1% in fiscal 2011/12.
Cycling LFL revenues increased by 5.7% over the year as a whole and were 8.7% year-on-year (yoy) in the group's final quarter, driven by strong performances in Premium and Children's Bikes.
At 8.0% of total Retail revenue, there was a disappointing online revenue performance, the group admitted, reflected declines in both Satellite-Navigation (sat-nav) and Child Safety products.
Setting aside LFL comparisons, total group revenue eased 0.8% in the full year but was up 0.3% yoy in the final quarter (January to March). The UK and Republic of Ireland retail estate saw sales slide 2.3% in fiscal 2012/13 and by 2.2% in the fourth quarter of that year. Once all the numbers have been totted up, gross margins are expected to be down by 1.3 to 1.5 percentage points, in line with previous guidance.
Halfords Autocentres upped revenue by 13.0% from the year before, with the fourth quarter seeing a 15.6% yoy improvement. The division's underlying operating profit is expected to be around £7m. This reflects both the start-up losses associated with the centre-opening programme and the continued investment for growth in key areas, such as above-the-line advertising and direct mail. With the acceleration of the lower-margin tyre proposition, gross margins will be marginally down on the previous year.
Looking ahead to the current financial year, it looks like the company is expecting to carry on cycling into stiff headwinds, with rising petrol prices a concern. "The UK consumer environment is expected to remain challenging, particularly for the motorist," the company's outlook statement said.
The group currently anticipates a broadly-flat Retail gross margin in the current year (FY13). Margin dilution from reduced sales of higher-margin Car Enhancement sub-categories, plus input-cost inflation, is expected to be partially offset by the benefits of increased fitting penetration and the continued success of its sourcing strategy.
"We are guiding to a rise in underlying Retail operating costs of c.4% against the FY12 out-turn, primarily due to a rise in inflation-linked business rates and staff costs, the latter reflecting minimum-wage inflation and our plan to reinstate a provision for colleague incentive payments," the group said.
"Our actions have reduced input-cost inflation, but retailers face a rise in operating costs. While we have historically demonstrated an ability to alleviate these it may be more difficult this year," admitted David Wild, Chief Executive Officer of Halfords.
The share price of Halfords shifted into reverse in early trading, shedding 11.2p at 304.2p in the first half hour.
JH
