Halfords warns that profits will fall amid a slump in sales of new bikes

Halfords warned that profits would be lower this Christmas as fewer people bought new bicycles.
The retailer’s shares fell as much as 22% after it cut its profit forecasts. It said it would not be able to achieve a profit of £58m for the entire year.

Halfords chief executive Graham Stapleton said that customers are “very cautious” when it comes to spending money on products other than essentials, such as bicycles.
The Office for National Statistics reported a 0.3pc drop in retail sales for October in comparison to September. This disappointed economists who expected a rise.

Halfords is focusing less on selling bikes and more on services, such as MOTs and vehicle services.
Mr Stapleton stated that customers still spent when they needed to. This helped drive a 14pc increase in revenues during the first half of this year.

Halfords stated that trading was “volatile throughout the first half of this year and we’ve seen some market softening over the last two months in our big-ticket discretionary categories”.
If this trend continues, the underlying profit would range between £48m and £53m.

The company’s shares have fallen to their lowest levels since early October. Mr Stapleton said it was “extreme” reaction to the company’s announcement that they were trimming their profit forecasts.

The news comes amid speculations that van rental outfit Redde Northgate had targeted Halfords over a potential £1.4bn partnership.

Halfords’ current value on the London Stock Exchange is around £413m, was revealed earlier this month , that Redde Northgate and Halfords had held detailed discussions over a proposed merger with nil premium.

Halfords’ board reportedly viewed the initial deal to be undervaluing of the company. Redde Northgate owns 130,000 corporate cars and vans in the UK and Spain. Its market cap is £843m.

On Wednesday, Mr Stapleton said that the company is “certainly undervalued” at the moment.

He said that he understood it was difficult to predict the market, and added: “It’s hard for investors to sort through it, given the unprecedented conditions for businesses like us.”