Financial Trading Blog
Stock of the day 26/05/2016 – Halfords Group PLC
Having fallen sharply across the second half of 2015 Halfords had a rather big price rebuild on its hands as the New Year began. Luckily the stock almost immediately got off to a good start thanks to its third quarter statement on the 21st January.
There was a lot to work through in that Q3 report; group sales rose 0.4% for the 15 weeks to mid-January, with like-for-like sales of bikes and assorted gear jumping 1.1% after a tough summer (where Halfords saw an 11% plunge in cycle sales). However, one of the warmest Decembers on record saw sales various weather-related car kit items, like de-icer and ice scrapers, tumble, putting pressure on its overall growth. The headline news was confirmation that the company was still set to meet its full year profit targets, with cost cutting measures (including slashes bonuses and the loss of around 1000 head staff) helping keep the company on track.
(Source: IT-Finance.com 26/05/2016)
This update saw Halfords surge nearly 13% in one day, with its climb continuing all the way until mid-March, where the stock hit a 4 month high of £4.25. A downgrade from UBS interrupted this rise, sparking a month-long decline that saw Halfords back slide to £3.86 by mid-April. Yet once again the stock was rescued by a trading update, its fourth quarter statement causing a near 10% surge as it revealed a 2.6% jump in like-for-like sales for the final quarter, alongside a 1.7% rise for the year as a whole. The thrust of the company’s growth came from its travelling (camping accessories and equipment) and motoring (car cleaning products, dashboard cameras etc) sectors, somewhat compensating for a 0.9% drop in like-for-like cycling revenue.
Halfords eventually hit £4.31 before trickling back to £4.13 by mid-May, only to climb to a 7-ish month high, and current trading price, of £4.51 (IT-Finance.com, 26/06/2016) thanks to a bit of M&A excitement. The company revealed it had bought Tredz and Wheelies Direct for £18.4 million, which combined produced £32 million in revenue and £2.4 million in profits last year.
In terms of the company’s full year figures Halfords is expecting to post pre-tax profit between £78-82 million, compared to the £80.8 million seen last year.
Halfords Group PLC has a consensus rating of ‘Hold’ with an average target price of £4.27.
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