City Column - Halfords can ride out the downturn better than most
 
Tue, 19th February 2008
 
 

City Column - Halfords can ride out the downturn better than most

City Column - Halfords can ride out the downturn better than most

We continue to believe that Halfords is one of the few bright spots in the retail sector at the moment, compared with most of its peers, based on its position as a retailer of non-discretionary products such as car parts and children's seats.by Glynn Davis

While flogging carburettors and spark plugs might not sound all that exciting it will undoubtedly insulate Halfords from the worst effects of the increasingly bitter consumer downturn that is afflicting the sector.

To some extent this is reflected in its share price that has come off by only around 12 per cent over the past three months whereas many other major stores groups have declined by more than double this figure. At the current level of 284p they have comfortably moved off their 12-month low of 236p in January.

And there should be more in the tank for investors if the outgoing chief executive Ian McLeod is to be believed. Although earlier this month he delivered a less-than-expected two per cent like-for-like sales increase (for the 17 weeks since Halfords' half-year) he rubbished suggestions that this slowdown - which compares with a 4.1 per cent increase over the 43 weeks to January 25 - was an indication of a maturing market.

To prove his point, he suggested that when stripping out the heavy sales of car seats, that were bought in the comparable period last year to comply with new legislation, then like-for-like growth would have been a more credible 3.2 per cent.

Car seats continue to sell well along with in-car technology. With SAT NAV now par-for-the-course in most cars Halfords is fully benefiting as it operates both a fitting and servicing operation.

The company also seems to be taking a sensible approach to store openings unlike many other retailers that have retained their gung-ho opening programmes despite the economic background, which suggests their growth story is purely down to adding volume through square footage.

Halfords has pencilled in the addition of 20 new stores per year over the medium term, which with a current portfolio of 440 outlets represents an increase in numbers for year one of a modest 4.5 per cent, and decreasing thereafter.

Further stores will also be added to the group's overseas division that consists of 16 units in the Republic of Ireland and three in the Czech Republic, which represents an area of great potential for the group.

One area that does not seem to be living up to its potential is the standalone Bikehut stores, if its roll-out is indicative of its performance, as the website shows only four outlets up and running whereas the company stated midway through 2007 that it intended to have six open by the end of the year as it pushed towards a target of 50 throughout the country.

This is something for the new chief executive to deal with as it is of little concern to McLeod as he has announced his intention to leave the business following an offer to run the Coles supermarket chain in Australia. Despite his success at the group his departure was not regarded by the City as detrimental to Halfords health and prosperity because potential candidates are in the wings and the business is on an especially firm-footing.

With this solid platform, combined with its defensive position in the marketplace, it is surprising that Halfords stands on a PE of a mere 9.6x. This might be acceptable for such a stock during buoyant times but we in exactly the opposite of this scenario at the moment. It is this perceived discount that could provide an opportunity for investors


 
 
category Retail  |  source The Retail Bulletin
 
   
 
 
 
 
Fri, 10th February 2012
Mobile technology will decide who wins battle on the high street
A global KPMG survey has revealed that UK retailers are slower than other countries in adopting mobile technology.

more >
 
Fri, 10th February 2012
Comet to cut 450 jobs
OpCapita, the new owner of the Comet, is to axe around 450 jobs at the electrical chain as part of a plan to reduce investment in its UK-wide repair service.

more >
 
Fri, 10th February 2012
The emergence of click & collect as a real sales driver.
Arguably, the click & collect phenomenon emerged first in France. Much of this development has been driven by legal constraints such as zoning laws in France and high hurdles for the opening of new hypermarches.

more >
 
Fri, 10th February 2012
Hammerson plans redevelopment of Croydon's Centrale
Hammerson is planning to redevelop the Centrale shopping centre in Croydon.

more >
 
Fri, 10th February 2012
Tesco gets green light for new dot.com warehouse in Crawley
Tesco has secured planning permission for a 120,000 sq ft home shopping warehouse in Crawley. The warehouse will help to strengthen Tesco's dot.com home delivery business and create around 500 jobs.

more >
 
Fri, 10th February 2012
Businesses in the dark on electricity usage
Up to £1 in every £2 spent on electricity could be wasted - figures show 46% of business electricity is used when people aren't working.

more >
 
Fri, 10th February 2012
Morrisons lays out plans to open 300 convenience stores
Morrisons is understood to be targeting 300 M Local convenience store openings by 2014.

more >
 
Fri, 10th February 2012
John Lewis weekly sales up 6% in cold spell
John Lewis saw a 6% uplift in sales in the week ending 4 February compared to the same week last year.

more >
 
Fri, 10th February 2012
Winter warmers drive John Lewis sales
John Lewis sales grew 6% to £52.5m in the week to February 4 as shoppers stocked up on winter warmers in the cold weather.

more >
 
Fri, 10th February 2012
Sales of winter warmers drive John Lewis sales
John Lewis sales grew 6% to £52.5m in the week to February 4 as shoppers stocked up on winter warmers in the cold weather.

more >
 
Fri, 10th February 2012
Waitrose to use online personalised retargeting to drive customer relationships
Waitrose is to become the first UK supermarket to use online personalised retargeting for groceries to help drive relationships with its customers.

more >
 
Fri, 10th February 2012
Hut Group revenues rise 70%
Online retailer The Hut Group saw revenues increase by 70% to £143 million in the year to 31 December.

more >
 
Fri, 10th February 2012
White Stuff opens art gallery
Fashion retailer White Stuff has opened an art gallery in its Cardiff store in an innovative approach for driving footfall.

more >
 
Fri, 10th February 2012
Forever 21 boss sounds caution on UK expansion
US fast fashion giant Forever 21 is taking a cautious approach to UK expansion as the macro-environment remains volatile. 

more >
 
Fri, 10th February 2012
Hotel Chocolat to take dip in beauty market
Upmarket chocolatier Hotel Chocolat is mulling the launch of beauty products as it enters the European market for the first time.

more >
 
Fri, 10th February 2012
Store stocks rise as retailers refocus
Store stocks were on the up over the week as food and general merchandisers rose with the market, although the former still lagged the All Share index while the latter outperformed.

more >
 
Fri, 10th February 2012
Value retailer QD Stores targets online
Value retailer QD Stores will launch a fully transactional mobile-optimised website in time for Christmas.

more >
 
Thu, 9th February 2012
Edinburgh Woollen Mill pulls out of Peacocks talks
Edinburgh Woollen Mill has pulled out of the bidding process for Peacocks, Retail Week can reveal.

more >
 
Thu, 9th February 2012
Asda creates sustainability network for suppliers
Asda has signed a deal to increase sustainable practices in its supply chain.

more >
 
Thu, 9th February 2012
Co-op receives 64,000 enquiries for apprenticeship roles
The Co-operative Group has revealed that it has received 64,000 internet enquiries regarding its apprenticeship scheme.

more >