Halfords share price down on FTSE 250 thanks to gloomy sales

Shares in Halfords were down on the FTSE 250 in afternoon trading after the retailer reported a rise in sales in the full year ended 1 April 2011.

Group total sales increased 4.6 per cent in the period, thanks mainly to the performance of the group's Autocentres, acquired last year, which saw a rise in sales of 1.1 per cent.

By contrast Halfords retail business reported a fall in total sales of 5.3 per cent, with the Car Enhancement business seeing a sales drop of 12.7 per cent and Leisure sales dropping 3.5 per cent. Car Maintenance however saw total sales increase 0.2 per cent.

In the final quarter of the year Car Maintenance and Car Enhancement saw their sales decline over ten per cent, while Leisure sales increased 5.2 per cent and sales at the group's Autocentres increased 2.1 per cent.

Halfords said that it would be launching a share buyback programme worth £75 million.

During the final quarter of the year Halfords finished its rebranding of 240 Autocentres, with the new acquisition seeing an "early positive response" from consumers thanks to a national advertising campaign.

Halfords said that it expected to see full year pre-tax profit of between £124 million to £127 million.

David Wild, Chief Executive Officer of Halfords, said, "We believe the environment will remain difficult for customers. We are responding with a trading strategy that offers great value, expert services and many new products; including the re-launch of our entire Premium Cycle range. In Halfords Autocentres we will build on the good early results since rebranding.

"Our plans are supported by the launch of our new campaign "That's Helpful That's Halfords" which will reinforce our unique service proposition. These initiatives give us the potential to trade more strongly in the year ahead.

"We are pleased to announce the launch of a share buyback programme. The strength of our cash generation and our balance sheet means that we can both return capital to our shareholders, maintain our dividend policy and retain the flexibility to invest when we identify the right opportunity."

Keith Bowman, Equity Analyst at Hargreaves Lansdown Stockbrokers, commented, "Halfords appears to be another retailer confirming the slow retrenchment of UK consumers. Sales are retreating, whilst costs are climbing, with management facing the addition dilemma as whether to add to costs via increased advertising.

"Like many other retailers, 'self help' initiatives are being employed, while investments in online sales and new outlets (Autocentres) are being made.

"In all, whilst prior management prudence is to be applauded, a trait now enabling the introduction of a share buy-back scheme, there is no disguising the increasingly difficult conditions being faced by the company. As such, whilst the cash generative nature of the company has been rewarded with positive recommendations, today's update is likely to see downward pressure being applied to investment opinion."

By 13:30 shares in Halfords were down 4.80 per cent on the FTSE 250 to 350.90 pence per share.