Halfords over sold

[Wizard]

Halfords has tanked this morning, after a 2% drop in sales being reported. Over sold? Short term opportunity to ride a bounce back?

Terry.

[monabri]

Halfords has tanked this morning, after a 2% drop in sales being reported. Over sold? Short term opportunity to ride a bounce back?

Terry.

I'd say "yes" (despite this being in "nasty retail"). I reckon the 20% fall is overdone.

(p.s I don't hold)

[monabri]

In the update :-

"We expect free cash flow for the full year to be up on last year and we remain confident that we will grow free cash flow over the medium term, supported by good early progress in our cost and cash efficiency programmes. This, combined with positive longer-term prospects for the Group, gives the Board confidence to maintain its dividend policy."

[monabri]

A bit more digging.

Maybe the fall is explicable - taking the worse case of £58m v £71.6m expected...about 20% ish.

https://www.londonstockexchange.com/exc ... 54500.html

"The bike and car parts retailer now expects annual adjusted pretax profit for the year ending March 30 to be between GBP58 million and GBP62 million. In November, Halfords said it expected profit for the 2019 financial year to be broadly flat on the GBP71.6 million achieved for the 2018 financial year."

So, in November they gave a profit expectation of broadly flat on the GBP71.6m and they've now revised it downwards.

I guess it's "a hold" in the anticipation that the free cash flow does support the divi. and that they can recover their sales.

[Bouleversee]

I had thought of doing a bed-and-ISA before today's statement but not sure it's worthwhile now. On the other hand, the tax loss could be useful so I can take more gains elsewhere. Would appreciate views on the long term recovery prospects of Halfords. I don't really have a feel for them.

Edit: I have just read Monabri's post. Maybe I should take the plunge and do the B&I in the hope they recover in due course.

[TheMotorcycleBoy]

I had thought of doing a bed-and-ISA before today's statement but not sure it's worthwhile now. On the other hand, the tax loss could be useful so I can take more gains elsewhere. Would appreciate views on the long term recovery prospects of Halfords. I don't really have a feel for them.

Edit: I have just read Monabri's post. Maybe I should take the plunge and do the B&I in the hope they recover in due course.

Hi Bouleversee

What is a bed-and-ISA?

Matt

[Bouleversee]

I had thought of doing a bed-and-ISA before today's statement but not sure it's worthwhile now. On the other hand, the tax loss could be useful so I can take more gains elsewhere. Would appreciate views on the long term recovery prospects of Halfords. I don't really have a feel for them.

Edit: I have just read Monabri's post. Maybe I should take the plunge and do the B&I in the hope they recover in due course.

Hi Bouleversee

What is a bed-and-ISA?

Matt

Simply selling shares held in a dealing account and buying them back in an ISA. The expression harks back to the days when one had to bed and breakfast shares, i.e. sell one day and buy back the next IIRC. Some brokers have special terms for this sort of transfer but sometimes it pays to keep the transactions separate, i.e. sell and hope to buy back later at a lower price or if funds permit buy more in the ISA and hope to sell those in the dealing account when the price has risen to cover costs. Always a gamble on price movements in any case but tax changes encourage transfers to ISAs.

[IanSmithISA]

Good morning,

Yes I do think that it is oversold, especially as the shares were already pretty close to a 5 year low.

I suspect that we are seeing the logic of Halfords are in the retail sector and the retail sector is doing badly so Halfords must be doing badly as well. It may be worth noting that whilst the last 14 weeks figures showed a small decline the last 40 weeks did not.

Unlike Debenhams, House of Fraser etc a lot of what Halfords sell isn’t well suited to buying on line; If you need oil, antifreeze or new wiper blades you probably need it now not within a few days and carriage on items such as oil can be quite high.

With a mild winter so far winter related consumables sales were down, screen wash, de-icer, ice scrapers are all nice profitable items.

It is very similar for children’s bikes, it’s a sunny day so let’s go to Halfords and buy 4 bikes, two for the parents and two for the children, this need isn’t filled well by mail order. Halfords also seem to have found the sweet spot with their Apollo range, cheap but no so cheap as to be un rideable, something that supermarket can struggle with.

Halfords did highlight a drop in sales of higher quality, higher price adult bikes, this may just be a bad year or it may be that the influence of Olympic/Tour de France cycling success has worn off.

The Carrera and Boardman ranges are well regarded amongst keen cyclists even amongst those who suggest that Halfords staff could sometimes benefit from more experience or time.

If you compare Carrera/Boardman to the offerings in the local specialist bike shop the Halfords ranges seem to offer a lot more bike for the same money, along with a less equipment snobby staff, “you don’t want to spend a £1,000 on a bike, that’s bottom of the range, get out of my shop!”

The repair centres were showing a small growth, again this is a sector that online will struggle against, maybe online can bring a mobile mechanic to your car but the Halfords centre will have access to the Halfords parts system.

We also see that plenty of customers are happy to order on line and collect in store, getting stock from a central warehouse to stores is something that Halfords know how to do and allows stores to have an almost unlimited range for items that we could do with this week rather than must have today.

Bye

Ian

[Bouleversee]

Thanks, IanSmith. Hope you are right. I did the B&I yesterday and they promptly went down further. Hoping for recovery from now on, with a good yield in the meantime, assuming they stick to their word and don't cut.

[IanSmithISA]

Good morning,

I too bought some, about £7k worth.

As for them going down today I am not at all surprised or terribly bothered. From my observations more often that not a big daily share price drop is followed by another two or three days of drops.

This seems to be retail investors being slow to notice the drop and then panicking.

Trading value then becomes important, if you in an AIM share that trades 3 times a day then you are stuck, HFD has a decent volume and given the historic low value and the fact that many shares seem to be being influenced by confusion over Brexit I am not expecting a big recovery immediately.

Bye

Ian

[AndyPandy]

Retail is a minefield and one has to be very picky about which businesses to buy into. I cannot remember the last time that I held MKS for instance and am out of food retail for the foreseeable future, having sold my last one, SBRY on the spike when it announced its merger with ASDA.

Having said that, some businesses are Internet resistant (not proof) and HFD may be one of those. Following is all anecdotal, I understand the figures, but wouldn't have the skills to post an in-depth analysis here....

Servicing. They have their Servicing arm which seems to be doing OK (although I personally prefer independant garages - others may prefer the value of a brand name and HFD seems to be relatively trusted).

Spares. If you need a bulb, you need a bulb (wiper, battery, fluid...). So much easier to pop in and pick up than buying online. Their fitting service in my experience is really good, too. Gone are my days of DIY car maintenance or even fiddling under a wheel arch to find where to access the bulb holder. I'm more than happy to pay £5-1£10 for someone else to scrabble about. Clearly in the days of minimum / living wage, 3 or 4 of those an hour will be pretty profitable for them.

Camping and bikes. Seem to do a steady trade and as a family we've bought all our recent bikes from them. Good shopping experience and they did well from the add-ons that I was persuaded to buy by the recipients.

SatNavs and in-car entertainment. No idea how well they do here. Does anyone really use a SatNav with Google maps or built-in navigation systems? Should they be thinking about dropping these?

Not hugely geared and a sustainable business. The CFO and I both thought the same yesterday although she bough a few more than I did.