Shares in Halfords declined over 3% early on Thursday (10 November), after the car and cycling products retailer reported a sharp decline in profit in the first half of its financial year, due to the impact of a weaker pound.
In the 26 weeks to the end of September, the FTSE 250-listed group, whose shares have fallen 22% over the last 12 months, saw underlying pretax profits decline 12% year-on-year, offsetting a 6.3% increase in revenue to £567.3m. The company, which despite the drop in profit reiterated its full-year expectations, attributed the disappointing figures to the pound's depreciation, increased investment and more promotional activity in its cycling business during the summer.
Sterling has lost approximately 18% of its value against the dollar since Britain voted in favour of leaving the European Union in June, leading to higher sourcing costs for the company. However, Halfords added the weak pound could also have a positive effect if it meant Britons choose to holiday in the UK rather than in Europe.
"The depreciation of sterling brings cost headwinds," said group chief executive Jill McDonald.
"However, we have developed a number of initiatives to mitigate the profit impact and remain confident in the underlying performance of the group."
The group added sales in the motoring +1.1% and cycling divisions increased 1.1% and 4.6% respectively on a like-for-like basis, with total cycling sales up 15.4% from the corresponding period in the previous year.
Autocentres sales were 0.9% higher on a like-for-like basis and 3.6% in total, while online sales across the group increased 30% year-on-year. "There is demonstrable progress across the plan, with more to come in the year ahead, and the benefits for colleagues and customers are starting to come through," McDonald added.