Most of us reading blogs like this are perhaps not so interested in Halfords – the high street vendor of bits for cars, owners of autocentres and seller of bikes for all.
However, Halfords is somewhat of a partial Bellweather for the UK bike industry. So its tumble this week has made many sit up and take note.
At one point there was a 15% slide in the share price that came on the back of a profits warning. A couple of days later, as you can see from the chart above, that fall appears there to stay…at least for now.
The Reuters article, further below, cites a weak pound in the year-to-March 2018 . Whilst the pound did fall post-Brexit it is not common knowledge that it is, in fact, NOW at the same sort of pre-Brexit levels and generally heading further back Northwards. As we all know, share prices do take into account recent earning figures (based on the poorer exchange rate) but share prices are more of a consensus view of investors on the future prospects of the company. I wouldn’t have thought the exchange rate was too major a factor any more, at least not compared to last year. So, what’s going on?
I think part of this is getting the bad news out-of-the-way by taking as many negative accounting hits as possible NOW..as these results broadly coincide with a change of FD and chairman. The replacements will want to look as good as possible. That’s always easier when you start from a low base.
Interestingly, Halfords said that they did not expect bicycle prices to rise as they had done in the previous year; perhaps this was due to a general tightening of the UK economy? Perhaps. But the economy IS still growing albeit not as good as at times in the past
Halfords does sell some good cycling products. I’m sure Boardman bikes are good. But it does also sell quite a lot of over-priced tat. It’s bike stores, that I’ve been to, have good staff but generally not enough of them to give an adequate overall level of customer service.
Some analysts are also saying that Halfords are not capitalizing on the e-bike market. There are big margins in that growing sector AND the UK lags behind Europe in its takeup of e-bikes. Yet I’ve already seen two e-bike shops close down. So it probably is an opportunity BUT only for those companies able to exploit it properly.
Me? I’m bearish on the overall market but I would be relatively bullish on Halfords themselves. Halfords just feel undervalued despite several dangers, some of which I’ve indicated above. From a wider market perspective I also reckon that the more specialist retailers, that many of us regularly deal with, will still see people like us overpaying for the good kit that we love.
Partial Source: Reuters
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