Halfords Q3 results show a trend reversal in UK bike sales

REDDITCH, UK – In its latest financial statement, UK bicycle retailer, Halfords, reports that cycling sales have dropped to pre-Covid-19 levels. Despite stating that “overall revenues are outperforming the market”, the cycling division is down 20% year-on-year to date.

In 2021, the company reported double annual cycling sales and the increased demand lead to stocks drying up. However, in the middle of 2022, the tide started to turn and warning signs appeared as inflation and supply chain constraints put pressure on sales of the UK’s largest bicycle retailer.

‘Softer than expected’ cycling results

In Q3 of FY2023 (which runs for the 13 weeks before 30 December), the Group’s revenue grew by 38.3% and 12.6% LFL vs FY2020 due to strong sales in the motoring category. Sales in cycling were reported as “softer than expected” . The Halfords Group now bases its results against FY2020 to get a better understanding of performance. “The disruption from Covid-19 to both FY2021 and FY2022 means that comparators against these years are more difficult to interpret,” the company stated.

A category that did report a good performance in Q3 however, was Kids bikes. Due to the stronger year-on-year availability and the Christmas period increasing the demand, revenues rose 4.6% vs FY2022. Adult bikes, on the other hand, performed weaker than expected, down 12% vs FY2022. The company attributes this to the impact of the weaker consumer backdrop relative to H1 and the more discretionary, higher ticket nature of the category. The Cycle2Work scheme, which is a government initiative to encourage cycling, saw sales grow 20.1% vs FY2022.

Longer-term outlook

“We have seen strong revenue growth in exceptionally challenging circumstances, and we have continued to grow our market share whilst tightly managing our costs, inventories and cashflows,” commented CEO, Graham Stapleton. “Consumer demand for our services and needs-based categories, which now account for most of our revenue, continues to grow.”

The company acknowledges that consumers continue to face inflation and a series of unknowns in the economy, and therefore it does not expect a significant short-term recovery in high-ticket, discretionary spending.

In light of this, the company has revised its underlying profit guidance from £60 million to £50 million for FY2023.

UK sales down, but cycling is on the rise

Although these latest financial results suggest a downturn in bicycle sales in the UK, the use of bicycles and e-bikes are on the rise, according to a report by Transport for London. According to the ‘London-only based report’ , cycling increased by 40% since the start of the pandemic, including a near doubling of journeys by bike on weekends. Across the capital, weekday bike trips are up 20-25% when March 2020 is compared with October 2022. On the weekends, the increase in bike trips is 90%.

In what could be considered a threat to traditional bike retailers like Halfords, the capital’s bike-sharing scheme run by Santander also reported record usage: over 10.9 million hires in 2022. Transport for London has stated a target of having a third of Londoners living within 400 metres of a high-quality cycle route by 2025.