A surge in sales of bicycles and cycling gear has powered Halfords a year ahead of where it expected to be in its three-year turnaround plan as it gears up for the Tour de France coming to Yorkshire this summer.
Shares in Halfords were lifted nearly 10% to 484p as the company revealed a 42% rise in underlying sales of cycling-related goods in the most recent three months.
Total sales rose 8% to £940m in the year to the end of March and profits were up 2.3% to £73m.
Chief executive Matt Davies said the performance had been better than expected because cycling had enjoyed an "absolute stand-out performance". The retailer had won business from rivals, he said, thanks to a combination of good weather, improved stock availability and products, better trained and motivated staff and a switch from promoting mainly on price.
The former Pets at Home boss said he expected sales of cycling goods to rise strongly again this year as a result of special events and promotions linked to the UK's "summer of cycling", which includes the Grand Départ of the Tour de France in Yorkshire, and the Commonwealth Games in Glasgow in July. The retailer is also launching children's versions of its Boardman racing bikes.
Davies added that the government needed to do more to improve safety if cycling was to continue to grow at its current pace. "We believe that focusing on cycling is a sensible use of tax-payers money," he said, suggesting that cycling should be made part of the national curriculum in schools.Davies said Halfords, which plans to offer cycling proficiency workshops in primary schools this year, was already engaging with the government on the topic and would look at doing more lobbying in the year ahead.
Even without more support from politicians, cycling goods already account for around half the sales made via Halfords' website and Davies expects the category to make up more than a third of overall sales as one of its core categories alongside car accessories.
The retailer now expects full-year underlying profits for 2015 to be ahead of those achieved in 2013 – a position Davies had warned the company might not reach until 2016, when he launched his turnaround plan a year ago."We have been able to achieve the changes we wanted without the steep decline in profitability that we thought might be required and that's because the level of sales growth we've been able to drive is beyond expectations." Davies said. He cautioned: "I'm happy with progress but we are in the very early stages of our plans to grow the business and it's important that we don't get carried away."
Davies said stellar sales growth justified Halfords' decision to demand better terms from suppliers to provide a "few million" of its planned £100m investment in its stores by 2016. The Forum for Small Business said Halfords had in effect asked suppliers for a rebate on already agreed terms which were "significant for both the amount being asked and the suggestion such payments might not be a one-off". It wants the Competition and Markets Authority to investigate.
Davies said he was "comfortable" with the approach to suppliers - saying that companies had been asked to contribute in a variety of ways depending on their importance to the business and level of performance. "Suppliers are benefiting from our growth and that growth does not come for free; a significant investment is required," he said. He said the contributions were voluntary but could affect Halfords' decision on future orders and placement in store. "I have absolutely nothing to apologise for. If we weren't delivering growth and this was just 'please give me money' I would feel less comfortable but I'm very comfortable."