LONDON (ShareCast) - (Sharecast News) - Motoring and cycling specialist Halfords shrugged off "challenging" conditions in the retail sector to post an improvement in first-half sales, though profits skidded sharply lower.
Like-for-like sales at the group's retail and autocentres rose 3.3% in the six months to 28 September, while total revenues increased 1.9% to £599.9m. Halfords said that good sales of electronic bikes, dashboard cameras and motoring services had underpinned increase, while online sales were almost 11%.

Pre-tax profits fell steeply, however, down 23% to £28.2m, as costs rose. Total operating costs were up 8% at £211m.

In September, Halfords announced it would overhaul the business with the intention of becoming a dedicated services-led specialist. The new strategy includes investing in stores and autocentres, and at the time the retailer said it would not see a return to profit growth until 2012 as a result.

Chief executive Graham Stapleton said of the interim numbers: "Despite the challenging UK consumer environment, we delivered robust sales and cash flow performance, with costs and profit broadly in line with our expectations.

"We are making good early progress as we implement our new strategy, and we are encouraged by the initial signs. We are moving to a more customer-centric approach, leveraging our expertise to provide a more differentiated shopping experience and an integrated and more convenient services offer."

Kate Heseltine, analyst at Edison Investment Research, called the results "solid" and said it was clear services were now "very much at the heart of the business".

She continued: "On average, the stores have not been updated for 11 years. As such, the company plans to accelerate investment in its stores and garages, expecting to refresh around 90 stores and 50 garages per annum over the medium term, with the prevailing capex guidance increasing from £40m to £60m per annum over the same period."

Sophie Lund-Yates at Hargreaves Lansdown the half year numbers were "pretty stable" as the group spends a lot on restructuring, but the bottom line remains in good health and net debt was trimmed too.

"Investors hold their breath when looking at retailer results these days, but all the signs are that Halfords will deliver on its transformation plans. An eye catching 152,000 Retail customers signed up for its MOT promotion as the group looks to maximise cross-selling opportunities across its Retail outlets and Autocentres - 70% of those are new to Autocentres."

She noted that the crossover of bricks and mortar stores and online sales, with 85% of all web orders collected in store, meaning Halfords is set up for even more cross-selling.

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