Halfords disappointing, but City hopes for revival

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BICYCLE and car repair firm Halfords and wholesaler Booker provide the focus for the City this week.

The mild spring weather and record petrol prices will spell more sales woe for Halfords when it updates the market on Thursday.

Petrol prices broke through the £1.40 barrier for the first time last month, forcing people to use their cars less and cut back on car maintenance products, while sales of de-icer and windscreen scrapers will suffer from the milder winter.

The group said sales of jerry cans rose six-fold at the end of last month amid fears that a tanker drivers’ strike would create petrol shortages, but this is not expected to have a big effect on its results.

However, the chain, which operates 467 stores, is set to benefit from more strong bike sales after the recent success of British cycling that has seen Mark Cavendish crowned world champion.

The chain’s shares have fallen by about 40 per cent over the past couple of years as weak trading and availability problems triggered a profits warning.

When Halfords last updated the market, it said like-for-like sales fell 4.8 per cent in the 13 weeks to 30 December, with car maintenance products down 12.8 per cent.

The City expects the group to report further sales declines of 1.7 per cent in the three months to the end of March but Jonathan Pritchard, an analyst at Oriel Securities, believes a decline of 3.2 per cent is more likely.

However, he thinks management will revive the business’s performance as it puts more staff into stores to improve customer service.

He compares Halfords to struggling supermarket giant Tesco, saying both chains cut staff levels too drastically in pursuit of profits.

But he said: “Halfords is a long way further down the brand rebuilding road than the food retail market leader, and we can see the light at the end of the tunnel. We’re not sure that Tesco yet knows quite where the tunnel is.”

Pasta and pizza chain Prezzo should unveil higher profits as it managed to tempt hard-pressed consumers with online offers and maintained its expansion drive. The group, which has more than 170 outlets in the UK, is expected to reveal profits of £16.1 million for 2011, up from £14.2m in 2010. The rise in profits is softer than previous years but, in 2011, the chain battled with rising utility and food costs – managing to offset them slightly with increasing its menu prices.

The UK’s biggest cash-and-carry wholesaler is set to reveal another strong performance on Thursday as its convenience store customers benefit as people increasingly top-up at nearby shops.

Booker – which has 172 branches and supplies nearly half a million businesses including corner shops, pubs and restaurants – reported a 7 per cent rise in sales in the 16 weeks to 30 December when it last updated the market, outperforming most of the supermarkets.

The Northamptonshire-based firm is expected to report strong trading as its customers continue to benefit as high petrol prices force people to drive less regularly to supermarkets and top-up more at local shops. The squeeze in consumer spending has also prompted people to shop more at convenience stores because they have less cash to spend at supermarkets.