Petrolheads’ favourite Halfords pulled off a coup last week with the hiring of David Wild as its new chief executive. Wild’s move from Wal-Mart, the world’s biggest retailer, to Halfords, capitalised at less than£600 million, prompted much musing about the agenda he is likely to pursue.
Although Halfords may be a tiddler compared with the US giant, it is a much-admired retailer with many roads to expansion. Having recorded sales growth every year for the past 20 and established itself as the clear market leader in its core categories, the retailer is in a strong position to make the most of opportunities. Unlike many new bosses at UK retailers, Wild is not there to deliver a turnaround but to lead continued growth.
Wild’s CV points to some likely priorities. At present he is Wal-Mart’s senior vice-president for new business development and his responsibilities have included work on the retailer’s Marketside format, which is being launched in opposition to Tesco’s Fresh & Easy. Wild was previously managing director of Wal-Mart’s German business.
Before that, he spent 18 years at Tesco, including six years as the grocer’s Central Europe chief executive and European corporate development director. That experience is likely to have been a big factor in Wild’s appeal to Halfords, because the motor accessories retailer is piloting stores of its own in Central Europe.
Last year, Halfords made its debut in the Czech Republic, where it now has three shops and a regional office in Prague. Another three Czech stores are planned and, this autumn, the retailer will open its first Polish shop in Wroclaw.
Observers wonder whether the arrival of Wild, who starts at Halfords on August 4, will signal accelerated expansion in Central Europe and, in the UK, of its five-store, fledgling, standalone chain Bikehut. Shore Capital analyst John Stevenson says: “The business has proved to be very conservative in backing its new opportunities with any great enthusiasm.
“With the infrastructure and support of its existing store network, Halfords could deliver a much more aggressive roll-out of its standalone concept. Similarly, early progress in the Czech Republic is said to have been encouraging, with David Wild’s experience of direct benefit here.”
Stevenson adds: “This is an excellent appointment. The change in chief executive offers a significant opportunity for the business. Halfords can move from being defensive and relatively cheap against the sector, to defensive with strong, sustainable long-term earnings growth.”
Halfords chairman Richard Pym agrees that Central Europe may well be a big opportunity, but insists the retailer will maintain its softly-softly approach. “David established a very successful business for Tesco in that geography, but we are just at the pilot stage” says Pym. “We’ll take it steadily. Our approach is to experiment and measure.”
Poised for acceleration
Halfords’ Central European business is not yet at the stage when the button will be pressed on rapid roll-out but, says Pym, if that decision is eventually taken, the retailer is in a good position from which to build.
He adds that Wroclaw was chosen as Halfords’ debut location in Poland because of its proximity to Prague and acknowledges that the Czech business might eventually prove a springboard for entry into other surrounding countries.
Might acquisitions be on the cards? Pym plays down the prospect: “We keep acquisitions under review and we’ve made small acquisitions in the past, but the main focus is on organic growth.”
The other international connection that some investors believe may eventually add spice to Halfords is East Asia, rather than Eastern Europe. Japanese motor accessories retailer Autobacs holds a 5.2 per cent stake in Halfords and analysts have speculated that there may be a full tie-up between the Asian and British store groups one day.
The close links between the pair have allowed Halfords to develop what it describes as “the UK’s first affordable in-dash satellite navigation unit” and Pym indicates that such collaborations, rather than potential corporate action, characterise the relationship. “We have a co-operation agreement,” he says. “I believe it is standard for Japanese companies to take stakeholdings in companies with which they have a co-operation agreement. The shareholding is very stable and has been for some years.”
For the time being, Pym says, Halfords’ main focus remains very much on the opportunities still to be realised in its domestic market. “The main profit generators are in the UK and, for the next few years, the UK will be where Halfords returns [shareholder] value,” he explains.
The retailer has 430 shops in the UK – mainly superstores and including 131 “supermezzanine” shops in which the extra floor space is dedicated to the cycling range. Halfords expects to open between 15 and 20 more stores this year and sees potential for at least another 100 in the UK and Republic of Ireland, explaining Pym’s preference to focus on domestic opportunity at present rather than potential elsewhere.
But might not a retailer that makes its money mainly from retail park stores catering for car enthusiasts be susceptible to the impact of spiralling fuel costs? Pym refuses to comment on anything that might be construed as current trading, but when the retailer posted full-year figures at the start of this month it made reassuring noises about the robustness of prospects.
In fact, the high cost of fuel, along with growing environmental awareness, has propelled sales of one of the products for which Halfords is best known – bikes. And although consumers may be weighing up their spending, much of Halfords’ motor-related business is made of up of essential maintenance goods and services. The retailer is also protected from the worst effects of the slowdown by its low average transaction value – said by analysts to be about£20.
Halfords is also bolstering its multichannel offer. Halfords.com receives about 17 million visits a year and the Reserve & Collect service introduced in time for last year’s Christmas trading period has since generated 150,000 reservations. The web site will be rejigged this year to improve the shopping experience and incorporate shopper product reviews.
As far as Pym is concerned, Wild will inherit a powerful and growing business from his predecessor, Ian McLeod, and a different leader will not change the fundamentals that have brought Halfords success. “David will bring his own style. It’s a style that we think matches Halfords,” he says. “We are not expecting very significant cultural change.”
Halfords is respected in the City for its management strength, category-killing offer, product innovation and methodical development of pilot businesses.
If the appointment of Wild is a signal that overseas growth is very likely to become a higher priority, a compelling international growth story may be added to the retailer’s defensive qualities.
Halfords at a glance
Number of stores: 450
Countries where present: UK (430 stores), Republic of Ireland (17), Czech Republic (3), Poland from this autumn
Results for year to March 28, 2008:
Sales:£797.4 million
Pre-tax profit:£90.2 million
Like-for-like growth: 4.3 per cent
In the driving seat: David Wild
Wild, 53, might easily have been destined for a career in science rather than on the shopfloor.
Halfords’ Manchester-born chief executive, who starts on August 4, graduated from University College, Oxford, with an MA in chemistry. However, after joining RHM Foods, he pursued a marketing career before joining Tesco in 1985.
He spent 18 years with the grocer, during which time it usurped Sainsbury’s position at the top of the supermarket league, and played a key part in its internationalisation – most notably in Central Europe. He was latterly Tesco’s group supply chain director.
In 2004, Wild jumped ship to Wal-Mart, where he ran the German division – which has since shut – and, in January last year, he became the retailer’s new business development director in the US. In that role, one of his main tasks was to counter the stateside arrival of Tesco with its Fresh & Easy chain. The result was Marketside, a 15,000 sq ft format that will make its debut later this year.
Revealing Wild’s appointment last week, Halfords chairman Richard Pym said: “He brings over 20 years’ retailing experience, gained at two world-leading businesses and clearly has the skills and ability to move the company forward.”
Wild said: “I am very excited to be joining Halfords. It’s a business I have admired from the outside for many years. It has some very attractive market positions and exciting opportunities for growth, as well as sound defensive qualities.”
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