Halfords' third quarter: What the analysts say

Halfords has again delivered strong sales momentum, retail like-for-like sales +5.9%, showing that the ‘Getting into Gear’ recovery strategy is starting to gain traction. The defensiveness of its offer again helped, cycling delivered a fabulous performance as opposed to car maintenance, which usually drives the business in the third quarter, but was weather affected. No change to forecasts due to mix effect and higher variable costs from higher sales- Kate Calvert, Investec

Halfords has reported strong third quarter. Retail like-for-like sales up 5.9%, versus consensus of +3.9% and our estimate of +3.5%. Self-help initiatives are coming through with a very strong performance on bikes. Sales mix leads to a small hit on gross margin and operating costs likely to come in at higher end of 5-6% guidance due to volumes. Our FY14E profit before tax guidance of £71.3m is at the higher end of the range of £67.5m-£72m – Sanjay Vidyarthi, Liberum

We view this as a good update from Halfords with a beat in like-for-like retail sales despite mild weather subduing demand in car maintenance. Encouragingly cycle sales were very strong, driven by initiatives on the range which gives us confidence in the group’s ability to drive market share in this category. Premium bikes outperformed, driven in part by new ranges from both Boardman and Apollo. Halfords also extended and refreshed ranges of other bikes such as introducing girls bikes into the Pendleton brand. Guidance reiterated but negative mix effect means that gross margin is likely to be at the bottom of range. In addition to a negative mix effect from the outperformance of lower margin Cycle sales in the qtr, within this category lower margin premium bikes also outperformed. Consequently, wereduce our FY14E gross margin assumption to -150bps - Georgina Johanan, J.P Morgan

Some feared that the ‘electronics Christmas’ and the unhelpful weather running into December would have a big impact on trading but this is an above the top of the range outcome. Overall this is a strong trading performance- Jonathan Pritchard, Oriel