As Halfords warns on profits, have the wheels fallen off the cycling market?

The most significant drop was in the cycling category with volume in the market falling 8 percentage points in January, compared with a decline of 5.1 percentage points in the previous quarter. 

The retailer said: “Looking ahead to FY25, we remain cautious on market recovery in the short-term and the current significant volatility in market conditions means that forecasting accurately is challenging.

“While we have reduced our profit guidance as a result of very challenging and exceptional short-term market conditions, we remain confident in our strategy and longer-term growth prospects.”

During the pandemic, the cycling segment saw a major boom, but it has struggled in recent years as the restrictions have relaxed. Halfords hasn’t struggled alone, however, with other major players such as Rapha reporting deepening losses. 

Retail Week looks at what has caused the cycling category to hit the brakes and what brands are doing to overcome a volatile market and get people back on their bikes.

Post-pandemic headwinds

Global lockdowns boosted demand for sporting goods and cycling enjoyed a bumper pandemic as home-bound consumers picked it up as a leisure pastime. Halfords reported an increase in cycling sales of 54.1% on a like-for-like basis for the full year ending April 2021.

Other specialist cycling retailers enjoyed a similar peak, such as luxury retailer Rapha which reported an increase of 34.3% in sales of sporting goods, including cycling gear, in the year ending January 2022. 

Fast forward two years and the financial figures of these retailers tell a completely different story. 

Halfords’ like-for-like sales in the cycling segment fell 10.9% in the full year ending March 2023, while sales at Rapha fell 10.1% and losses deepened for the year ending January 2023.

The fall in demand has had a more drastic impact on Portsmouth-based pureplay bike retailer WiggleCRC, which filed for administration in October last year after its parent company Signa terminated a €150m (£130m) funding commitment to its struggling sports division.

As the retailer introduced clearance sales of up to 80% on its website to get rid of stocks, this had a wider knock-on effect on the segment with Halfords noting that increased promotional participation and customers purchasing on credit led to weaker gross margins than previously anticipated.

As cycling sales fell further in its latest results, Halfords said this was due to “a combination of continued weak customer confidence and unusually mild and very wet weather” along with the cycling market being “more challenging and competitive as it continues to consolidate”. 

Investec analyst Kate Calvert said: “The category saw a growth during the pandemic but consumers who invested in bikes then are less likely to invest in another, unless it is for a child.  

“Consumer confidence is still low. Yes, it’s on a recovery trend, but we still have a cost-of-living crisis ongoing, which has hit discretionary categories like cycling. Halfords wasn’t expecting a recovery in the cycling market this year; they are expecting it next year.” 

As consumers cut back on spending, Halfords said it expects weaker demand in the category to continue through its peak Easter cycling period in March. 

Halfords declined to comment on its plans to overcome the challenges but said its cycling division constitutes around 20% of sales, with the focus having shifted largely to motoring services in recent years. 

Jamel Boughedda, associate analyst at Global Data, said Halfords needs to innovate if it wants to boost cycling sales. He said: “The challenge will persist as consumer confidence remains low, with the high price points of bikes discouraging consumers from buying.

“Halfords must innovate to reinvigorate its cycling sales, for instance by expanding its successful Motoring Loyalty Club into its cycling business.” 

Picking up the pace

Indeed, Rapha is taking such an approach as it looks to strengthen its loyal consumer community – Rapha Cycling Club has over 23,000 members worldwide. 

Rapha’s global marketing director, Christina Lindquist, says: “It was in 2020, during the peak of the pandemic, when our focus on community accelerated.  

“We believe that by investing in people – employees, customers and the future generation of cyclists – through our activations, global clubhouse networks, athletes and our commitment to improving our social and environmental impact, this is where we can play our part in helping to deliver long term, sustained interest in cycling. 

“Rapha’s founding principle was to create a direct-to-consumer performance cycling clothing company with the community at its very heart. Today, we are doubling down on this to ensure the business can navigate a rapidly changing retail industry.” 

As cycling retail hits a bump in the road, Halfords and other specialist retailers will have to ride it out and, as consumer outlook improves, look to leverage their community schemes to keep consumers engaged and get themselves back to the front of the pack.