Stock of the Week Part 2: Halfords – Morningstar

September 16, 2022 by No Comments

James Gard: Welcome to Morningstar. Making its debut as stock of the week is Halfords, which sells bikes, car parts and all manner of things from WD40 to camping gear.

It’s put out a trading statement for the last twenty weeks and shares soared 15% on the day. Investors focused on a rise in sales, and the new focus on MOT and repair services, which have higher margins. As the cycling boom fades and people return to the office, the car is back. Anyone who’s been on the M25 this summer knows that heavy traffic is here to stay and that means more wear and tear on our cars.

The cost of upgrading to a new model means people may have to hang on to the old one for longer. And that means bigger bills. As well as getting more expensive to buy, British used cars are costing more to repair and maintain. And that’s where Halfords comes in.

Profit forecasts for the full year remain in the range between 65 million to 75 million pounds, but this is lower than for the year before.  

In share price terms, Halfords investors have been on a long hard road. Shares rallied during the pandemic but have been on a skid since last summer. Could the share price be factoring in too much bad news? Halfords offers a bumpy ride for investors but could benefit from changing consumer trends. For example, it has been servicing more and more electric vehicles and selling electric bikes and e-scooters too.

For Morningstar, I’m James Gard.

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