Rain dampens Halfords sales after profit slide

LONDON Thu May 31, 2012 10:43am BST

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LONDON (Reuters) - British bicycles to car parts retailer Halfords (HFD.L) blamed the wettest April on record and a soggy start to May for dampening sales in its new financial year, after it reported a 27 percent drop in profit for the year ended March.

Poor weather has hit sales across Britain's retail industry in recent weeks, exacerbating an already tough situation as shoppers struggle with rising prices, muted wages growth and government austerity measures.

Home improvements group Kingfisher (KGF.L) also reported a lower first-quarter profit on Thursday, as the rain put shoppers off buying seasonal ranges.

"Retail sales in the financial year 2013 have been very disappointing so far," said Halfords, which trades from 467 shops in Britain and Ireland and 260 Halfords Autocentres.

The company said that although it had not seen the usual seasonal demand for cycling and outdoor leisure products, some of those sales were deferred rather than cancelled, and it expected a stronger performance as the year progresses.

"The release was not surprising given the very bad weather and the impact it had to all retailers in the UK but investors will likely be reluctant to accept management's optimism at face value before they witness any positive results," analysts at Barclays said.

Halfords shares were the top mid-cap .FTMC fallers in London and were down nearly 8 percent at 255 pence in mid-morning trade, their lowest in nearly two years.

Peel Hunt analyst John Stevenson cut his rating on Halfords shares to 'sell,' and noted the company had now delivered seven downgrades over eight quarters.

"Our 'sell' stance is not a reaction to current trading, rather a reflection of our concerns over the medium-term outlook," Stevenson said.

"Lacking clear growth drivers beyond a potential Olympic fillip, we have yet to gain confidence that we have hit the nadir."

Analysts said Halfords' comments on the outlook would likely prompt downgrades to profit forecasts.

Full-year underlying profit for the year ended March 2012, was 92.2 million pounds ($143.2 million), in line with estimates, according to Thomson Reuters I/B/E/S.

Sales were down about 1 percent at 863 million pounds.

(Editing by Rosalba O'Brien and Mark Potter)

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