May 22, 2018 / 6:26 AM / a year ago

New Halfords CEO issues profit warning, shares deflated

LONDON (Reuters) - The new boss of Halfords (HFD.L) warned profit was unlikely to grow this year, held back by a lack of price rises in cycling, currency moves and increased investment in the British bicycles to car parts retailer.

FILE PHOTO: A sign is seen on the front door of a branch of Halfords in west London, Britain July 15, 2015. REUTERS/Toby Melville/File Photo

Shares in Halfords fell as much as 15 percent on Tuesday, losing all the gains they had made so far this year.

The results for the year to the end of March were the first presented by Graham Stapleton, a former Dixons Carphone (DC.L) executive who succeeded Jill McDonald as Halfords CEO in January. McDonald went to Marks & Spencer (MKS.L) to lead its clothing business.

The group, which trades from 457 Halfords stores, 20 Cycle Republic shops and 316 Autocentres, said it expected the motoring market would remain robust in 2018-19 and continued to see good growth prospects for cycling.

However, it did not expect bicycle prices to rise as they had done in the previous year.

“Given this, the phasing of our remaining foreign exchange mitigation actions and decisions to accelerate investment in services and customer capabilities, we currently anticipate FY19 underlying profit before tax to be broadly in line with FY18,” it said.

Prior to Tuesday’s update analysts’ average forecast was an increase to 76.5 million pounds.

For the year to March 30, Halfords made an underlying pretax profit of 71.6 million pounds - in line with analysts’ forecasts but down from 75.4 million pounds in 2016-17 and a second straight fall. Turnover rose 3.7 percent to 1.14 billion pounds.

The profit fall reflected a 25 million pounds hit due to the weaker pound against the U.S. dollar which raised the import cost of goods.

British retailers are also being hampered by an ongoing squeeze on consumers’ spending power.

Stapleton said Halfords would focus even more on improving its customer services and digital offer but would present his long-term vision for the business in September.

Shares in Halfords were down 39 pence at 349 pence at 0845 GMT, valuing the business at around 690 million pounds.

“Standard form for new Halfords CEOs is to cut the forecast and talk about investment in customer service, data and awareness. Stapleton got the memo, and consensus numbers are coming down by circa 8 percent,” said analysts at Peel Hunt who have a “sell” stance on the stock.

Halfords also named Keith Williams as its new chairman from July 24. Williams, a former CEO and chairman of British Airways, will succeed Dennis Millard who is retiring after nine years in the job.

Finance chief Jonny Mason is joining Dixons Carphone from a date to be confirmed.

Reporting by James Davey; Editing by Paul Sandle/Keith Weir

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