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Investing.com -- Shares of Halfords Group PLC (LON:HFD) jumped by 11% on Tuesday following the company’s announcement that its FY25 profit before tax (PBT) is expected to be at the upper end of its previously guided range.
The automotive and cycling retailer also revealed a change in leadership, with CEO Graham Stapleton stepping down and Henry Birch taking over the role.
The company reported that FY25 like-for-like (LFL) sales grew by 2.3% YoY, slightly above the Visible Alpha consensus of 2.0% YoY. The Autocentres division saw a LFL sales growth of 3.7% YoY, despite being just under the consensus of 3.9% YoY, while Retail LFL sales growth was 1.7% YoY, outperforming the consensus of 1.1% YoY.
Halfords noted improvements in both Motoring and Cycling categories.
In addition to the sales growth, Halfords highlighted a significant acceleration in H2 gross margin gains, aided by pricing optimization, better buying practices, and a favorable hedged foreign exchange rate. The company exceeded its £30 million cost savings target for FY25, contributing to the positive financial outlook.
Halfords expects to finish the fiscal year in a net cash position, contrary to the consensus prediction of £13 million in net debt. Looking ahead to FY26, the company anticipates challenges due to uncertain retail sales and has identified £23 million in labor cost headwinds following the Autumn budget.
Despite these challenges, Halfords is exploring various mitigation strategies, including pricing strategy adjustments, further cost efficiencies, and the acceleration of strategic initiatives.
RBC analysts commented on the company’s prospects, stating, "Halfords has a strong market position in the UK motoring and cycling markets, with a good offer in both the retail and services sector. Near term, we expect continued market weakness in tyres, but we see potential for a continued recovery in the motoring market. We are encouraged by Halfords’ Services led strategy, which should be supportive for margins in the long run, however, we note that there is execution risk for this strategy."
RBC added that it sees potential for Halfords to become a major player in EV servicing but believes a material step-up in U.K. EV penetration is still a number of years away.