Car maintenance tunes up Halfords sales

Car battery sales powered a cheerful final Christmas at Halfords for chief executive Matt Davies, who has been hired to rebuild Tesco's struggling UK business.

The cycle parts and car repairs group met market expectations with 6.5 per cent sales growth for the 15 weeks to January 9 as its car maintenance business reported record levels of parts fitting.

"We are delighted to report strong third quarter sales, demonstrating our ability to continue to drive top-line growth. The standout performer this quarter was car maintenance," said Matt Davies, chief executive, who is set to join Tesco in May.

Tesco tapped the Halfords boss to run its UK business, which accounts for the majority of its sales, in early January. Mr Davies, who has foregone his bonus this financial year, has been credited with turning around Halfords.

During his two-year reign, shares in have risen 30 per cent on the back of a Britain's growing love affair with cycling. Cycle sales were up 7.6 per cent in the quarter, boosted by sales of children's bikes, which grew 13.8 per cent, the company said.

Car maintenance sales rose 11 per cent, while the company's car enhancement division fell 0.3 per cent as sat nav sales continued to fall as consumers turn to smartphones for directions.

Under Halfords three year turnround plan, launched in 2013, the group has cut staff, retraining the remaining employees to reduce staff churn, and invested in refurbishing its stores and relaunching its website.

Click and collect helped push online sales up to a record 12.9 per cent of retail sales in the quarter, said Mr Davies, as its online retail division grew 16.5 per cent.

Full year retail gross margins are expected to be at the "better half" of guidance of between -25 and -75 basis points, the company said, while operating cost growth is expected to be at the higher end of the company's 5-6 per cent guidance.

Halfords cut its full year finance cost guidance by £0.5m to between £3m-£4m after reducing its credit facility by £30m to £170m and extending it to November 2019.

In December, the group relaunched its Cycle Republic format in London as it opened the first of a chain of up to 30 cycling-only stores. Halfords previously scrapped the brand in 2009.

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