Halfords has issued a trading update which appears to show that the cost of living is taking its toll on its cycling business. Overall, cycling sales are down 21.2%, with growth in the auto side of the business offsetting these losses. The figures in the report cover the 13 weeks up to December 31st 2022, and compare sales against the same periods in both 2021 and 2020.
But look more closely at the details they’ve provided, and it seems that it’s not as simple as ‘people aren’t buying bikes’. In certain markets, people are buying bikes, in increased quantities. The statement says:
▪ Our own brand Premium Adult bikes performed well, up +20%, as did E-bikes growing over
Halfords trading update
+100%.
▪ Our online performance cycling business “Tredz” also performed very well, up +47%.
▪ Kids bikes sales started well but softened later in the period. Unexpected freight delays in
Junior bikes compounded the impacts of Omicron including lower footfall and general
customer caution
So, premium bikes (more expensive), ebikes (also more expensive), and Tredz (likely catering to an enthusiast market, likely to be buying higher end bikes) have sold quite significantly more. Yet, overall, sales are down 21.2%.
This suggests to us that at the budget end of the market sales have slumped dramatically. This would match up to other cost of living pressures, where those with higher incomes tend not to feel the squeeze as much or as early as those on low incomes. As the year progresses, if the economic outlook does not improve, we would expect to see a slowing of sales elsewhere in the Halfords market. Those on the highest incomes that are largely insulated from economic conditions may well not be Halfords’ core market – the highest price bike on the Halfords website is a road bike at ‘just’ £3,900′, while the most expensive mountain bike is an eMTB at £2,999. If mid to high earners start tightening their belts, Halfords could well feel the squeeze.
