Halfords boss buys £100k worth of shares after motoring slowdown dip

The chief executive of Halfords bought almost £100,000 worth of shares on Thursday as the retailer reported half-year results and set out its key strategic priorities for the months ahead.

Halfords shares slipped despite reporting stronger sales and profits for the six months to 26 September, as bumper demand within cycling failed to offset investor concerns about a slowdown in motoring momentum.

Boss Henry Birch, who replaced Graham Stapleton earlier this year, told shareholders the business would pursue a three-phase ‘Optimise, Evolve, Scale’ strategy in a bid to boost returns and grow its services business.

And a regulatory filing published on Friday shows Birch put his money where his mouth is, buying 71,500 shares in the group at just under £1.40 each for a total cost of around £99,975.

It came as Birch and Halfords management spoke to investors in a strategy update call following the publication of its results.

Analysts at Peel Hunt said the update was ‘highly engaging’, with Birch outlining his view that while there is ‘no need for widespread change’, Halfords ‘needs to tighten up processes’.

Halfords shares recovered ground after concerns about a slowdown in motoring growth hit their value on Thursday

Peel Hunt wrote in a note: ‘The presentation outlined that Halfords’ position is attractive, with a widely known and liked brand and a combination of businesses that is unique in the industry. What is required is a greater focus on the bottom line.

‘Too often, previous management teams have spread themselves too thinly, and there has not been a laser focus on ensuring that processes were the best available.

‘That has meant that, while the strategic thinking behind the change of corporate direction has been sound, the delivery of bottom-line growth has been disappointing.’

‘Tweaks, not major surgery, are required’

Halfords shares are down by around 68 per cent since July 2021 after a prolonged period of weak consumer confidence and high inflation. At their current level of 142p, Halfords shares remain well below a July 2015 peak above 536p.

Reiterating a buy rating with a target price of 200p, Peel Hunt said: ‘If management can deliver on more margin-focused outcomes, the potential for long-term earnings growth is exciting.

‘It is not a slam dunk, but the shares look overly cautious, in our view.’

Among the measures likely to be implemented, Halfords is set to focus on ‘category management’ within its retail business, and invest more in advertising its service proposition.

There is also set to be a focus on processes and efficiency within its garages business, improve use of data, and revamp Halford’s online offering.

Should Halfords successfully implement the changes, margins and returns should improve, according to Peel Hunt, which sees scope for the retailer to then expand its garage offering via acquisitions and expand into different markets.

Peel Hunt said: ‘Birch knew that he was inheriting a ship that was cruising relatively smoothly when he took the job and, rightly, he is not looking to change direction, rather make the voyage a bit less choppy.

‘The ideas in his presentation are not revolutionary, nor did he pretend that they were: tweaks, not major surgery, are required here.

‘The shares are suggesting that a margin recovery is not on the cards: the operational gearing potential here is large, however, and if Mr Birch can get it right, we believe the multiple is going to move quickly.’

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