Cycling market "significantly worse than expected", Halfords warns — with "high-profile failure of Wiggle" and widespread sales evidence of "another
year of decline"

The UK's largest cycling retailer predicted more pain is to come over the
next 12 months and reported its profits had fallen as bike sales have
dropped a third on pre-Covid levels...

by DAN ALEXANDER
THU, JUN 27, 2024 11:16

Publishing its preliminary financial results for the year to March 2024, Halfords has seen its profits slashed amid "significantly worse than
expected" cycling performance and bike sales dropping to 30 per cent below pre-Covid levels.

The major retailer, the largest provider of cycling sales and services in
the UK, highlighted the "high-profile failure" of Wiggle Chain Reaction as evidence of the "challenging" market and noted that "significant pressure"
was being felt due to widespread industry sales.

Halfords reported (link is external) its cycling volumes were down four per cent compared with the previous financial year, "far behind" the forecast,
with the now-familiar "worse than anticipated headwinds" — namely, the cost-of-living crisis, inflation, low consumer confidence for big
discretionary purchases, and poor spring weather — all blamed for contributing to the "very challenging market conditions" facing the bike industry.

Overall, Halfords' pre-tax profits fell by 18 per cent to £36.1 million,
the retailer's 'Autocentre' car servicing offering named as "the star
performer again". CEO Graham Stapleton conceded that the short-term outlook "remains challenging", with cycling sales expected to slump further over
the next 12 months, but concluded that given the company's profitability
during a time of significant headwinds the business is "well positioned for profitable growth" in the future.

Looking at cycling specifically, the four per cent decline on 2023 was "significantly worse" than the predicted one per cent drop. "Low customer confidence in the ongoing cost-of-living crisis has further impacted demand
for big-ticket, discretionary items such as bikes. Another year of decline leaves bike market volumes c. 30% below pre-Covid levels," the report
states.

Halfords also pointed to the cycling industry continuing to "consolidate quickly" — a reference to Wiggle being bought by Mike Ashley's Frasers
Group, the retail group that already owns Evans Cycles and Sports Direct —
as another reason why the cycling industry has become "more challenging and competitive".

Wiggle's "high-profile failure" was, Halfords says, a demonstration of the "much broader challenge" facing cycling businesses in the UK.

As widely seen elsewhere in the industry, Halfords introduced major sales
on cycling goods in recent times, promotional participation up a third
compared with the previous financial year. That, combined with more
customers purchasing on credit, has lead to "significant pressure on gross margins".

Halfords says it "further cemented leadership of the UK cycling market" and also reported its Cycle2Work revenue had risen 8.3 per cent year-on-year. Likewise, likely aided by Wiggle's demise, Halfords-owned online retailer
Tredz saw sales rise 11.1 per cent.

While Halfords expects its cycling market to slump even further over the
next year, the retailer said it expects "to emerge in an even stronger
position once market conditions normalise".

The cycling giant's £36.1 million pre-tax profit was in line with the downgraded profit forecast it had predicted at the start of the year, news
that prompted Halfords' share price to plunge 25 per cent back in February.

Last year, amid poor cycling performance, the business said it would focus
on "needs-based" sources of revenue, such as cheap motoring repairs, in a
bid to fill the gap left by "discretionary" spending areas, such as cycling
and car cleaning, which were "adversely affected by unfavourable weather
and low consumer confidence".

The noises last June were, however, that in the long term Halfords remains "very, very confident" about the cycling market. "Cycling still hits the
sweet spot in terms of climate change… We still think it's the right place
to be," the retailer's chief executive Stapleton said at the time.

Those comments came a year after, in June 2022, the company warned of a "considerable softening of the cycling market" following its pandemic boom, with supply chain disruption and inflation beginning to bite.

<https://road.cc/content/news/halfords-cycling-market-significantly-worse-expected-309085>

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