Rampant inflation has also hit retailers’ prospects in recent months. Consumer confidence is now at its lowest level since 2008 and could deteriorate further as the cost of living crisis deepens.
As a result, Halfords shares have fallen 35 percent so far this year and 28 percent since our original tip in March last year. However, we maintain our optimistic outlook for the company. The ratio between net debt and equity (including lease obligations) of 50 pc. and an interest cover of 12 in the first half of the current year suggest it has the financial resources to withstand what could turn out to be a very weak business environment in the near term. walk.
In addition, it has continued to shift its revenue sources into the less discretionary, more resilient automotive services segment through organic growth and acquisitions. The Autocenters generated 10.7 percent comparable store sales growth in the most recent quarter and offer significant long-term growth potential as electric vehicles become more popular.
EV sales doubled in the first quarter of the year compared to the same period last year. According to the Institute of the Motor Industry, there could be a shortage of about 35,000 EV technicians by 2030. As Halfords invests heavily in its EV service offering, in training and equipment, it could be in a much stronger position than its rivals to meet the rapidly growing demand. Smaller, independent garages, in particular, may struggle to bear the costs of switching to electric vehicles.
Trading on a P/E ratio of 8.6, Halfords is exceptionally cheap. While equities will likely struggle to recover in the near term due to that weak consumer outlook, they offer significant long-term growth potential. Delay.
Questor says: wait
Share price at closing: 226p
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