After its recent flotation and strong first half sales growth, car parts retailer Halfords is cruising along nicely. With intelligent management steering the business, it is expected to maintain its strong performance despite a weak 2004 forecast for the aftermarket.
The recently floated car parts retailer Halfords has seen sales grow by 11% in the first half of its financial year on a like for like basis. Total sales growth was even greater - up by 13% in the period. Such a performance is impressive given that the wider aftermarket is expected to be flat in 2004, or even register a small decline in revenues.
The performance follows several years of revenue growth significantly ahead of the of the broader car aftermarket. In major parts, this reflects the company's focus and strength in the car accessories and tuning sector. Halfords has capitalized on the growth of the 'boy racer' market, catering for young men who are prepared to spend significant sums on performance parts and accessories for their cars. In this sector, the company has no major national competitor.
Halfords has also benefited from the sale of its garage servicing chain to the AA, back in 2001. In doing so, the company exited a far more cut-throat market sector where it competed head on with the likes of the much larger Kwik Fit chain, vehicle manufacturers' franchised dealers and thousands of independent garages.
Furthermore, the company has expanded its product range to target the outdoor leisure sector, selling items such as tents and sleeping bags, thereby reducing its reliance on the automotive side.
The only negative note was the slight decline in gross margin for the period, partly due to its sales mix - the company is selling a higher proportion of lower margin goods. However profitability at the chain has however been significantly improved over the past few years through a squeeze on suppliers and a focus on overheads throughout the business.
The results show that, while the aftermarket shows only modest growth and is a highly competitive operating environment, there are opportunities for those companies with an effective strategy and a focus on lucrative, if slightly niche, segments of the market.
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